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File No. 33-83240
File No. 811-8726
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 6 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [X]
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(Check appropriate box or boxes)
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST SECURITY BENEFIT
LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
(Exact Name of Registrant)
First Security Benefit Life Insurance and Annuity Company of New York
(Name of Depositor)
70 West Red Oak Lane, 4th Floor, White Plains, New York 10604
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, Including Area Code:
(914) 697-4748
Copies to:
Roger K. Viola, Secretary and Vice President Jeffrey S. Puretz, Esq.
First Security Benefit Life Insurance and Annuity Dechert Price & Rhoads
Company of New York 1500 K Street, N.W.
700 Harrison Street, Topeka, KS 66636-0001 Washington, DC 20005
(Name and address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on April 30, 1999, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on April 30, 1999, pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on April30, 1999, pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of securities being registered: Interests in a separate account under
individual flexible premium deferred variable annuity contracts.
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VARIABLE ANNUITY PROSPECTUS
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T. ROWE PRICE NO-LOAD VARIABLE ANNUITY
An Individual Flexible Premium
Deferred Variable Annuity Contract
May 1, 1999
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ISSUED BY:
First Security Benefit Life Insurance and Annuity
Company of New York
70 West Red Oak Lane, 4th Floor
White Plains, New York 10604
1-914-697-4748
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INTRODUCTION
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* THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
* THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE T. ROWE
PRICE EQUITY SERIES, INC., THE T. ROWE PRICE FIXED INCOME SERIES, INC.
AND THE T. ROWE PRICE INTERNATIONAL SERIES, INC. YOU SHOULD READ THE
PROSPECTUSES CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
This Prospectus describes the T. Rowe Price No-Load Variable Annuity--a
flexible premium deferred variable annuity contract (the "Contract") issued
by First Security Benefit Life Insurance and Annuity Company of New York
(the "Company"). The Contract is available for individuals as a non-tax
qualified retirement plan. The Contract is also available as an individual
retirement annuity ("IRA") qualified under Section 408 of the Internal
Revenue Code. The Contract is designed to give you flexibility in planning
for retirement and other financial goals.
You may allocate your purchase payments to one or more of the Subaccounts
that comprise a separate account of the Company called the T. Rowe Price
Variable Annuity Account of First Security Benefit Life Insurance and
Annuity Company of New York, or to the Fixed Interest Account of the
Company. Each Subaccount invests in a corresponding Portfolio of the T. Rowe
Price Equity Series, Inc., the T. Rowe Price Fixed Income Series, Inc., or
the T. Rowe Price International Series, Inc. (the "Funds"). Each Portfolio
is listed under its respective Fund below.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price New America Growth Portfolio
T. Rowe Price Mid-Cap Growth Portfoli
T. Rowe Price Equity Income Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
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The investments made by the Funds at any given time are not expected to be
the same as the investments made by other mutual funds sponsored by T. Rowe
Price Associates, Inc., including other mutual funds with investment
objectives and policies similar to those of the Funds. Different performance
will result due to differences in cash flows into and out of the Fund,
different fees and expenses and differences in portfolio size and position.
Amounts that you allocate to the Subaccounts will vary based on investment
performance of the Subaccounts to which the Account Value is allocated. The
Company does not guarantee any minimum amount of Account Value in the
Subaccounts.
Amounts that you allocate to the Fixed Interest Account will accrue interest
at rates that are paid by the Company as described in "The Fixed Interest
Account," page 28. The Company guarantees Account Value in the Fixed
Interest Account.
When you are ready to begin receiving annuity payments, the Contract
provides several options for annuity payments (see "Annuity Options," page
25.)
You may return a Contract according to the terms of its Free-Look Right (see
"Free-Look Right," page 21). This Prospectus concisely sets forth
information about the Contract and the T. Rowe Price Variable Annuity
Account that you should know before purchasing the Contract. The "Statement
of Additional Information," dated May 1, 1999, which has been filed with the
Securities and Exchange Commission (the "SEC") contains certain additional
information. The Statement of Additional Information, as it may be
supplemented from time to time, is incorporated by reference into this
Prospectus and is available at no charge, by writing the Company at 70 West
Red Oak Lane, 4th Floor, White Plains, New York 10604. The table of contents
of the Statement of Additional Information is set forth on page 43 of this
Prospectus.
Date: May 1, 1999
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CONTENTS
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* THE CONTRACT IS AVAILABLE ONLY IN NEW YORK. YOU SHOULD NOT CONSIDER THIS
PROSPECTUS TO BE AN OFFERING IF THE CONTRACT MAY NOT BE LAWFULLY OFFERED
IN YOUR STATE. YOU SHOULD ONLY RELY UPON INFORMATION CONTAINED IN THIS
PROSPECTUS OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
Definitions 5
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Summary 7
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Expense Table 9
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Condensed Financial Information 11
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Information About the Company, the Separate Account, and the Funds 12
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The Contract 15
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Charges and Deductions 23
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Annuity Payments 24
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The Fixed Interest Account 28
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More About the Contract 31
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Federal Tax Matters 32
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Other Information 39
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Performance Information 41
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Additional Information 42
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DEFINITIONS
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* VARIOUS TERMS COMMONLY USED IN THIS PROSPECTUS ARE DEFINED AS FOLLOWS:
ACCOUNT VALUE The total value of a Contract, which includes amounts
allocated to the Subaccounts and the Fixed Interest Account. The Company
determines Account Value as of each Valuation Date prior to the Annuity
Payout Date and on and after the Annuity Payout Date under Annuity Options 5
through 7.
ACCUMULATION PERIOD The period commencing on the Contract Date and ending on
the Annuity Payout Date or, if earlier, when the Contract is terminated
through a full withdrawal, payment of charges, or payment of the death
benefit proceeds.
ACCUMULATION UNIT A unit of measure used to calculate Account Value.
ANNUITANT The person or persons on whose life annuity payments depend under
Annuity Options 1 through 4. If Joint Annuitants are named in the Contract,
"Annuitant" means both Annuitants unless otherwise stated. The Annuitant
receives Annuity Payments during the Annuity Period.
ANNUITY A series of periodic income payments made by the Company to an
Annuitant, Joint Annuitant, or Beneficiary during the period specified in
the Annuity Option.
ANNUITY OPTIONS or OPTIONS Options under the Contract that prescribe the
provisions under which a series of Annuity Payments are made.
ANNUITY PAYMENTS Payments made beginning on the Annuity Payout Date
according to the provisions of the Annuity Option selected. Annuity Payments
are made on the same day of each month, on a monthly, quarterly, semiannual
or annual basis depending upon the Annuity Option selected.
ANNUITY PERIOD The period beginning on the Annuity Payout Date during which
annuity payments are made.
ANNUITY PAYOUT DATE The date when Annuity Payments are scheduled to begin.
AUTOMATIC INVESTMENT PROGRAM A program pursuant to which purchase payments
are automatically paid from your checking account on a specified day of the
month, on a monthly, quarterly, semiannual or annual basis, or a salary
reduction arrangement.
CONTRACT DATE The date shown as the Contract Date in a Contract. Annual
Contract anniversaries are measured from the Contract Date. It is usually
the date that the initial purchase payment is credited to the Contract.
CONTRACTOWNER or OWNER The person entitled to the ownership rights under the
Contract and in whose name the Contract is issued.
CONTRACT YEAR Each 12-month period measured from the Contract Date.
DESIGNATED BENEFICIARY The person having the right to the death benefit, if
any, payable upon the death of the Owner or the Joint Owner during the
Accumulation Period or the death of the Annuitant during the Annuity Period.
The Designated Beneficiary is the first person on the following list who is
alive on the date of death of the Owner or the Joint Owner: the Owner; the
Joint Owner; the Primary Beneficiary; the Secondary Beneficiary; the
Annuitant; or if none of the above is alive, the Owner's Estate.
FIXED INTEREST ACCOUNT An account that is part of the Company's General
Account in which all or a portion of the Account Value may be held for
accumulation at fixed rates of interest (which may not be less than 3%)
declared by the Company periodically at its discretion.
FUNDS T. Rowe Price Equity Series, Inc., T. Rowe Price Fixed Income Series,
Inc., and T. Rowe Price International Series, Inc. The Funds are
diversified, open-end management investment companies commonly referred to
as mutual funds.
GENERAL ACCOUNT All assets of the Company other than those allocated to the
Separate Account or to any other separate account of the Company.
PAYMENT UNIT A unit of measure used to calculate Annuity Payments under
Options 1 through 4.
PURCHASE PAYMENT The amounts paid to the Company as consideration for the
Contract.
SEPARATE ACCOUNT The T. Rowe Price Variable Annuity Account of First
Security Benefit Life Insurance and Annuity Company of New York, a separate
account of the Company. Account Value may be allocated to Subaccounts of the
Separate Account for variable accumulation.
SUBACCOUNT A division of the Separate Account of the Company which invests
in a separate Portfolio of one of the Funds. Currently, seven Subaccounts
are available under the Contract.
VALUATION DATE Each date on which the Separate Account is valued, which
currently includes each day that the Company and the New York Stock Exchange
are both open for trading. The Company and the New York Stock Exchange are
closed on weekends and on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
VALUATION PERIOD A period used in measuring the investment experience of
each Subaccount. The Valuation Period begins at the close of one Valuation
Date and ends at the close of the next succeeding Valuation Date.
WITHDRAWAL VALUE The amount a Contractowner receives upon full withdrawal of
the Contract, which is equal to Account Value less any premium taxes due and
paid by the Company.
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SUMMARY
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This summary provides a brief overview of the more significant aspects of
the Contract. Further detail is provided in this Prospectus, the Statement
of Additional Information, and the Contract. Unless the context indicates
otherwise, the discussion in this summary and the remainder of the
Prospectus relate to the portion of the Contract involving the Separate
Account. The Fixed Interest Account is briefly described under "The Fixed
Interest Account," page 28 and in the Contract.
PURPOSE OF THE CONTRACT
The flexible premium deferred variable annuity contract ("Contract")
described in this Prospectus is designed to give you flexibility in planning
for retirement and other financial goals.
You may purchase the Contract as a non-tax qualified retirement plan for an
individual ("Non-Qualified Plan"). If you are eligible, you may also
purchase the Contract as an individual retirement annuity ("IRA") qualified
under Section 408 of the Internal Revenue Code of 1986, as amended
("Qualified Plan"). See the discussion of IRAs under "Section 408," page 36.
THE SEPARATE ACCOUNT AND THE FUNDS
You may allocate your purchase payments to the T. Rowe Price Variable
Annuity Account of First Security Benefit Life Insurance and Annuity Company
of New York (the "Separate Account"). See "Separate Account," page 13. The
Separate Account is currently divided into seven divisions referred to as
Subaccounts. Each Subaccount invests exclusively in shares of a specific
Portfolio of one of the Funds. Each of the Funds' Portfolios has a different
investment objective or objectives. Each Portfolio is listed under its
respective Fund below.
T. ROWE PRICE EQUITY SERIES, INC.
T. Rowe Price New America Growth Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Equity Income Portfolio
T. Rowe Price Personal Strategy Balanced Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
T. Rowe Price Limited-Term Bond Portfolio
T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Stock Portfolio
Amounts that you allocate to the Subaccounts will increase or decrease in
dollar value depending on the investment performance of the corresponding
Portfolio in which such Subaccount invests. The Contractowner bears the
investment risk for amounts allocated to a Subaccount.
FIXED INTEREST ACCOUNT
You may allocate all or part of your purchase payments to the Fixed Interest
Account, which is part of the Company's General Account. Amounts that you
allocate to the Fixed Interest Account earn interest at rates determined at
the discretion of the Company and that are guaranteed to be at least an
effective annual rate of 3%. See "The Fixed Interest Account," page 28.
PURCHASE PAYMENTS
If you are purchasing a Contract as a Non-Qualified Plan, the minimum
initial purchase payment is $10,000 ($5,000 if made pursuant to an Automatic
Investment Program). If you are purchasing a Contract as a Qualified Plan,
the minimum initial purchase payment is $2,000 ($25 if made pursuant to an
Automatic Investment Program). Thereafter, you may choose the amount and
frequency of purchase payments, except that the minimum subsequent purchase
payment is $1,000 ($200 if made pursuant to an Automatic Investment Program)
for a Non-Qualified Plan or $500 ($25 if made pursuant to an Automatic
Investment Program) for a Qualified Plan. See "Purchase Payments," page 16.
CONTRACT BENEFITS
You may exchange Account Value among the Subaccounts and to and from the
Fixed Interest Account, subject to certain restrictions as described in "The
Contract," page 15, "Annuity Payments," page 24 and "The Fixed Interest
Account," page 28.
At any time before the Annuity Payout Date, you may surrender your Contract
for its Withdrawal Value and may make partial withdrawals, including
systematic withdrawals, from Account Value. On or after the Annuity Payout
Date, you may withdraw your Account Value under Annuity Options 5 through 7.
Withdrawals of Account Value allocated to the Fixed Interest Account are
subject to certain restrictions described in "The Fixed Interest Account,"
page 28. See "Full and Partial Withdrawals," page 20, "Annuity Payments,"
page 24 and "Federal Tax Matters," page 32 for more information about
withdrawals, including the 10% penalty tax that may be imposed upon full and
partial withdrawals (including systematic withdrawals) made prior to the
Owner attaining age 59 1/2.
The Contract provides for a death benefit upon the death of the Owner prior
to the Annuity Start Date. See "Death Benefit," page 21 for more
information. The Contract provides for several Annuity Options on either a
variable basis, a fixed basis, or both. The Company guarantees Annuity
Payments under the fixed Annuity Options. See "Annuity Payments," page 24.
FREE-LOOK RIGHT
You may return the Contract within the Free-Look Period, which is generally
a 10-day period beginning when you receive the Contract. In this event, the
Company will refund to you the amount of purchase payments allocated to the
Fixed Interest Account plus the Account Value in the Subaccounts. The
Company will refund purchase payments allocated to the Subaccounts rather
than the Account Value in those circumstances in which it is required to do
so. See "Free-Look Right," on page 21.
CHARGES AND DEDUCTIONS
The Company does not deduct a sales load from purchase payments. The Company
will deduct certain charges in connection with the Contract as described
below.
* MORTALITY AND EXPENSE RISK CHARGE The Company deducts a daily charge from
the assets of each Subaccount for mortality and expense risks equal to an
annual rate of .55% of each Subaccount's average daily net assets. See
"Mortality and Expense Risk Charge," page 23.
* PREMIUM TAX CHARGE The Company assesses a premium tax charge to reimburse
itself for any premium taxes that it incurs with respect to this
Contract. This charge will usually be deducted when Annuity Payments
begin or upon full withdrawal if the Company incurs a premium tax.
Partial withdrawals, including systematic withdrawals, may be subject to
a premium tax charge if a premium tax is incurred on the withdrawal by
the Company and is not refundable. No premium tax is currently imposed in
the State of New York. The Company reserves the right to deduct such
taxes, if imposed, when due or anytime thereafter. See "Premium Tax
Charge," page 23.
* OTHER EXPENSES The Company pays the operating expenses of the Separate
Account. Investment management fees and operating expenses of the Funds
are paid by the Funds and are reflected in the net asset value of Fund
shares. For a description of these charges and expenses, see the
prospectus for the Funds.
CONTACTING THE COMPANY
You should direct all written requests, notices, and forms required by the
Contract, and any questions or inquiries to First Security Benefit Life
Insurance and Annuity Company of New York, 70 West Red Oak Lane, 4th Floor,
White Plains, New York 10604.
EXPENSE TABLE
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The purpose of this table is to assist you in understanding the various
costs and expenses that you will bear directly and indirectly if you
allocate Account Value to the Subaccounts. The table reflects any
contractual charges, expenses of the Separate Account, and charges and
expenses of the Funds. The table does not reflect premium taxes that may be
imposed by various jurisdictions. See "Premium Tax Charge," page 23. The
information contained in the table is not applicable to amounts allocated to
the Fixed Interest Account.
For a complete description of a Contract's costs and expenses, see "Charges
and Deductions," page 23. For a more complete description of each Fund's
costs and expenses, see the Funds' prospectus, which accompanies this
Prospectus.
TABLE 1
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CONTRACTOWNER TRANSACTION EXPENSES
Sales Load on Purchase Payments None
Annual Maintenance Fee None
ANNUAL SEPARATE ACCOUNT EXPENSES
Annual Mortality and Expense Risk Charge
(as a percentage of each Subaccount's average daily net assets) .55%
Total Annual Separate Account Expenses .55%
ANNUAL PORTFOLIO EXPENSES (AS A PERCENTAGE OF EACH PORTFOLIO'S
AVERAGE DAILY NET ASSETS)
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<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER PORTFOLIO
FEE* EXPENSES EXPENSES
<S> <C> <C> <C> <C>
T. Rowe Price New America Growth Portfolio .85% 0% .85%
T. Rowe Price International Stock Portfolio 1.05% 0% 1.05%
T. Rowe Price Mid-Cap Growth Portfolio .85% 0% .85%
T. Rowe Price Equity Income Portfolio .85% 0% .85%
T. Rowe Price Personal Strategy Balanced Portfolio .90% 0% .90%
T. Rowe Price Limited-Term Bond Portfolio .70% 0% .70%
T. Rowe Price Prime Reserve Portfolio .55% 0% .55%
</TABLE>
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* The management fee includes the ordinary expenses of operating the Funds.
EXAMPLES
The example presented below shows expenses that you would pay at the end of
one, three, five, or ten years. The example shows expenses based upon an
allocation of $1,000 to each of the Subaccounts and a hypothetical annual
return of 5%. The information presented applies if, at the end of those time
periods, the Contract is (1) surrendered, (2) annuitized, or (3) not
surrendered or annuitized.
You should not consider the example below a representation of past or future
expenses. Actual expenses may be greater or lesser than those shown. The 5%
return assumed in the example is hypothetical and should not be considered a
representation of past or future actual returns, which may be greater or
lesser than the assumed amount.
EXAMPLE - You would pay the expenses shown below during the Accumulation
Period and during the Annuity Period:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
New America Growth Subaccount $14 $44 $77 $168
International Stock Subaccount $16 $50 $87 $190
Mid-Cap Growth Subaccount $14 $44 $77 $168
Equity Income Subaccount $14 $44 $77 $168
Personal Strategy Balanced Subaccount $15 $46 $79 $174
Limited-Term Bond Subaccount $13 $40 $69 $151
Prime Reserve Subaccount $11 $35 $61 $134
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CONDENSED FINANCIAL INFORMATION
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The following condensed financial information presents accumulation unit
values for the years ended December 31, 1998, 1997 and 1996, as well as
ending accumulation units outstanding under each Subaccount.
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1996 1997 1998
NEW AMERICA GROWTH SUBACCOUNT
Accumulation unit value:
Beginning of period $10.00 $16.00 $19.27
End of period $16.00 $19.27 $22.72
Accumulation units:
Outstanding at the end of period 143,768 170,990 188,096
INTERNATIONAL STOCK SUBACCOUNT
Accumulation unit value:
Beginning of period $10.00 $12.77 $13.09
End of period $12.77 $13.09 $15.08
Accumulation units:
Outstanding at the end of period 86,235 123,502 126,224
EQUITY INCOME SUBACCOUNT
Accumulation unit value:
Beginning of period $10.00 $14.70 $18.84
End of period $14.70 $18.84 $20.42
Accumulation units:
Outstanding at the end of period 181,250 320,917 341,036
PERSONAL STRATEGY BALANCED SUBACCOUNT
Accumulation unit value:
Beginning of period $10.00 $13.51 $15.86
End of period $13.51 $15.86 $18.04
Accumulation units:
Outstanding at the end of period 39,697 76,311 94,177
LIMITED TERM-BOND SUBACCOUNT
Accumulation unit value:
Beginning of period $10.00 $10.92 $11.60
End of period $10.92 $11.60 $12.37
Accumulation units:
Outstanding at the end of period 33,375 41,943 40,576
MID-CAP GROWTH SUBACCOUNT*
Accumulation unit value:
Beginning of period $10.00 $11.82
End of period $11.82 $14.34
Accumulation units:
Outstanding at the end of period 91,142 155,295
PRIME RESERVE SUBACCOUNT*
Accumulation unit value:
Beginning of period $10.00 $10.47
End of period $10.47 $10.97
Accumulation units:
Outstanding at the end of period 75,383 99,654
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*The Mid-Cap Growth and Prime Reserve Subaccounts commenced operations on
January 2, 1997.
<PAGE>
INFORMATION ABOUT THE COMPANY, THE SEPARATE ACCOUNT, AND THE FUNDS
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FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
The Company is a stock life insurance company organized under the laws of
the State of New York on November 8, 1994. The Company offers variable
annuity contracts in New York and is admitted to do business in that state.
On September 8, 1995, the Company merged with and is the successor
corporation of Pioneer National life Insurance Company, a stock life
insurance company organized under the laws of the State of Kansas. The
Company is a wholly-owned subsidiary of Security Benefit Group, Inc., a
financial services holding company which is wholly-owned by Security Benefit
Life Insurance Company, a stock life insurance company, organized under the
laws of the State of Kansas. On July 31, 1998, Security Benefit Life
Insurance Company converted from a mutual life insurance company to a stock
life insurance company ultimately controlled by Security Benefit Mutual
Holding Company, a Kansas mutual holding company. Membership interests of
persons who owned Security Benefit Life policies as of July 31, 1998 became
membership interests in Security Benefit Mutual Holding Company as of that
date, and persons who acquire policies from Security Benefit Life after that
date automatically become members in the mutual holding company.
YEAR 2000 COMPLIANCE
Like other insurance companies, as well as other financial and business
organizations around the world, the Company could be adversely affected if
the computer systems used by the Company in performing its administrative
functions do not properly process and calculate date-related information and
data before, during, and after January 1, 2000. Some computer software and
hardware systems currently cannot distinguish between the year 2000 and the
year 1900 or some other date because of the way date fields were encoded.
This is commonly known as the "Year 2000 Problem." If not addressed, the
Year 2000 Problem could impact (i) the administrative services provided by
the Company with respect to the Contract, and (ii) the management services
provided to the Funds by T. Rowe Price, as well as transfer agency,
accounting, custody, distribution, and other services provided to the Funds.
For more information on T. Rowe Price Year 2000 compliance efforts, see the
Funds' prospectus, which accompanies this Prospectus.
The Company has adopted a plan to be "Year 2000 Compliant" with respect to
both its internally built systems as well as systems provided by external
vendors. We consider a system Year 2000 Compliant when it is able to
correctly process, provide, and/or receive data before, during and after the
Year 2000. The Company's overall approach to addressing the Year 2000 issue
is as follows: (1) to inventory its internal and external hardware,
software, telecommunications and data transmissions to customers, and
conduct a risk assessment with respect to the impact that a failure on any
such system would have on its business operations; (2) to modify or replace
its internal systems and obtain vendor certifications of Year 2000
compliance for systems provided by vendors or replace such systems that are
not Year 2000 Compliant; and (3) to implement and test its systems for Year
2000 compliance. The Company has completed the inventory of its internal and
external systems and has made substantial progress toward completing the
modification/replacement of its internal systems as well as towards
obtaining Year 2000 Compliant certifications from its external vendors.
Overall systems testing commenced in early 1998 and will extend into the
first six months of 1999.
Although the Company has taken steps to ensure that its systems will
function properly before, during, and after the Year 2000, external vendors
provide its key operating systems and information sources, which creates
uncertainty to the extent the Company is relying on the assurance of such
vendors as to whether its systems will be Year 2000 Compliant. The costs or
consequences of incomplete or untimely resolution of the Year 2000 issue are
unknown to the Company at this time but could have a material adverse impact
on the operations of the Separate Account and administration of the
Contract.
The Year 2000 Problem is also expected to impact companies, which may
include issuers of portfolio securities held by the Funds, to varying
degrees based upon various factors, including, but not limited to, the
company's industry sector and degree of technological sophistication. The
Company is unable to predict what impact, if any, the Year 2000 Problem will
have on issuers of the portfolio securities held by the Funds.
PUBLISHED RATINGS
The Company may from time to time publish in advertisements, sales
literature, and reports to Owners, the ratings and other information
assigned to it by one or more independent rating organizations such as A.M.
Best Company and Standard & Poor's. The purpose of the ratings is to reflect
the financial strength and/or claims-paying ability of the Company and
should not be considered as bearing on the investment performance of assets
held in the Separate Account. Each year the A.M. Best Company reviews the
financial status of thousands of insurers, culminating in the assignment of
Best's Ratings. These ratings reflect their current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance industry. In addition,
the claims-paying ability of the Company as measured by Standard & Poor's
Insurance Ratings Services may be referred to in advertisements or sales
literature or in reports to Owners. These ratings are opinions of an
operating insurance company's financial capacity to meet the obligations of
its insurance and annuity policies in accordance with their terms. Such
ratings do not reflect the investment performance of the Separate Account or
the degree of risk associated with an investment in the Separate Account.
SEPARATE ACCOUNT
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK
The Company established the T. Rowe Price Variable Annuity Account as a
separate account under New York law on November 1, 1994. The Contract
provides that the income, gains, or losses of the Separate Account, whether
or not realized, are credited to or charged against the assets of the
Separate Account without regard to other income, gains, or losses of the
Company. Section 4240 of the New York Insurance Law provides that assets in
a separate account attributable to the reserves and other liabilities under
the contracts may not be charged with liabilities arising from any other
business that the insurance company conducts if, and to the extent the
contracts so provide. The Contract contains such a provision. The Company
owns the assets in the Separate Account and is required to maintain
sufficient assets in the Separate Account to meet all Separate Account
obligations under the Contract. The Company may transfer to its General
Account assets that exceed anticipated obligations of the Separate Account.
All obligations arising under the Contracts are general corporate
obligations of the Company. The Company may invest its own assets in the
Separate Account for other purposes, but not to support contracts other than
variable annuity contracts, and may accumulate in the Separate Account
proceeds from Contract charges and investment results applicable to those
assets.
The Separate Account is currently divided into seven Subaccounts. The
Contract provides that income, gains and losses, whether or not realized,
are credited to, or charged against, the assets of each Subaccount without
regard to the income, gains, or losses in the other Subaccounts. Each
Subaccount invests exclusively in shares of a specific Portfolio of one of
the Funds. The Company may in the future establish additional Subaccounts of
the Separate Account, which may invest in other Portfolios of the Funds or
in other securities, mutual funds, or investment vehicles. Under its
contract with the distributor, T. Rowe Price Investment Services, Inc.
("Investment Services"), the Company cannot add new Subaccounts, or
substitute shares of another portfolio, without the consent of Investment
Services, unless (1) such change is necessary to comply with applicable
laws, (2) shares of any or all of the Portfolios should no longer be
available for investment, or (3) the Company receives an opinion from
counsel acceptable to Investment Services that substitution is in the best
interest of Contractowners and that further investment in shares of the
Portfolio(s) would cause undue risk to the Company. For more information
about the distributor, see "Distribution of the Contract," page 41.
The Separate Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"). Registration with
the SEC does not involve supervision by the SEC of the administration or
investment practices of the Separate Account or of the Company.
THE FUNDS
The T. Rowe Price Equity Series, Inc., the T. Rowe Price Fixed Income
Series, Inc., and the T. Rowe Price International Series, Inc. are
diversified, open-end management investment companies of the series type.
The Funds are registered with the SEC under the 1940 Act. Such registration
does not involve supervision by the SEC of the investments or investment
policy of the Funds. Together, the Funds currently have seven separate
Portfolios, each of which pursues different investment objectives and
policies.
In addition to the Separate Account, shares of the Funds are being sold to
variable life insurance and variable annuity separate accounts of other
insurance companies, including insurance companies affiliated with the
Company. In the future, it may be disadvantageous for variable annuity
separate accounts of other life insurance companies, or for both variable
life insurance separate accounts and variable annuity separate accounts, to
invest simultaneously in the Funds. Currently neither the Company nor the
Funds foresee any such disadvantages to either variable annuity owners or
variable life insurance owners. The management of the Funds intends to
monitor events in order to identify any material conflicts between or among
variable annuity owners and variable life insurance owners and to determine
what action, if any, should be taken in response. In addition, if the
Company believes that any Fund's response to any of those events or
conflicts insufficiently protects Owners, it will take appropriate action on
its own. For more information see the Funds' prospectus.
A summary of the investment objective of each Portfolio of the Funds is set
forth below. There can be no assurance that any Portfolio will achieve its
objective. More detailed information is contained in the accompanying
prospectus of the Funds, including information on the risks associated with
the investments and investment techniques of each Portfolio.
THE FUNDS' PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ
CAREFULLY BEFORE INVESTING.
T. ROWE PRICE NEW AMERICA GROWTH PORTFOLIO
The investment objective of the New America Growth Portfolio is long-term
growth of capital through investments primarily in the common stocks of U.S.
growth companies that operate in service industries.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
The investment objective of the International Stock Portfolio is to seek
long-term growth of capital through investments primarily in common stocks
of established, non-U.S. companies.
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO
The investment objective of the Mid-Cap Growth Portfolio is to provide
long-term capital appreciation by investing primarily in common stocks of
medium-sized growth companies.
T. ROWE PRICE EQUITY INCOME PORTFOLIO
The investment objective of the Equity Income Portfolio is to provide
substantial dividend income and also capital appreciation by investing
primarily in dividend-paying common stocks of established companies.
T. ROWE PRICE PERSONAL STRATEGY BALANCED PORTFOLIO
The investment objective of the Personal Strategy Balanced Portfolio is to
seek the highest total return over time consistent with an emphasis on both
capital appreciation and income.
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO
The investment objective of the Limited-Term Bond Portfolio is to seek a
high level of income consistent with moderate price fluctuation by investing
primarily in short- and intermediate-term investment grade debt securities.
T. ROWE PRICE PRIME RESERVE PORTFOLIO
The investment objectives of the Prime Reserve Portfolio are preservation of
capital, liquidity, and, consistent with these, the highest possible current
income, by investing primarily in high-quality money market securities.
THE INVESTMENT ADVISERS
T. Rowe Price Associates, Inc. ("T. Rowe Price"), located at 100 East Pratt
Street, Baltimore, Maryland 21202, serves as Investment Adviser to each
Portfolio, except the T. Rowe Price International Stock Portfolio. Rowe
Price-Fleming International, Inc. ("Price-Fleming"), an affiliate of T. Rowe
Price, serves as Investment Adviser to the T. Rowe Price International Stock
Portfolio. Price-Fleming's U.S. office is located at 100 East Pratt Street,
Baltimore, Maryland 21202. As Investment Adviser to the Portfolios, T. Rowe
Price and Price-Fleming are responsible for selection and management of
portfolio investments. T. Rowe Price and Price-Fleming are registered with
the SEC as investment advisers.
T. Rowe Price and Price-Fleming are not affiliated with the Company, and the
Company has no responsibility for the management or operations of the
Portfolios.
THE CONTRACT
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GENERAL
The Company issues the Contract offered by this Prospectus. It is a flexible
premium deferred variable annuity. To the extent that you allocate all or a
portion of your purchase payments to the Subaccounts, the Contract is
significantly different from a fixed annuity contract in that it is the
Owner who assumes the risk of investment gain or loss rather than the
Company. When you are ready to begin receiving annuity payments, the
Contract provides several Annuity Options under which the Company will pay
periodic annuity payments on a variable basis, a fixed basis, or both,
beginning on the Annuity Payout Date. The amount that will be available for
annuity payments will depend on the investment performance of the
Subaccounts to which you have allocated Account Value and the amount of
interest credited on Account Value that you have allocated to the Fixed
Interest Account.
The Contract is available for purchase by an individual as a non-tax
qualified retirement plan ("Non-Qualified Plan"). The Contract is also
eligible for purchase as an individual retirement annuity ("IRA") qualified
under Section 408, or a Roth IRA under Section 408A, of the Internal Revenue
Code ("Qualified Plan"). You may name Joint Owners only on a Contract issued
pursuant to a Non-Qualified Plan.
APPLICATION FOR A CONTRACT
If you wish to purchase a Contract, you may submit an application and an
initial purchase payment to the Company, as well as any other form or
information that the Company may require. The initial purchase payment may
be made by check or, if you own shares of one or more Funds distributed by
Investment Services ("T. Rowe Price Funds"), you may elect on the
application to redeem shares of that fund(s) and forward the redemption
proceeds to the Company. Any such transaction shall be effected by
Investment Services, the distributor of the T. Rowe Price Funds and the
Contract. If you redeem fund shares, it is a sale of shares for tax
purposes, which may result in a taxable gain or loss. You may obtain an
application by contacting the Company. The Company reserves the right to
reject an application or purchase payment for any reason, subject to the
Company's underwriting standards and guidelines and any applicable state or
federal law relating to nondiscrimination.
The maximum age of an Owner or Annuitant for which a Contract will be issued
is 85. If there are Joint Owners or Annuitants, the maximum issue age will
be determined by reference to the older Owner or Annuitant.
PURCHASE PAYMENTS
If you are purchasing a Contract as a Non-Qualified Plan, the minimum
initial purchase payment is $10,000 ($5,000 if made pursuant to an Automatic
Investment Program). If you are purchasing a Contract as a Qualified Plan,
the minimum initial purchase payment is $2,000 ($25 if made pursuant to an
Automatic Investment Program). Thereafter, you may choose the amount and
frequency of purchase payments, except that the minimum subsequent purchase
payment is $1,000 ($200 if made pursuant to an Automatic Investment Program)
for Non-Qualified Plans and $500 ($25 if made pursuant to an Automatic
Investment Program) for Qualified Plans. The Company may reduce the minimum
purchase payment requirements under certain circumstances, such as for group
or sponsored arrangements. Cumulative purchase payments exceeding $1 million
will not be accepted under a Contract without prior approval of the Company.
The Company will apply the initial purchase payment not later than the end
of the second Valuation Date after the Valuation Date it is received by the
Company at P.O. Box 2788, Topeka, Kansas 66601-9804; provided that the
purchase payment is preceded or accompanied by an application that contains
sufficient information to establish an account and properly credit such
purchase payment. If the Company does not receive a complete application,
the Company will notify you that it does not have the necessary information
to issue a Contract. If you do not provide the necessary information within
five Valuation Dates after the Valuation Date on which the Company first
receives the initial purchase payment or if the Company determines it cannot
otherwise issue the Contract, the Company will return the initial purchase
payment to you unless you consent to the Company retaining the purchase
payment until the application is made complete.
The Company will credit subsequent purchase payments as of the end of the
Valuation Period in which they are received. You may make purchase payments
after the initial purchase payment at any time prior to the Annuity Payout
Date, so long as the Owner is living. Subsequent purchase payments under a
Qualified Plan may be limited by the terms of the plan and provisions of the
Internal Revenue Code. Subsequent purchase payments may be paid under an
Automatic Investment Program or, if you own shares of one or more T. Rowe
Price Funds, you may direct Investment Services to redeem shares of that
fund(s) and forward the redemption proceeds to the Company as a subsequent
purchase payment. The minimum initial purchase payment must be paid before
the Company will accept an Automatic Investment Program. If you redeem fund
shares, it is a sale of shares for tax purposes, which may result in a
taxable gain or loss.
ALLOCATION OF PURCHASE PAYMENTS
In an application for a Contract, you select the Subaccounts or the Fixed
Interest Account to which purchase payments will be allocated. The
allocation must be a whole percentage. Purchase payments will be allocated
according to your instructions contained in the application or more recent
instructions received, if any, except that no purchase payment allocation is
permitted that would result in less than 5% of any payment being allocated
to any one Subaccount or the Fixed Interest Account. Available allocation
alternatives include the seven Subaccounts and the Fixed Interest Account.
You may change the purchase payment allocation instructions by submitting a
proper written request to the Company. A proper change in allocation
instructions will be effective upon receipt by the Company and will continue
in effect until subsequently changed. You may change your purchase payment
allocation instructions by telephone or by sending a request in writing to
the Company. Changes in the allocation of future purchase payments have no
effect on existing Account Value. You may, however, exchange Account Value
among the Subaccounts and the Fixed Interest Account as described in
"Exchanges of Account Value," page 19.
DOLLAR COST AVERAGING OPTION
Prior to the Annuity Payout Date, you may dollar cost average your Account
Value by authorizing the Company to make periodic exchanges of Account Value
from any one Subaccount to one or more of the other Subaccounts. Dollar cost
averaging is a systematic method of investing in which securities are
purchased at regular intervals in fixed dollar amounts so that the cost of
the securities gets averaged over time and possibly over various market
cycles. The option will result in the exchange of Account Value from one
Subaccount to one or more of the other Subaccounts. Amounts exchanged under
this option will be credited at the Subaccount's price as of the end of the
Valuation Dates on which the exchanges are effected. Since the price of a
Subaccount's Accumulation Units will vary, the amounts allocated to a
Subaccount will result in the crediting of a greater number of units when
the price is low and a lesser number of units when the price is high.
Similarly, the amounts exchanged from a Subaccount will result in a debiting
of a greater number of units when the Subaccount's price is low and a lesser
number of units when the price is high. Dollar cost averaging does not
guarantee profits, nor does it assure that you will not have losses.
You may request a Dollar Cost Averaging Request form from the Company. On
the form, you must designate whether Account Value is to be exchanged on the
basis of a specific dollar amount, a fixed period or earnings only, the
Subaccount or Subaccounts to and from which the exchanges will be made, the
desired frequency of the exchanges, which may be on a monthly, quarterly,
semiannual, or annual basis, and the length of time during which the
exchanges shall continue or the total amount to be exchanged over time.
To elect the Dollar Cost Averaging Option, your Account Value must be at
least $5,000, ($2,000 for a Contract funding a Qualified Plan), and a Dollar
Cost Averaging Request in proper form must be received by the Company. The
Company will not consider the Dollar Cost Averaging Request form to be
complete until the your Account Value is at least the required amount. You
may not have in effect at the same time Dollar Cost Averaging and Asset
Rebalancing Options.
After the Company has received a Dollar Cost Averaging Request in proper
form, the Company will exchange Account Value in the amounts you designate
from the Subaccount from which exchanges are to be made to the Subaccount or
Subaccounts you have chosen. The minimum amount that may be exchanged is
$200 and the minimum amount that may be allocated to any one Subaccount is
$25. The Company will effect each exchange on the date you specify or if no
date is specified, on the monthly, quarterly, semiannual, or annual
anniversary, whichever corresponds to the period selected, of the date of
receipt at the Company of a Dollar Cost Averaging Request in proper form.
Exchanges will be made until the total amount elected has been exchanged, or
until the Account Value in the Subaccount from which exchanges are made has
been depleted. Amounts periodically exchanged under this option are not
included in the six exchanges per Contract Year that are allowed as
discussed in "Exchanges of Account Value," page 19.
You may instruct the Company at any time to terminate the option by written
request to the Company. In that event, the Account Value in the Subaccount
from which exchanges were being made that has not been exchanged will remain
in that Subaccount unless you instruct us otherwise. If you wish to continue
exchanging on a dollar cost averaging basis after the expiration of the
applicable period, the total amount elected has been exchanged, or the
Subaccount has been depleted, or after the Dollar Cost Averaging Option has
been canceled, you must complete a new Dollar Cost Averaging Request and
send it to the Company. The Contract must meet the $5,000 ($2,000 for a
Contract funding a Qualified Plan) minimum required amount of Account Value
at that time. The Company may discontinue, modify, or suspend the Dollar
Cost Averaging Option at any time provided that, as required by its contract
with Investment Services, the Company first obtains the consent of
Investment Services.
Account Value also may be dollar cost averaged to or from the Fixed Interest
Account, subject to certain restrictions described under "The Fixed Interest
Account," page 28.
ASSET REBALANCING OPTION
Prior to the Annuity Payout Date, you may authorize the Company to
automatically exchange Account Value each quarter to maintain a particular
percentage allocation among the Subaccounts. The Account Value allocated to
each Subaccount will grow or decline in value at different rates during the
quarter, and Asset Rebalancing automatically reallocates the Account Value
in the Subaccounts each quarter to the allocation you select. Asset
Rebalancing is intended to exchange Account Value from those Subaccounts
that have increased in value to those Subaccounts that have declined in
value. Over time, this method of investing may help you to buy low and sell
high, although there can be no assurance of this. This investment method
does not guarantee profits, nor does it assure that you will not have
losses.
To elect the Asset Rebalancing Option, the Account Value must be at least
$10,000 ($2,000 for a Contract funding a Qualified Plan) and an Asset
Rebalancing Request in proper form must be received by the Company. You may
not have in effect at the same time Dollar Cost Averaging and Asset
Rebalancing Options. An Asset Rebalancing Request form is available upon
request. On the form, you must indicate the applicable Subaccounts and the
percentage of Account Value which should be allocated to each of the
applicable Subaccounts each quarter under the Asset Rebalancing Option. If
the Asset Rebalancing Option is elected, all Account Value allocated to the
Subaccounts must be included in the Asset Rebalancing Option.
This option will result in the exchange of Account Value to one or more of
the Subaccounts on the date you specify or, if no date is specified, on the
date of the Company's receipt of the Asset Rebalancing Request in proper
form and on each quarterly anniversary of the applicable date thereafter.
The amounts exchanged will be credited at the price of the Subaccount as of
the end of the Valuation Dates on which the exchanges are effected. Amounts
periodically exchanged under this option are not included in the six
exchanges per Contract Year that are allowed as discussed below.
You may instruct us to terminate this option at any time by written request
to the Company. This option will terminate automatically in the event that
you exchange Account Value by written request or telephone instructions. In
either event, the Account Value in the Subaccounts that has not been
exchanged will remain in those Subaccounts regardless of the percentage
allocation unless you instruct us otherwise. If you wish to resume Asset
Rebalancing after it has been canceled, you must complete a new Asset
Rebalancing Request form and send it to the Company. The Account Value at
the time the request is made must be at least $10,000 ($2,000 for a Contract
funding a Qualified Plan). The Company may discontinue, modify, or suspend
the Asset Rebalancing Option at any time provided that, as required by its
contract with Investment Services, the Company first obtains the consent of
Investment Services.
Account Value allocated to the Fixed Interest Account may be included in
Asset Rebalancing, subject to certain restrictions described under "The
Fixed Interest Account," page 28.
EXCHANGES OF ACCOUNT VALUE
Prior to the Annuity Payout Date, you may exchange Account Value among the
Subaccounts upon proper written request to the Company. You may exchange
Account Value (other than exchanges in connection with the Dollar Cost
Averaging or Asset Rebalancing Options) by telephone if an Authorization for
Telephone Requests form has been properly completed, signed, and filed at
the Company. Up to six exchanges are allowed in any Contract Year. The
minimum exchange amount is $500 ($200 under the Dollar Cost Averaging
Option), or the amount remaining in a given Subaccount.
You may also exchange Account Value between the Subaccounts and the Fixed
Interest Account; however, exchanges from the Fixed Interest Account to the
Subaccounts are restricted as described in "The Fixed Interest Account,"
page 28. For a discussion of exchanges after the Annuity Payout Date, see
"Annuity Payments," page 24.
ACCOUNT VALUE
The Account Value is the sum of the amounts under the Contract held in each
Subaccount and the Fixed Interest Account. Account Value is determined as of
any Valuation Date during the Accumulation Period and during the Annuity
Period under Annuity Options 5 through 7.
On each Valuation Date, the portion of the Account Value allocated to any
particular Subaccount will be adjusted to reflect the investment experience
of that Subaccount for that date. See "Determination of Account Value,"
below. No minimum amount of Account Value is guaranteed. You bear the entire
investment risk relating to the investment performance of Account Value
allocated to the Subaccounts.
DETERMINATION OF ACCOUNT VALUE
Account Value will vary to a degree that depends upon several factors,
including investment performance of the Subaccounts to which you have
allocated Account Value, payment of subsequent purchase payments, partial
withdrawals, annuity payments under Options 5 through 7 , and the charges
assessed in connection with the Contract. The amounts allocated to the
Subaccounts will be invested in shares of the corresponding Portfolios of
the Funds. The investment performance of the Subaccounts will reflect
increases or decreases in the net asset value per share of the corresponding
Portfolios and any dividends or distributions declared by the corresponding
Portfolios. Any dividends or distributions from any Portfolio will be
automatically reinvested in shares of the same Portfolio, unless the
Company, on behalf of the Separate Account, elects otherwise.
Assets in the Subaccounts are divided into Accumulation Units, which are
accounting units of measure used to calculate the value of a Contractowner's
interest in a Subaccount. When you allocate purchase payments to a
Subaccount, your Contract is credited with Accumulation Units. The number of
Accumulation Units to be credited is determined by dividing the dollar
amount allocated to the particular Subaccount by the price for the
particular Subaccount as of the end of the Valuation Period in which the
purchase payment is credited. In addition, other transactions including full
or partial withdrawals, exchanges, annuity payments under Options 5 through
7, and assessment of premium taxes against the Contract, all affect the
number of Accumulation Units credited to a Contract. The number of units
credited or debited in connection with any such transaction is determined by
dividing the dollar amount of such transaction by the price of the affected
Subaccount. The price of each Subaccount is determined as of each Valuation
Date. The number of Accumulation Units credited to a Contract will not be
changed by any subsequent change in the value of an Accumulation Unit, but
the price of an Accumulation Unit may vary from Valuation Date to Valuation
Date depending upon the investment experience of the Subaccount and charges
against the Subaccount.
The price of each Subaccount's units initially was $10. Determination of the
price of a Subaccount takes into account the following: (1) the investment
performance of the Subaccount, which is based upon the investment
performance of the corresponding Portfolio of the Funds, (2) any dividends
or distributions paid by the corresponding Portfolio, (3) the charges, if
any, that may be assessed by the Company for taxes attributable to the
operation of the Subaccount, and (4) the mortality and expense risk charge
under the Contract.
FULL AND PARTIAL WITHDRAWALS
Prior to the Annuity Payout Date, you may surrender the Contract for its
Withdrawal Value or make a partial withdrawal of Account Value. A full or
partial withdrawal, including a systematic withdrawal, may be taken from the
Account Value at any time while the Owner is living, subject to restrictions
on partial withdrawals of Account Value from the Fixed Interest Account and
limitations under applicable law. Withdrawals after the Annuity Payout Date
are permitted only under Annuity Options 5 through 7. See "Annuity
Payments," page 24. A full or partial withdrawal request will be effective
as of the end of the Valuation Period that a proper written request is
received by the Company. A proper written request must include the written
consent of any effective assignee or irrevocable Beneficiary, if applicable.
You may direct Investment Services to apply the proceeds of a full or
partial withdrawal to the purchase of shares of one or more of the T. Rowe
Price Funds by so indicating in your written withdrawal request.
The proceeds received upon a full withdrawal will be the Contract's
Withdrawal Value. The Withdrawal Value is equal to the Account Value as of
the end of the Valuation Period during which a proper withdrawal request is
received by the Company, less any premium taxes due and paid by the Company.
You may request a partial withdrawal as a specified percentage or dollar
amount of Account Value. Each partial withdrawal must be for at least $500
except systematic withdrawals discussed below. A request for a partial
withdrawal will result in a payment by the Company in accordance with the
amount specified in the partial withdrawal request. Upon payment, the
Account Value will be reduced by an amount equal to the payment and any
applicable premium tax. If a partial withdrawal is requested that would
leave the Withdrawal Value in the Contract less than $2,000, the Company
reserves the right to treat the partial withdrawal as a request for a full
withdrawal.
The amount of a partial withdrawal will be deducted from the Account Value
in the Subaccounts and the Fixed Interest Account, according to your
instructions to the Company, subject to the restrictions on partial
withdrawals from the Fixed Interest Account. See "The Fixed Interest
Account," page 28. If you do not specify the allocation, the Company will
contact you for instructions, and the withdrawal will be effected as of the
end of the Valuation Period in which such instructions are obtained. A full
or partial withdrawal, including a systematic withdrawal, may be subject to
a premium tax charge to reimburse the Company for any tax on premiums on a
Contract that may be imposed by various states and municipalities. See
"Premium Tax Charge," page 23.
A full or partial withdrawal, including a systematic withdrawal, may result
in receipt of taxable income to the Owner and, if made prior to the Owner's
attaining age 59 1/2, may be subject to a 10% penalty tax. You should
carefully consider the tax consequences of a withdrawal under the Contract.
See "Federal Tax Matters," page 32.
SYSTEMATIC WITHDRAWALS
The Company currently offers a feature under which you may elect to receive
systematic withdrawals of Account Value by sending a properly completed
Systematic Withdrawal Request form to the Company. Systematic withdrawals
are available only prior to the Annuity Payout Date. You may direct
Investment Services to apply the proceeds of a systematic withdrawal to the
purchase of shares of one or more of the T. Rowe Price Funds by so
indicating on the Systematic Withdrawal Request form. A proper request must
include the written consent of any effective assignee or irrevocable
Beneficiary, if applicable. You may designate the systematic withdrawal
amount as a percentage of Account Value allocated to the Subaccounts and/or
Fixed Interest Account, as a specified dollar amount, as all earnings in the
Contract, or as based upon the life expectancy of the Owner or the Owner and
a beneficiary, and the desired frequency of the systematic withdrawals,
which may be monthly, quarterly, semiannually, or annually. You may stop or
modify systematic withdrawals upon proper written request to the Company at
least 30 days in advance of the requested date of termination or
modification.
Each systematic withdrawal must be at least $100. Upon payment, your Account
Value will be reduced by an amount equal to the payment proceeds plus any
applicable premium taxes. Any systematic withdrawal that equals or exceeds
the Withdrawal Value will be treated as a full withdrawal. In no event will
payment of a systematic withdrawal exceed the Withdrawal Value. The Contract
will automatically terminate if a systematic withdrawal causes the
Contract's Withdrawal Value to equal zero.
The Company will effect each systematic withdrawal as of the end of the
Valuation Period during which the withdrawal is scheduled. The deduction
caused by the systematic withdrawal will be allocated to your Account Value
in the Subaccounts and the Fixed Interest Account based on your
instructions.
The Company may, at any time, discontinue, modify, or suspend systematic
withdrawals provided that, as required by its contract with Investment
Services, the Company first obtains the consent of Investment Services.
Systematic withdrawals from Account Value allocated to the Fixed Interest
Account must provide for payments over a period of not less than 36 months
as described under "The Fixed Interest Account," page 28. You should
consider carefully the tax consequences of a systematic withdrawal,
including the 10% penalty tax imposed on withdrawals made prior to the
Owner's attaining age 59 1/2. See "Federal Tax Matters," page 32.
FREE-LOOK RIGHT
You may return a Contract within the Free-Look Period, which is a 30-day
period beginning when you receive the Contract. The returned Contract will
then be deemed void and the Company will refund any purchase payments
allocated to the Fixed Interest Account plus the Account Value in the
Subaccounts as of the end of the Valuation Period during which the returned
Contract is received by the Company. The Company will return purchase
payments allocated to the Subaccounts rather than Account Value in those
circumstances in which it is required to do so.
DEATH BENEFIT
If the Owner dies during the Accumulation Period, the Company will pay the
death benefit proceeds to the Designated Beneficiary upon receipt of due
proof of death and instructions regarding payment to the Designated
Beneficiary. If there are Joint Owners, the death benefit proceeds will be
payable upon receipt of due proof of death of either Owner during the
Accumulation Period and instructions regarding payment. If the surviving
spouse of the deceased Owner is the sole Designated Beneficiary, such spouse
may elect to continue the Contract in force, subject to certain limitations.
See "Distribution Requirements" below. If the Owner is not a natural person,
the death benefit proceeds will be payable upon receipt of due proof of
death of the Annuitant during the Accumulation Period and instructions
regarding payment, and the amount of the death benefit is based on the age
of the oldest Annuitant on the date the Contract was issued. If the death of
an Owner occurs on or after the Annuity Payout Date, no death benefit
proceeds will be payable under the Contract, except that any guaranteed
annuity payments remaining unpaid will continue to be paid to the Annuitant
pursuant to the Annuity Option in force at the date of death. See "Annuity
Options," page 25.
The death benefit proceeds will be the death benefit reduced by any premium
taxes due or paid by the Company. If an Owner dies during the Accumulation
Period and the age of each Owner was 75 or younger on the date the Contract
was issued, the amount of the death benefit will be the greatest of (1) the
Account Value as of the end of the Valuation Period in which due proof of
death and instructions regarding payment are received by the Company, (2)
the aggregate purchase payments received less any reductions caused by
previous withdrawals, or (3) the stepped-up death benefit. The stepped-up
death benefit is: (a) the highest death benefit on any annual Contract
anniversary that is both an exact multiple of five and occurs prior to the
oldest Owner attaining age 76, plus (b) any purchase payments made since the
applicable fifth annual Contract anniversary, less (c) any withdrawals since
the applicable anniversary.
If an Owner dies during the Accumulation Period and the Contract was issued
to the Owner after age 75, the amount of the death benefit will be the
Account Value as of the end of the Valuation Period in which due proof of
death and instructions regarding payment are received by the Company.
The Company will pay the death benefit proceeds to the Designated
Beneficiary in a single sum or under one of the Annuity Options, as elected
by the Designated Beneficiary. If the Designated Beneficiary is to receive
annuity payments under an Annuity Option, there may be limits under
applicable law on the amount and duration of payments that the Beneficiary
may receive, and requirements respecting timing of payments. A tax adviser
should be consulted in considering Annuity Options. See "Federal Tax
Matters," page 32 for a discussion of the tax consequences in the event of
death.
DISTRIBUTION REQUIREMENTS
For Contracts issued in connection with Non-Qualified Plans, if the
surviving spouse of the deceased Owner is the sole Designated Beneficiary,
such spouse may elect to continue the Contract in force until the earlier of
the surviving spouse's death or the Annuity Payout Date or to receive the
death benefit proceeds. For any Designated Beneficiary other than a
surviving spouse, only those options may be chosen that provide for complete
distribution of the Owner's interest in the Contract within five years of
the death of the Owner. If the Designated Beneficiary is a natural person,
that person alternatively can elect to begin receiving annuity payments
within one year of the Owner's death over a period not extending beyond his
or her life or life expectancy. If the Owner of the Contract is not a
natural person, these distribution rules are applicable upon the death of or
a change in the primary Annuitant.
For Contracts issued in connection with Qualified Plans, the terms of any
Qualified Plan and the Internal Revenue Code should be reviewed with respect
to limitations or restrictions on distributions following the death of the
Owner or Annuitant. Because the rules applicable to Qualified Plans are
extremely complex, a competent tax adviser should be consulted.
DEATH OF THE ANNUITANT
If the Annuitant dies prior to the Annuity Payout Date, and the Owner is a
natural person and is not the Annuitant, no death benefit proceeds will be
payable under the Contract. The Owner may name a new Annuitant within 30
days of the Annuitant's death. If a new Annuitant is not named, the Company
will designate the Owner as Annuitant. On the death of the Annuitant on or
after the Annuity Payout Date, any guaranteed annuity payments remaining
unpaid will continue to be paid to the Designated Beneficiary pursuant to
the Annuity Option in force at the date of death. See "Annuity Options,"
page 25.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
The Company deducts a daily charge from the assets of each Subaccount for
mortality and expense risks assumed by the Company under the Contracts. The
charge is equal to an annual rate of .55% of each Subaccount's average daily
net assets. This amount is intended to compensate the Company for certain
mortality and expense risks the Company assumes in offering and
administering the Contracts and in operating the Subaccounts.
The expense risk borne by the Company is the risk that the Company's actual
expenses in issuing and administering the Contracts and operating the
Subaccounts will be more than the profit realized from the mortality and
expense risk charge. The mortality risk borne by the Company is the risk
that Annuitants, as a group, will live longer than the Company's actuarial
tables predict. In this event, the Company guarantees that annuity payments
will not be affected by a change in mortality experience that results in the
payment of greater annuity income than assumed under the Annuity Options in
the Contract. The Company assumes a mortality risk in connection with the
death benefit under the Contract.
The Company may ultimately realize a profit from the mortality and expense
risk charge to the extent it is not needed to cover mortality and
administrative expenses, but the Company may realize a loss to the extent
the charge is not sufficient. The Company may use any profit derived from
this charge for any lawful purpose, including any promotional and
administrative expenses, including compensation paid by the Company to T.
Rowe Price Investment Services, Inc. or an affiliate thereof. The Company
pays Investment Services at the annual rate of .10% of each Subaccount's
average daily net assets for administrative services.
PREMIUM TAX CHARGE
Various states and municipalities impose a tax on premiums on annuity
contracts received by insurance companies. Whether or not a premium tax is
imposed will depend upon, among other things, the Owner's state of
residence, the Annuitant's state of residence, and the insurance tax laws
and the Company's status in a particular state. The Company assesses a
premium tax charge to reimburse itself for premium taxes that it incurs in
connection with a Contract. This charge will be deducted upon the Annuity
Payout Date, upon full or partial withdrawal, or upon payment of the death
benefit, if premium taxes are incurred at that time and are not refundable.
No premium tax is currently imposed in the State of New York. The Company
reserves the right to deduct premium taxes, if imposed, when due or any time
thereafter.
OTHER CHARGES
The Company may charge the Separate Account or the Subaccounts for the
federal, state, or local taxes incurred by the Company that are attributable
to the Separate Account or the Subaccounts, or to the operations of the
Company with respect to the Contracts, or that are attributable to payment
of premiums or acquisition costs under the Contracts. No such charge is
currently assessed. See "Tax Status of the Company and the Separate Account"
and "Charge for the Company's Taxes," page 32.
GUARANTEE OF CERTAIN CHARGES
The Company guarantees that the charge for mortality and expense risks will
not exceed an annual rate of .55% of each Subaccount's average daily net
assets.
FUND EXPENSES
Each Subaccount purchases shares at the net asset value of the corresponding
Portfolio of the Funds. Each Portfolio's net asset value reflects the
investment management fee and any other expenses that are deducted from the
assets of the Fund. These fees and expenses are not deducted from the
Subaccount, but are paid from the assets of the corresponding Portfolio. As
a result, you indirectly bear a pro rata portion of such fees and expenses.
The management fees and other expenses, if any, which are more fully
described in the Funds' prospectus, are not specified or fixed under the
terms of the Contract, and the Company bears no responsibility for such fees
and expenses.
ANNUITY PAYMENTS
- --------------------------------------------------------------------------------
GENERAL
You may select the Annuity Payout Date at the time of application. You may
not defer the Annuity Payout Date beyond the Annuitant's 90th birthday,
although the terms of a Qualified Plan and the laws of certain states may
require you to begin receiving annuity payments at an earlier age. If you do
not select an Annuity Payout Date, the Annuity Payout Date will be the later
of the Annuitant's 70th birthday or the fifth annual Contract Anniversary.
See "Selection of an Option," page 26. If there are Joint Annuitants, the
birth date of the older Annuitant will be used to determine the latest
Annuity Payout Date.
On the Annuity Payout Date, the Account Value as of that date, less any
premium taxes, will be applied to provide an annuity under one of the
options described below. Each option is available either as a variable
annuity supported by the Subaccounts or as a fixed annuity supported by the
Fixed Interest Account. A combination variable and fixed annuity is also
available under Options 5 through 7. Your payment choices for each annuity
option are set forth in the table below.
----------------------------------------------------------------------------
COMBINATION
VARIABLE
ANNUITY OPTION VARIABLE FIXED AND FIXED
ANNUITY ANNUITY ANNUITY
----------------------------------------------------------------------------
Option 1 - Life Income X X
----------------------------------------------------------------------------
Option 2 - Life Income with Period Certain X X
----------------------------------------------------------------------------
Option 3 - Life Income with Installment Refund X X
----------------------------------------------------------------------------
Option 4 - Joint and Last Survivor X X
----------------------------------------------------------------------------
Option 5 - Payments for a Specified Period X X X
----------------------------------------------------------------------------
Option 6 - Payments of a Specified Amount X X X
----------------------------------------------------------------------------
Option 7 - Age Recalculation X X X
----------------------------------------------------------------------------
Variable annuity payments will fluctuate with the investment performance of
the applicable Subaccounts while fixed annuity payments will not. Unless you
direct otherwise, Account Value allocated to the Subaccounts will be applied
to purchase a variable annuity and Account Value allocated to the Fixed
Interest Account will be applied to purchase a fixed annuity.The Company
will make annuity payments on a monthly, quarterly, semiannual, or annual
basis. No annuity payments will be made for less than $20. You may direct
Investment Services to apply the proceeds of an annuity payment to shares of
one or more of the T. Rowe Price Funds by submitting a written request to
the Company. If the frequency of payments selected would result in payments
of less than $20, the Company reserves the right to change the frequency.
You may designate or change an Annuity Payout Date, Annuity Option and
Annuitant, provided proper written notice is received at the Company at
least 30 days prior to the Annuity Payout Date. The date selected as the new
Annuity Payout Date must be at least 30 days after the date written notice
requesting a change of Annuity Payout Date is received by the Company.
EXCHANGES AND WITHDRAWALS
During the Annuity Period, the Owner may exchange Account Value or Payment
Units among the Subaccounts upon proper written request to the Company. Up
to six exchanges are allowed in any Contract Year. Exchanges are not allowed
within 30 days of the Annuity Payout Date. Exchanges of Account Value or
Payment Units during the Annuity Period will result in future annuity
payments based upon the performance of the Subaccounts to which the exchange
is made.
The Owner may exchange Payment Units under Options 1 through 4 and may
exchange Account Value among the Subaccounts and the Fixed Interest Account
under Options 5 through 7, subject to the restrictions on exchanges from the
Fixed Interest Account described under the "Fixed Interest Account," page
28. The minimum amount of Account Value that may be exchanged is $500 or, if
less, the amount remaining in the Fixed Interest Account or Subaccount.
Once annuity payments have commenced, an Annuitant or Owner cannot change
the Annuity Option and generally cannot surrender his or her annuity for the
Withdrawal Value. Full and partial withdrawals of Account Value are
available, however, during the Annuity Period under Options 5 through 7,
subject to the restrictions on withdrawals from the Fixed Interest Account.
Partial withdrawals during the Annuity Period will reduce the amount of
future annuity payments.
ANNUITY OPTIONS
The Contract provides for seven Annuity Options. Other Annuity Options may
be available upon request at the discretion of the Company. If no Annuity
Option has been selected, annuity payments will be made to the Annuitant
under Option 2 which shall be an annuity payable monthly during the lifetime
of the Annuitant with payments guaranteed to be made for 10 years. The
Annuity Options are set forth below.
OPTION 1 - LIFE INCOME Periodic annuity payments will be made during the
lifetime of the Annuitant. It is possible under this Option for an Annuitant
to receive only one annuity payment if the Annuitant's death occurred prior
to the due date of the second annuity payment, two if death occurred prior
to the due date of the third annuity payment, etc. THERE IS NO MINIMUM
NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS CEASE UPON THE
DEATH OF THE ANNUITANT, REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 2 - LIFE INCOME WITH PERIOD CERTAIN OF 5, 10, 15, OR 20 YEARS
Periodic annuity payments will be made during the lifetime of the Annuitant
with the promise that if, at the death of the Annuitant, payments have been
made for less than a stated period, which may be 5, 10, 15, or 20 years, as
elected, annuity payments will be continued during the remainder of such
period to the Designated Beneficiary. UPON THE ANNUITANT'S DEATH AFTER THE
PERIOD CERTAIN, NO FURTHER ANNUITY PAYMENTS WILL BE MADE.
OPTION 3 - LIFE INCOME WITH INSTALLMENT OR UNIT REFUND OPTION Periodic
annuity payments will be made during the lifetime of the Annuitant with the
promise that, if at the death of the Annuitant, the number of payments that
has been made is less than the number determined by dividing the amount
applied under this Option by the amount of the first payment, annuity
payments will be continued to the Designated Beneficiary until that number
of annuity payments has been made.
OPTION 4 - JOINT AND LAST SURVIVOR Periodic annuity payments will be made
during the lifetime of the Annuitants. Annuity payments will be made as long
as either Annuitant is living. Upon the death of one Annuitant, annuity
payments continue to the surviving annuitant at the same or a reduced level
of 75%, 66 2/3% or 50% of annuity payments as elected by the Owner at the
time the Annuity Option is selected. With respect to fixed annuity payments,
the amount of the annuity payment and, with respect to variable annuity
payments, the number of Payment Units used to determine the annuity payment
is reduced as of the first annuity payment following the Annuitant's death.
It is possible under this Option for only one annuity payment to be made if
both Annuitants died prior to the second annuity payment due date, two if
both died prior to the third annuity payment due date, etc. AS IN THE CASE
OF OPTION 1, THERE IS NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS
OPTION. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT,
REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
OPTION 5 - PAYMENTS FOR SPECIFIED PERIOD Periodic annuity payments will be
made for a fixed period, which may be from 5 to 20 years, as elected by the
Owner. The amount of each annuity payment is determined by dividing Account
Value by the number of annuity payments remaining in the period. If, at the
death of the Annuitant, payments have been made for less than the selected
fixed period, the remaining unpaid payments will be paid to the Designated
Beneficiary.
OPTION 6 - PAYMENTS OF A SPECIFIED AMOUNT Periodic annuity payments of the
amount elected by the Owner will be made until Account Value is exhausted,
with the guarantee that, if, at the death of the Annuitant, all guaranteed
payments have not yet been made, the remaining unpaid payments will be paid
to the Designated Beneficiary. This Option is available only for Contracts
issued in connection with Non-Qualified Plans.
OPTION 7 - AGE RECALCULATION Periodic annuity payments will be made based
upon the Annuitant's life expectancy, or the joint life expectancy of the
Annuitant and a beneficiary, at the Annuitant's attained age (and the
beneficiary's attained or adjusted age, if applicable) each year. The
payments are computed by reference to government actuarial tables and are
made until Account Value is exhausted. Upon the Annuitant's death, any
Account Value will be paid to the Designated Beneficiary.
SELECTION OF AN OPTION
You should carefully review the Annuity Options with your financial or tax
adviser. For Contracts used in connection with a Qualified Plan, reference
should be made to the terms of the particular plan and the requirements of
the Internal Revenue Code for pertinent limitations respecting annuity
payments and other matters. For instance, Qualified Plans generally require
that annuity payments begin no later than April 1 of the calendar year
following the year in which the Annuitant reaches age 70 1/2. In addition,
under Qualified Plans, the period elected for receipt of annuity payments
under Annuity Options (other than life income) generally may be no longer
than the joint life expectancy of the Annuitant and beneficiary in the year
that the Annuitant reaches age 70 1/2, and must be shorter than such joint
life expectancy if the beneficiary is not the Annuitant's spouse and is more
than 10 years younger than the Annuitant. For Non-Qualified Plans, the
Company does not allow annuity payments to be deferred beyond the
Annuitant's 90th birthday.
ANNUITY PAYMENTS
Annuity payments under Options 1 through 4 are based upon annuity rates that
vary with the Annuity Option selected. The annuity rates will vary based
upon the age and sex of the Annuitant, except that unisex rates are used
where required by law. The annuity rates reflect your life expectancy based
upon your age as of the Annuity Payout Date and gender, unless unisex rates
apply. The annuity rates are based upon the 1983(a) mortality table adjusted
to reflect an assumed interest rate of 3.5% or 5%, compounded annually, as
selected by the Owner. In the case of Options 5, 6 and 7, annuity payments
are based upon Account Value without regard to annuity rates. The Company
calculates variable annuity payments under Options 1 through 4 using Payment
Units. The value of a Payment Unit for each Subaccount is determined as of
each Valuation Date and was initially $1.00. The Payment Unit value of a
Subaccount as of any subsequent Valuation Date is determined by adjusting
the Payment Unit value on the previous Valuation Date for (1) the interim
performance of the corresponding Portfolio of the Funds; (2) any dividends
or distributions paid by the corresponding Portfolio; (3) the mortality and
expense risk charge; (4) the charges, if any, that may be assessed by the
Company for taxes attributable to the operation of the Subaccount; and (5)
the assumed interest rate.
The Company determines the number of Payment Units used to calculate each
variable annuity payment as of the Annuity Payout Date. As discussed above,
the Contract specifies annuity rates for Options 1 through 4, which are the
guaranteed minimum dollar amount of monthly annuity payment for each $1,000
of Account Value, less any applicable premium taxes, applied to an Annuity
Option. The Account Value as of the Annuity Payout Date, less any applicable
premium taxes, is divided by $1,000 and the result is multiplied by the rate
per $1,000 specified in the annuity tables to determine the initial annuity
payment for a variable annuity and the guaranteed monthly annuity payment
for a fixed annuity.
On the Annuity Payout Date, the Company divides the initial variable annuity
payment by the value as of that date of the Payment Unit for the applicable
Subaccount to determine the number of Payment Units to be used in
calculating subsequent annuity payments. If variable annuity payments are
allocated to more than one Subaccount, the number of Payment Units will be
determined by dividing the portion of the initial variable annuity payment
allocated to a Subaccount by the value of that Subaccount's Payment Unit as
of the Annuity Payout Date. The initial variable annuity payment is
allocated to the Subaccounts in the same proportion as the Account Value is
allocated as of the Annuity Payout Date. The number of Payment Units will
remain constant for subsequent annuity payments, unless the Owner exchanges
Payment Units among Subaccounts.
Subsequent variable annuity payments are calculated by multiplying the
number of Payment Units allocated to a Subaccount by the value of the
Payment Unit as of the date of the annuity payment. If the annuity payment
is allocated to more than one Subaccount, the annuity payment is equal to
the sum of the payment amount determined for each Subaccount. An example is
set forth below of an annuity payment calculation under Option 2, assuming
purchase of a Contract by a 60-year-old male with Account Value of $100,000.
----------------------------------------------------------------------------
Account Value $100,000
Premium Tax - 0 $100,000
-------- -------- =100
Proceeds Under the Contract $100,000 $1,000
Amount determined by reference to annuity table for a male,
age 60 under Option 2.......................................... $4.78
First Variable Annuity Payment (100 x $4.78)................... $478
<TABLE>
<CAPTION>
ALLOCATION OF FIRST VARIABLE PAYMENT UNIT NUMBER OF PAYMENT
ACCOUNT VALUE ANNUITY PAYMENT VALUE ON ANNUITY UNITS USED TO DETERMINE
SUBACCOUNT UNDER ALLOCATION PAYOUT DATE SUBSEQUENT PAYMENTS
THE CONTRACT
<S> <C> <C> <C> <C> <C> <C>
Equity Income 50% $239.00 / $1.51 = 158.2781
International Stock 50% 239.00 / 1.02 = 234.3137
------
$478.00
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF PAYMENT UNITS PAYMENT UNIT VALUE ON SUBSEQUENT AMOUNT OF SUBSEQUENT
SUBACCOUNT USED TO DETERMINE PAYMENT DATE ANNUITY PAYMENT
SUBSEQUENT PAYMENTS
<S> <C> <C> <C> <C> <C>
Equity Income 158.2781 x $1.60 = $253.24
International Stock 234.3137 x 1.10 = 257.74
</TABLE>
Subsequent Variable Annuity Payment............................ $510.98
- --------------------------------------------------------------------------------
ASSUMED INTEREST RATE
As discussed above, the annuity rates for Options 1 through 4 are based upon
an assumed interest rate of 3.5% or 5%, compounded annually, as you elect at
the time the Annuity Option is selected. Variable annuity payments generally
increase or decrease from one annuity payment date to the next based upon
the performance of the applicable Subaccounts during the interim period
adjusted for the assumed interest rate. If the performance of the
Subaccounts is equal to the assumed interest rate, annuity payments will
remain constant. If the performance of the Subaccounts is greater than the
assumed interest rate, the amount of the annuity payments will increase and
if it is less than the assumed interest rate, the amount of the annuity
payments will decline. A higher assumed interest rate, for example 5%, would
mean a higher initial variable annuity payment, but the amount of the
annuity payments would increase more slowly in a rising market (or the
amount of the annuity payments would decline more rapidly in a falling
market). Conversely, a lower assumed interest rate, for example 3.5%, would
mean a lower initial variable annuity payment and more rapidly rising
annuity payment amounts in a rising market and more slowly declining payment
amounts in a falling market.
THE FIXED INTEREST ACCOUNT
- --------------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments and exchange
Account Value to the Fixed Interest Account. Amounts allocated to the Fixed
Interest Account become part of the Company's General Account, which
supports the Company's insurance and annuity obligations. The Company's
General Account is subject to regulation and supervision by the New York
Department of Insurance. In reliance on certain exemptive and exclusionary
provisions, interests in the Fixed Interest Account have not been registered
as securities under the Securities Act of 1933 (the "1933 Act") and the
Fixed Interest Account has not been registered as an investment company
under the Investment Company Act of 1940 (the "1940 Act"). Accordingly,
neither the Fixed Interest Account nor any interests therein are generally
subject to the provisions of the 1933 Act or the 1940 Act. The Company has
been advised that the staff of the SEC has not reviewed the disclosure in
this Prospectus relating to the Fixed Interest Account. This disclosure,
however, may be subject to certain generally applicable provisions of the
federal securities laws relating to the accuracy and completeness of
statements made in the Prospectus. This Prospectus is generally intended to
serve as a disclosure document only for aspects of a Contract involving the
Separate Account and contains only selected information regarding the Fixed
Interest Account. For more information regarding the Fixed Interest Account,
see "The Contract," page 15.
Amounts allocated to the Fixed Interest Account become part of the General
Account of the Company, which consists of all assets owned by the Company
other than those in the Separate Account and other separate accounts of the
Company. Subject to applicable law, the Company has sole discretion over the
investment of the assets of its General Account.
INTEREST
Account Value allocated to the Fixed Interest Account earns interest at a
fixed rate or rates that are paid by the Company. The Account Value in the
Fixed Interest Account earns interest at an interest rate that is guaranteed
to be at least an annual effective rate of 3% which will accrue daily
("Guaranteed Rate"). Such interest will be paid regardless of the actual
investment experience of the Company's General Account. In addition, the
Company may in its discretion pay interest at a rate ("Current Rate") that
exceeds the Guaranteed Rate. The Company will determine the Current Rate, if
any, from time to time.
Account Value allocated or exchanged to the Fixed Interest Account will earn
interest at the Current Rate, if any, in effect on the date such portion of
Account Value is allocated or exchanged to the Fixed Interest Account. The
Current Rate paid on any such portion of Account Value allocated or
exchanged to the Fixed Interest Account will be guaranteed for rolling
one-year periods (each a "Guarantee Period"). Upon expiration of any
Guarantee Period, a new Guarantee Period begins with respect to that portion
of Account Value, which will earn interest at the Current Rate, if any,
declared by the Company as of the first day of the new Guarantee Period.
Account Value allocated or exchanged to the Fixed Interest Account at one
point in time may be credited with a different Current Rate than amounts
allocated or exchanged to the Fixed Interest Account at another point in
time. For example, amounts allocated to the Fixed Interest Account in June
may be credited with a different Current Rate than amounts allocated to the
Fixed Interest Account in July. Therefore, at any time, various portions of
a Contractowner's Account Value in the Fixed Interest Account may be earning
interest at different Current Rates depending upon the point in time such
portions were allocated or exchanged to the Fixed Interest Account. The
Company bears the investment risk for the Account Value allocated to the
Fixed Interest Account and for paying interest at the Guaranteed Rate on
amounts allocated to the Fixed Interest Account.
For purposes of determining the interest rates to be credited on Account
Value in the Fixed Interest Account, withdrawals or exchanges from the Fixed
Interest Account will be deemed to be taken first from any portion of
Account Value allocated to the Fixed Interest Account for which the
Guarantee Period expires during the calendar month in which the withdrawal
or exchange is effected, then in the order beginning with that portion of
such Account Value which has the longest amount of time remaining before the
end of its Guarantee Period and ending with that portion which has the least
amount of time remaining before the end of its Guarantee Period. For more
information about exchanges and withdrawals from the Fixed Interest Account,
see "Exchanges and Withdrawals" below.
DEATH BENEFIT
The death benefit under the Contract will be determined in the same fashion
for a Contract that has Account Value in the Fixed Interest Account as for a
Contract that has Account Value allocated to the Subaccounts. See "Death
Benefit," page 21.
CONTRACT CHARGES
Premium taxes will be the same for Contractowners who allocate purchase
payments or exchange Account Value to the Fixed Interest Account as for
those who allocate purchase payments to the Subaccounts. The charge for
mortality and expense risks will not be assessed against the Fixed Interest
Account, and any amounts that the Company pays for income taxes allocable to
the Subaccounts will not be charged against the Fixed Interest Account. In
addition, the investment management fees and any other expenses paid by the
Funds will not be paid directly or indirectly by Contractowners to the
extent the Account Value is allocated to the Fixed Interest Account;
however, such Contractowners will not participate in the investment
experience of the Subaccounts.
EXCHANGES AND WITHDRAWALS
Amounts may be exchanged from the Subaccounts to the Fixed Interest Account
and from the Fixed Interest Account to the Subaccounts, subject to the
following limitations. Exchanges from the Fixed Interest Account are allowed
only (1) from Account Value, the Guarantee Period of which expires during
the calendar month in which the exchange is effected, (2) pursuant to the
Dollar Cost Averaging Option provided that such exchanges are scheduled to
be made over a period of not less than one year, and (3) pursuant to the
Asset Rebalancing Option, provided that upon receipt of the Asset
Rebalancing Request, Account Value is allocated among the Fixed Interest
Account and the Subaccounts in the percentages selected by the Contractowner
without violating the restrictions on exchanges from the Fixed Interest
Account set forth in (1) above. Accordingly, a Contractowner who desires to
implement the Asset Rebalancing Option should do so at a time when Account
Value may be exchanged from the Fixed Interest Account to the Subaccounts in
the percentages selected by the Contractowner without violating the
restrictions on exchanges from the Fixed Interest Account. Once an Asset
Rebalancing Option is implemented, the restrictions on exchanges will not
apply to exchanges made pursuant to the Option. Up to six exchanges are
allowed in any Contract Year and exchanges pursuant to the Dollar Cost
Averaging and Asset Rebalancing Options are not included in the six
exchanges allowed per Contract Year. The minimum exchange amount is $500
($200 under the Dollar Cost Averaging Option) or the amount remaining in the
Fixed Interest Account.
If Account Value is being exchanged from the Fixed Interest Account pursuant
to the Dollar Cost Averaging or Asset Rebalancing Option or withdrawn from
the Fixed Interest Account pursuant to systematic withdrawals, any purchase
payment allocated to, or Account Value exchanged to or from, the Fixed
Interest Account will automatically terminate such Dollar Cost Averaging or
Asset Rebalancing Option or systematic withdrawals, and any withdrawal from
the Fixed Interest Account or the Subaccounts will automatically terminate
the Asset Rebalancing Option. In the event of automatic termination of any
of the foregoing options, the Company shall so notify the Contractowner, and
the Contractowner may reestablish Dollar Cost Averaging, Asset Rebalancing,
or systematic withdrawals by sending a written request to the Company,
provided that the Owner's Account Value at that time meets any minimum
amount required for the Dollar Cost Averaging or Asset Rebalancing Option.
The Contractowner may also make full withdrawals to the same extent as a
Contractowner who has allocated Account Value to the Subaccounts. A
Contractowner may make a partial withdrawal from the Fixed Interest Account
only (1) from Account Value, the Guarantee Period of which expires during
the calendar month in which the partial withdrawal is effected, (2) pursuant
to systematic withdrawals, and (3) once per Contract Year in an amount up to
the greater of $5,000 or 10% of Account Value allocated to the Fixed
Interest Account at the time of the partial withdrawal. Systematic
withdrawals from Account Value allocated to the Fixed Interest Account must
provide for payments over a period of not less than 36 months. See "Full and
Partial Withdrawals," page 20 and "Systematic Withdrawals," page 21.
PAYMENTS FROM THE FIXED INTEREST ACCOUNT
The Company reserves the right to delay for up to six months after a written
request in proper form is received by the Company, full and partial
withdrawals and exchanges from the Fixed Interest Account. During the period
of deferral, interest at the applicable interest rate or rates will continue
to be credited to the amounts allocated to the Fixed Interest Account. The
Company does not expect to delay payments from the Fixed Interest Account
and will notify you if there will be a delay.
MORE ABOUT THE CONTRACT
- --------------------------------------------------------------------------------
OWNERSHIP
The Contractowner is the person named as such in the application or in any
later change shown in the Company's records. While living, the Contractowner
alone has the right to receive all benefits and exercise all rights that the
Contract grants or the Company allows. The Owner may be an entity that is
not a living person, such as a trust or corporation, referred to herein as
"Non-Natural Persons." See "Federal Tax Matters," below.
JOINT OWNERS. The Joint Owners will be joint tenants with rights of
survivorship and upon the death of an Owner, the surviving Owner shall be
the sole Owner. Any Contract transaction requires the signature of all
persons named jointly. Joint Owners are permitted only on a Contract issued
pursuant to a Non-Qualified Plan.
DESIGNATION AND CHANGE OF BENEFICIARY
The Beneficiary is the individual named as such in the application or any
later change shown in the Company's records. The Contractowner may change
the Beneficiary at any time while the Contract is in force by written
request on a form provided by the Company and received by the Company. The
change will not be binding on the Company until it is received and recorded
by the Company. The change will be effective as of the date this form is
signed subject to any payments made or other actions taken by the Company
before the change is received and recorded. A Secondary Beneficiary may be
designated. The Owner may designate a permanent Beneficiary whose rights
under the Contract cannot be changed without the Beneficiary's consent.
NON-PARTICIPATING
The Company is a stock life insurance company and, accordingly, no dividends
are paid by the Company on the Contract.
PAYMENTS FROM THE SEPARATE ACCOUNT
The Company will pay any full or partial withdrawal benefit or death benefit
proceeds from Account Value allocated to the Subaccounts, and will effect an
exchange between Subaccounts or from a Subaccount to the Fixed Interest
Account within seven days from the Valuation Date a proper request is
received by the Company. However, the Company can postpone the calculation
or payment of such a payment or exchange of amounts from the Subaccounts to
the extent permitted under applicable law, for any period: (a) during which
the New York Stock Exchange is closed other than customary weekend and
holiday closings, (b) during which trading on the New York Stock Exchange is
restricted as determined by the SEC, or (c) during which an emergency, as
determined by the SEC, exists as a result of which (i) disposal of
securities held by the Separate Account is not reasonably practicable, or
(ii) it is not reasonably practicable to determine the value of the assets
of the Separate Account.
PROOF OF AGE AND SURVIVAL
The Company may require proof of age or survival of any person on whose life
annuity payments depend.
MISSTATEMENTS
If the age or sex of an Annuitant or age of an Owner has been misstated, the
correct amount paid or payable by the Company under the Contract shall be
such as the Account Value would have provided for the correct age or sex
(unless unisex rates apply).
FEDERAL TAX MATTERS
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INTRODUCTION
The Contract described in this Prospectus is designed for use by individuals
in retirement plans which may or may not be Qualified Plans under the
provisions of the Internal Revenue Code ("Code").
The ultimate effect of federal income taxes on the amounts held under a
Contract, on annuity payments, and on the economic benefits to the Owner,
the Annuitant, and the Beneficiary or other payee will depend upon the type
of retirement plan for which the Contract is purchased, the tax and
employment status of the individuals involved, and a number of other
factors. The discussion of the federal income tax considerations relating to
a contract contained herein and in the Statement of Additional Information
is general in nature and is not intended to be an exhaustive discussion of
all questions that might arise in connection with a Contract. It is based
upon the Company's understanding of the present federal income tax laws as
currently interpreted by the Internal Revenue Service ("IRS"), and is not
intended as tax advice. No representation is made regarding the likelihood
of continuation of the present federal income tax laws or of the current
interpretations by the IRS or the courts. Future legislation may affect
annuity contracts adversely. Moreover, no attempt has been made to consider
any applicable state or other laws. Because of the inherent complexity of
the tax laws and the fact that tax results will vary according to the
particular circumstances of the individual involved and, if applicable, the
Qualified Plan, a person should consult a qualified tax adviser regarding
the purchase of a Contract, the selection of an Annuity Option under a
Contract, the receipt of annuity payments under a Contract, or any other
transaction involving a Contract (including an exchange). THE COMPANY DOES
NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF, OR TAX CONSEQUENCES
ARISING FROM, ANY CONTRACT OR ANY TRANSACTION INVOLVING THE CONTRACT.
TAX STATUS OF THE COMPANY AND THE SEPARATE ACCOUNT
GENERAL
The Company intends to be taxed as a life insurance company under Part I,
Subchapter L of the Code. Because the operations of the Separate Account
form a part of the Company, the Company will be responsible for any federal
income taxes that become payable with respect to the income of the Separate
Account and its Subaccounts.
CHARGE FOR THE COMPANY'S TAXES
A charge may be made against the Separate Account for any federal taxes
incurred by the Company that are attributable to the Separate Account, the
Subaccounts, or to the operations of the Company with respect to the
Contracts or attributable to payments, premiums, or acquisition costs under
the Contracts. The Company will review the question of a charge to the
Separate Account, the Subaccounts, or the Contracts for the Company's
federal taxes periodically. Charges may become necessary if, among other
reasons, the tax treatment of the Company or of income and expenses under
the Contracts is ultimately determined to be other than what the Company
currently believes it to be, if there are changes made in the federal income
tax treatment of variable annuities at the insurance company level, or if
there is a change in the Company's tax status.
Under current laws, the Company may incur state and local taxes (in addition
to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, the Company reserves the right to charge the Separate Account or the
Subaccounts for such taxes, if any, attributable to the Separate Account or
Subaccounts.
DIVERSIFICATION STANDARDS
Each of the Portfolios will be required to adhere to regulations issued by
the Treasury Department pursuant to Section 817(h) of the Code prescribing
asset diversification requirements for investment companies whose shares are
sold to insurance company separate accounts funding variable contracts.
Pursuant to these regulations, on the last day of each calendar quarter (or
on any day within 30 days thereafter), no more than 55% of the total assets
of a Portfolio may be represented by any one investment, no more than 70%
may be represented by any two investments, no more than 80% may be
represented by any three investments, and no more than 90% may be
represented by any four investments. For purposes of Section 817(h),
securities of a single issuer generally are treated as one investment, but
obligations of the U.S. Treasury and each U.S. Governmental agency or
instrumentality generally are treated as securities of separate issuers. The
Separate Account, through the Portfolios, intends to comply with the
diversification requirements of Section 817(h).
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contractowner's gross income. The IRS has stated in published
rulings that a variable contractowner will be considered the owner of
separate account assets if the contractowner possesses incidents of
ownership in those assets, such as the ability to exercise investment
control over the assets. The Treasury Department also announced, in
connection with the issuance of regulations concerning diversification, that
those regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset account may
cause the investor (i.e., the policyowner), rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." As of the date of this Prospectus, no such guidance has
been issued.
The ownership rights under the Contract are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, in the present case the Contractowner has additional flexibility in
allocating purchase payments and Contract Values than in the cases described
in the rulings. These differences could result in a Contractowner being
treated as the owner of a pro rata portion of the assets of the Separate
Account. In addition, the Company does not know what standards will be set
forth, if any, in the regulations or rulings which the Treasury Department
has stated it expects to issue. The Company therefore reserves the right to
modify the Contract, as deemed appropriate by the Company, to attempt to
prevent a Contractowner from being considered the owner of a pro rata share
of the assets of the Separate Account. Moreover, in the event that
regulations or rulings are promulgated, there can be no assurance that the
Portfolios will be able to operate as currently described in the Prospectus,
or that the Funds will not have to change any Portfolio's investment
objective or investment policies.
INCOME TAXATION OF ANNUITIES IN GENERAL-NON-QUALIFIED PLANS
Section 72 of the Code governs the taxation of annuities. In general, a
Contractowner is not taxed on increases in value under an annuity contract
until some form of distribution is made under the contract. However, the
increase in value may be subject to tax currently under certain
circumstances. See "Contracts Owned by Non-Natural Persons" on page 35 and
"Diversification Standards" on page 33. Withholding of federal income taxes
on all distributions may be required unless a recipient who is eligible
elects not to have any amounts withheld and properly notifies the Company of
that election.
* SURRENDERS OR WITHDRAWALS PRIOR TO THE ANNUITY PAYOUT DATE Code Section
72 provides that amounts received upon a total or partial withdrawal
(including systematic withdrawals) from a Contract prior to the Annuity
Payout Date generally will be treated as gross income to the extent that
the cash value of the Contract (determined without regard to any
surrender charge in the case of a partial withdrawal) exceeds the
"investment in the contract." The "investment in the contract" is that
portion, if any, of purchase payments paid under a Contract less any
distributions received previously under the Contract that are excluded
from the recipient's gross income. The taxable portion is taxed at
ordinary income tax rates. For purposes of this rule, a pledge or
assignment of a Contract is treated as a payment received on account of a
partial withdrawal of a Contract. Similarly, loans under a Contract are
generally treated as distributions under the Contract.
* SURRENDERS OR WITHDRAWALS ON OR AFTER THE ANNUITY PAYOUT DATE Upon a
complete surrender, the receipt is taxable to the extent that the cash
value of the Contract exceeds the investment in the Contract. The taxable
portion of such payments will be taxed at ordinary income tax rates. For
fixed annuity payments, the taxable portion of each payment generally is
determined by using a formula known as the "exclusion ratio," which
establishes the ratio that the investment in the Contract bears to the
total expected amount of annuity payments for the term of the Contract.
That ratio is then applied to each payment to determine the non-taxable
portion of the payment. The remaining portion of each payment is taxed at
ordinary income rates. For variable annuity payments, the taxable portion
of each payment is determined by using a formula known as the "excludable
amount," which establishes the non-taxable portion of each payment. The
non-taxable portion is a fixed dollar amount for each payment, determined
by dividing the investment in the Contract by the number of payments to
be made. The remainder of each variable annuity payment is taxable. Once
the excludable portion of annuity payments to date equals the investment
in the Contract, the balance of the annuity payments will be fully
taxable.
* PENALTY TAX ON CERTAIN SURRENDERS AND WITHDRAWALS With respect to amounts
withdrawn or distributed before the taxpayer reaches age 59 1/2, a
penalty tax is generally imposed equal to 10% of the portion of such
amount which is includible in gross income. However, the penalty tax is
not applicable to withdrawals: (i) made on or after the death of the
owner (or where the owner is not an individual, the death of the "primary
annuitant," who is defined as the individual the events in whose life are
of primary importance in affecting the timing and amount of the payout
under the Contract); (ii) attributable to the taxpayer's becoming totally
disabled within the meaning of Code Section 72(m)(7); (iii) which are
part of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
taxpayer, or the joint lives (or joint life expectancies) of the taxpayer
and his or her beneficiary; (iv) from certain qualified plans; (v) under
a so-called qualified funding asset (as defined in Code Section 130(d));
(vi) under an immediate annuity contract; or (vii) which are purchased by
an employer on termination of certain types of qualified plans and which
are held by the employer until the employee separates from service.
If the penalty tax does not apply to a surrender or withdrawal as a
result of the application of item (iii) above, and the series of payments
are subsequently modified (other than by reason of death or disability),
the tax for the first year in which the modification occurs will be
increased by an amount (determined by the regulations) equal to the tax
that would have been imposed but for item (iii) above, plus interest for
the deferral period, if the modification takes place (a) before the close
of the period which is five years from the date of the first payment and
after the taxpayer attains age 59 1/2, or (b) before the taxpayer reaches
age 59 1/2.
ADDITIONAL CONSIDERATIONS
* DISTRIBUTION-AT-DEATH RULES In order to be treated as an annuity
contract, a Contract must provide the following two distribution rules:
(a) if any owner dies on or after the Annuity Payout Date, and before the
entire interest in the Contract has been distributed, the remainder of
the owner's interest will be distributed at least as quickly as the
distribution method in effect on the owner's death; and (b) if any owner
dies before the Annuity Payout Date, the entire interest in the Contract
must generally be distributed within five years after the date of death,
or, if payable to a designated beneficiary, must be annuitized over the
life of that designated beneficiary or over a period not extending beyond
the life expectancy of that beneficiary, commencing within one year after
the date of death of the owner. If the sole designated beneficiary is the
spouse of the deceased owner, the Contract (together with the deferral of
tax on the accrued and future income thereunder) may be continued in the
name of the spouse as owner.
Generally, for purposes of determining when distributions must begin
under the foregoing rules, where an owner is not an individual, the
primary annuitant is considered the owner. In that case, a change in the
primary annuitant will be treated as the death of the owner. Finally, in
the case of joint owners, the distribution-at-death rules will be applied
by treating the death of the first owner as the one to be taken into
account in determining generally when distributions must commence, unless
the sole Beneficiary is the deceased owner's spouse.
* GIFT OF ANNUITY CONTRACTS Generally, gifts of Non-Qualified Plan
Contracts prior to the Annuity Payout Date will trigger tax on the gain
on the Contract, with the donee getting a stepped-up basis for the amount
included in the donor's income. The 10% penalty tax and gift tax also may
be applicable. This provision does not apply to transfers between spouses
or incident to a divorce.
* CONTRACTS OWNED BY NON-NATURAL PERSONS If the Contract is held by a
non-natural person (for example, a corporation), the income on that
Contract (generally the increase in net surrender value less the purchase
payments) is includible in taxable income each year. The rule does not
apply where the Contract is acquired by the estate of a decedent, where
the Contract is held by certain types of retirement plans, where the
Contract is a qualified funding asset for structured settlements, where
the Contract is purchased on behalf of an employee upon termination of a
qualified plan, and in the case of a so-called immediate annuity. An
annuity contract held by a trust or other entity as agent for a natural
person is considered held by a natural person.
* MULTIPLE CONTRACT RULE For purposes of determining the amount of any
distribution under Code Section 72(e) (amounts not received as annuities)
that is includible in gross income, all Non-Qualified annuity contracts
issued by the same insurer to the same Contractowner during any calendar
year are to be aggregated and treated as one contract. Thus, any amount
received under any such contract prior to the contract's Annuity Payout
Date, such as a partial withdrawal, dividend, or loan, will be taxable
(and possibly subject to the 10% penalty tax) to the extent of the
combined income in all such contracts.
In addition, the Treasury Department has broad regulatory authority in
applying this provision to prevent avoidance of the purposes of this
rule. It is possible that, under this authority, the Treasury Department
may apply this rule to amounts that are paid as annuities (on and after
the Annuity Payout Date) under annuity contracts issued by the same
company to the same owner during any calendar year. In this case, annuity
payments could be fully taxable (and possibly subject to the 10% penalty
tax) to the extent of the combined income in all such contracts and
regardless of whether any amount would otherwise have been excluded from
income because of the "exclusion ratio" under the contract.
* POSSIBLE TAX CHANGES In recent years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities,
and President Clinton's fiscal-year 1999 Budget proposal includes a
provision that, if adopted, would impose new taxes on owners of variable
annuities. There is always the possibility that the tax treatment of
annuities could change by legislation or other means (such as IRS
regulations, revenue rulings, and judicial decisions). Moreover, although
unlikely, it is also possible that any legislative change could be
retroactive (that is, effective prior to the date of such change).
* TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A CONTRACT A transfer of
ownership of a Contract, the designation of an Annuitant, Payee, or other
Beneficiary who is not also the Owner, the selection of certain Annuity
Payout Dates or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein. An Owner
contemplating any such transfer, assignment, selection, or exchange
should contact a qualified tax adviser with respect to the potential
effects of such a transaction.
QUALIFIED PLANS
The Contract may be used as a Qualified Plan that meets the requirements of
an individual retirement annuity ("IRA") under Section 408 of the Code. No
attempt is made herein to provide more than general information about the
use of the Contract as a Qualified Plan. Contractowners, Annuitants, and
Beneficiaries are cautioned that the rights of any person to any benefits
under such Qualified Plans may be limited by applicable law, regardless of
the terms and conditions of the Contract issued in connection therewith.
The amount that may be contributed to a Qualified Plan is subject to
limitations under the Code. In addition, early distributions from Qualified
Plans may be subject to penalty taxes. Furthermore, distributions from most
Qualified Plans are subject to certain minimum distribution rules. Failure
to comply with these rules could result in disqualification of the Plan or
subject the Owner or Annuitant to penalty taxes. As a result, the minimum
distribution rules may limit the availability of certain Annuity Options to
certain Annuitants and their beneficiaries. These rules and requirements may
not be incorporated into our Contract administration procedures. Therefore,
Contractowners, Annuitants, and Beneficiaries are responsible for
determining that contributions, distributions, and other transactions with
respect to the Contracts comply with applicable law.
THE FOLLOWING IS A BRIEF DESCRIPTION OF QUALIFIED PLANS AND THE USE OF THE
CONTRACT THEREWITH:
* SECTION 408
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to establish individual retirement programs through the
purchase of Individual Retirement Annuities ("traditional IRAs"). The
Contract may be purchased as an IRA. The IRAs described in this paragraph
are called "traditional IRAs" to distinguish them from "Roth IRAs" which
became available in 1998.
IRAs are subject to limitations on the amount that may be contributed,
the persons who may be eligible, and on the time when distributions must
commence. Depending upon the circumstances of the individual,
contributions to a traditional IRA may be made on a deductible or
nondeductible basis. IRAs may not be transferred, sold, assigned,
discounted, or pledged as collateral for a loan or other obligation. The
annual premium for an IRA may not be fixed and may not exceed $2,000. Any
refund of premium must be applied to the payment of future premiums or
the purchase of additional benefits.
Sale of the Contracts for use with IRAs may be subject to special
requirements imposed by the Internal Revenue Service. Purchasers of the
Contracts for such purposes will be provided with such supplementary
information as may be required by the Internal Revenue Service and will
have the right to revoke the Contract under certain circumstances. See
the IRA Disclosure Statement which accompanies this Prospectus.
An individual's interest in a traditional IRA must generally be
distributed or begin to be distributed not later than April 1 of the
calendar year following the calendar year in which the individual reaches
age 70 1/2 ("required beginning date"). The Contractowner's retirement
date, if any, will not affect his or her required beginning date.
Periodic distributions must not extend beyond the life of the individual
or the lives of the individual and a designated beneficiary (or over a
period extending beyond the life expectancy of the individual or the
joint life expectancy of the individual and a designated beneficiary).
If an individual dies before reaching his or her required beginning date,
the individual's entire interest must generally be distributed within
five years of the individual's death. However, the five-year rule will be
deemed satisfied if distributions begin before the close of the calendar
year following the individual's death to a designated beneficiary and are
made over the life of the beneficiary (or over a period not extending
beyond the life expectancy of the beneficiary). If the designated
beneficiary is the individual's surviving spouse, distributions may be
delayed until the individual would have reached age 70 1/2.
If an individual dies after reaching his or her required beginning date,
the individual's interest must generally be distributed at least as
rapidly as under the method of distribution in effect at the time of the
individual's death.
Distributions from IRAs are generally taxed under Code Section 72. Under
these rules, a portion of each distribution may be excludable from
income. The amount excludable from the individual's income is the amount
of the distribution which bears the same ratio as the individual's
nondeductible contributions bear to the expected return under the IRA.
The Internal Revenue Service has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in
the Contract comports with IRA qualification requirements.
* TAX PENALTIES
PREMATURE DISTRIBUTION TAX. Distributions from a Qualified Plan before
the owner reaches age 59 1/2 are generally subject to an additional tax
equal to 10% of the taxable portion of the distribution. The 10% penalty
tax does not apply to distributions: (i) made on or after the death of
the Owner; (ii) attributable to the Owner's disability; (iii) which are
part of a series of substantially equal periodic payments made (at least
annually) for the life (or life expectancy) of the Owner or the joint
lives (or joint life expectancies) of the Owner and a designated
beneficiary; (iv) made to pay for certain medical expenses; (v) that are
exempt withdrawals of an excess contribution; (vi) that are rolled over
or transferred in accordance with Code requirements; or (vii) which,
subject to certain restrictions, do not exceed the health insurance
premiums paid by unemployed individuals in certain cases. Starting
January 1, 1998, there are two additional exceptions to the 10% penalty
tax on withdrawals from IRAs before age 59 1/2: withdrawals made to pay
"qualified higher education expenses" and certain "qualified first-time
homebuyer distributions."
MINIMUM DISTRIBUTION TAX. If the amount distributed from a Qualified Plan
is less than the minimum required distribution for the year, the Owner is
subject to a 50% tax on the amount that was not properly distributed.
EXCESS DISTRIBUTION/ACCUMULATION TAX. The penalty tax of 15% which was
imposed (in addition to any ordinary income tax) on large plan
distributions and the "excess retirement accumulations" of an individual
has been repealed, effective January 1, 1997.
* WITHHOLDING
Periodic distributions (e.g., annuities and installment payments) from a
Qualified Plan that will last for a period of 10 or more years are
generally subject to voluntary income tax withholding. The amount
withheld on such periodic distributions is determined at the rate
applicable to wages. The recipient of a periodic distribution may
generally elect not to have withholding apply.
Nonperiodic distributions (e.g., lump sums and annuities or installment
payments of less than 10 years) from an IRA are subject to income tax
withholding at a flat 10% rate. The recipient of such a distribution may
elect not to have withholding apply.
The above description of the federal income tax consequences applicable
to Qualified Plans which may be funded by the Contract offered by this
Prospectus is only a brief summary and is not intended as tax advice. The
rules governing the provisions of Qualified Plans are extremely complex
and often difficult to comprehend. Anything less than full compliance
with the applicable rules, all of which are subject to change, may have
adverse tax consequences. A prospective Contractowner considering
adoption of a Qualified Plan and purchase of a Contract in connection
therewith should first consult a qualified and competent tax adviser,
with regard to the suitability of the Contract as an investment vehicle
for the Qualified Plan.
OTHER INFORMATION
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VOTING OF FUND SHARES
The Company is the legal owner of the shares of the Funds held by the
Subaccounts. The Company will exercise voting rights attributable to the
shares of each Portfolio of the Funds held in the Subaccounts at any regular
and special meetings of the shareholders of the Funds on matters requiring
shareholder voting under the 1940 Act. In accordance with its view of
presently applicable law, the Company will exercise these voting rights
based on instructions received from persons having the voting interest in
corresponding Subaccounts. However, if the 1940 Act or any regulations
thereunder should be amended, or if the present interpretation thereof
should change, and as a result the Company determines that it is permitted
to vote the shares of the Funds in its own right, it may elect to do so.
The person having the voting interest under a Contract is the Owner. Unless
otherwise required by applicable law, the number of shares of a particular
Portfolio as to which voting instructions may be given to the Company is
determined by dividing a Contractowner's Account Value in a Subaccount on a
particular date by the net asset value per share of that Portfolio as of the
same date. Fractional votes will be counted. The number of votes as to which
voting instructions may be given will be determined as of the date
coincident with the date established by the Fund for determining
shareholders eligible to vote at the meeting of the Fund. If required by the
SEC, the Company reserves the right to determine in a different fashion the
voting rights attributable to the shares of the Funds. Voting instructions
may be cast in person or by proxy.
Voting rights attributable to the Contractowner's Account Value in a
Subaccount for which no timely voting instructions are received will be
voted by the Company in the same proportion as the voting instructions that
are received in a timely manner for all Contracts participating in that
Subaccount. The Company will also exercise the voting rights from assets in
each Subaccount that are not otherwise attributable to Contractowners, if
any, in the same proportion as the voting instructions that are received in
a timely manner for all Contracts participating in that Subaccount.
SUBSTITUTION OF INVESTMENTS
The Company reserves the right, subject to compliance with the law as then
in effect, to make additions to, deletions from, substitutions for, or
combinations of the securities that are held by the Separate Account or any
Subaccount or that the Separate Account or any Subaccount may purchase. If
shares of any or all of the Portfolios of the Funds should no longer be
available for investment, or if the Company receives an opinion from counsel
acceptable to Investment Services that substitution is in the best interest
of Contractowners and that further investment in shares of the Portfolio(s)
would cause undue risk to the Company, the Company may substitute shares of
another Portfolio of the Funds or of a different fund for shares already
purchased, or to be purchased in the future under the Contract. The Company
may also purchase, through the Subaccount, other securities for other
classes of contracts, or permit a conversion between classes of contracts on
the basis of requests made by Owners.
In connection with a substitution of any shares attributable to an Owner's
interest in a Subaccount or the Separate Account, the Company will, to the
extent required under applicable law, provide notice, seek Owner approval,
seek prior approval of the SEC, and comply with the filing or other
procedures established by applicable state insurance regulators.
The Company also reserves the right to establish additional Subaccounts of
the Separate Account that would invest in a new Portfolio of one of the
Funds or in shares of another investment company, a series thereof, or other
suitable investment vehicle. New Subaccounts may be established by the
Company with the consent of Investment Services, and any new Subaccount will
be made available to existing Owners on a basis to be determined by the
Company and Investment Services. The Company may also eliminate or combine
one or more Subaccounts if marketing, tax, or investment conditions so
warrant.
Subject to compliance with applicable law, the Company may transfer assets
to the General Account with the consent of Investment Services. The Company
also reserves the right, subject to any required regulatory approvals, to
transfer assets of any Subaccount of the Separate Account to another
separate account or Subaccount with the consent of Investment Services.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in these and other contracts as
may be necessary or appropriate to reflect such substitution or change. If
deemed by the Company to be in the best interests of persons having voting
rights under the Contracts, the Separate Account may be operated as a
management investment company under the 1940 Act or any other form permitted
by law; it may be deregistered under that Act in the event such registration
is no longer required; or it may be combined with other separate accounts of
the Company or an affiliate thereof. Subject to compliance with applicable
law, the Company also may combine one or more Subaccounts and may establish
a committee, board, or other group to manage one or more aspects of the
operation of the Separate Account.
CHANGES TO COMPLY WITH LAW AND AMENDMENTS
The Company reserves the right, without the consent of Owners, to suspend
sales of the Contract as presently offered and to make any change to the
provisions of the Contracts to comply with, or give Owners the benefit of,
any federal or state statute, rule, or regulation, including but not limited
to requirements for annuity contracts and retirement plans under the
Internal Revenue Code and regulations thereunder or any state statute or
regulation. The Company also reserves the right to limit the amount and
frequency of subsequent purchase payments.
REPORTS TO OWNERS
A statement will be sent annually to each Contractowner setting forth a
summary of the transactions that occurred during the year, and indicating
the Account Value as of the end of each year. In addition, the statement
will indicate the allocation of Account Value among the Fixed Interest
Account and the Subaccounts and any other information required by law.
Confirmations will also be sent out upon purchase payments, exchanges, and
full and partial withdrawals. Certain transactions will be confirmed
quarterly. These transactions include exchanges under the Dollar Cost
Averaging and Asset Rebalancing Options, purchase payments made under an
Automatic Investment Program, systematic withdrawals, and annuity payments.
Each Contractowner will also receive an annual and semiannual report
containing financial statements for the Portfolios, which will include a
list of the portfolio securities of the Portfolios, as required by the 1940
Act, and/or such other reports as may be required by federal securities
laws.
TELEPHONE EXCHANGE PRIVILEGES
You may request an exchange of Account Value by telephone if an
Authorization for Telephone Requests form ("Telephone Authorization") has
been completed, signed, and filed with the Company. The Company has
established procedures to confirm that instructions communicated by
telephone are genuine and will not be liable for any losses due to
fraudulent or unauthorized instructions, provided that it complies with its
procedures. The Company's procedures require that any person requesting an
exchange by telephone provide the account number and the Owner's tax
identification number and such instructions must be received on a recorded
line. The Company reserves the right to deny any telephone exchange request.
If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), Contractowners might not be
able to request exchanges by telephone and would have to submit written
requests.
By authorizing telephone exchanges, a Contractowner authorizes the Company
to accept and act upon telephonic instructions for exchanges involving the
Contractowner's Contract, and agrees that neither the Company, nor any of
its affiliates, nor the Funds, nor any of their directors, trustees,
officers, employees, or agents, will be liable for any loss, damages, cost,
or expense (including attorney's fees) arising out of any requests effected
in accordance with the Telephone Authorization and believed by the Company
to be genuine, provided that the Company has complied with its procedures.
As a result of this policy on telephone requests, the Contractowner will
bear the risk of loss arising from the telephone exchange privileges. The
Company may discontinue, modify, or suspend telephone exchange privileges at
any time.
DISTRIBUTION OF THE CONTRACT
T. Rowe Price Investment Services, Inc. ("Investment Services"), is the
distributor of the Contracts. Investment Services also acts as the
distributor of certain mutual funds advised by T. Rowe Price and
Price-Fleming. Investment Services is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934, and in all 50
states, the District of Columbia, and Puerto Rico. Investment Services is a
member of the National Association of Securities Dealers, Inc. Investment
Services is a wholly owned subsidiary of T. Rowe Price and is an affiliate
of the Funds.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Separate Account is a
party, or which would materially affect the Separate Account.
LEGAL MATTERS
Legal matters relating to New York law have been passed upon by LeBoeuf,
Lamb, Greene & MacRae, New York, New York.
Legal matters relating to the federal securities and federal income tax laws
have been passed upon by Dechert Price & Rhoads, Washington, D.C.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Performance information for the Subaccounts of the Separate Account,
including the yield and total return of all Subaccounts may appear in
advertisements, reports, and promotional literature to current or
prospective Owners.
Current yield for the Prime Reserve Subaccount will be based on investment
income received by a hypothetical investment over a given seven-day period
(less expenses accrued during the period), and then "annualized" (i.e.,
assuming that the seven-day yield would be received for 52 weeks, stated in
terms of an annual percentage return on the investment). "Effective yield"
for the Prime Reserve Subaccount is calculated in a manner similar to that
used to calculate yield but reflects the compounding effect of earnings.
For the other Subaccounts, quotations of yield will be based on all
investment income per Accumulation Unit earned during a given 30-day period,
less expenses accrued during the period ("net investment income"), and will
be computed by dividing net investment income by the value of an
Accumulation Unit on the last day of the period. Quotations of average
annual total return for any Subaccount will be expressed in terms of the
average annual compounded rate of return on a hypothetical investment in a
Contract over a period of 1, 5, and 10 years (or, if less, up to the life of
the Subaccount), and will reflect the deduction of the mortality and expense
risk charge and may simultaneously be shown for other periods. Where the
Portfolio in which a Subaccount invests was established prior to inception
of the Subaccount, quotations of total return may include quotations for
periods beginning prior to the Subaccount's date of inception. Such
quotations of total return are based upon the performance of the
Subaccount's corresponding Portfolio adjusted to reflect deduction of the
mortality and expense risk charge.
Performance information for any Subaccount reflects only the performance of
a hypothetical Contract under which Account Value is allocated to a
Subaccount during a particular time period on which the calculations are
based. Performance information should be considered in light of the
investment objectives and policies, characteristics, and quality of the
Portfolio in which the Subaccount invests, and the market conditions during
the given time period, and should not be considered as a representation of
what may be achieved in the future. For a description of the methods used to
determine yield and total return for the Subaccounts and the usage of other
performance related information, see the Statement of Additional
Information.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
REGISTRATION STATEMENT
A Registration Statement under the 1933 Act has been filed with the SEC
relating to the offering described in this Prospectus. This Prospectus has
been filed as a part of the Registration Statement and does not contain all
of the information set forth in the Registration Statement and exhibits
thereto, and reference is made to such Registration Statement and exhibits
for further information relating to the Company and the Contract. Statements
contained in this Prospectus, as to the content of the Contract and other
legal instruments, are summaries. For a complete statement of the terms
thereof, reference is made to the instruments filed as exhibits to the
Registration Statement. The Registration Statement and the exhibits thereto
may be inspected and copied at the SEC's office, located at 450 Fifth
Street, N.W., Washington, D.C.
FINANCIAL STATEMENTS
The financial statements of the Company at December 31, 1998 and 1997, and
for each of the three years in the period ended December 31, 1998, and the
financial statements of the Separate Account as of December 31, 1998, and
for the years ended December 31, 1998 and 1997, are included in the
Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
and financial statements relating to the Company and the Separate Account.
The Table of Contents of the Statement of Additional Information is set
forth below.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
General Information and History 1
----------------------------------------------------------------------------
Distribution of the Contract 1
----------------------------------------------------------------------------
Limits on Premiums Paid Under Tax-Qualified Retirement Plans 1
----------------------------------------------------------------------------
Experts 2
----------------------------------------------------------------------------
Performance Information 2
----------------------------------------------------------------------------
Financial Statements 4
----------------------------------------------------------------------------
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
T. ROWE PRICE VARIABLE ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
DATE: MAY 1, 1999
Individual Flexible Premium Deferred Variable Annuity Contract
- --------------------------------------------------------------------------------
ISSUED BY: MAILING ADDRESS:
First Security Benefit Life Insurance First Security Benefit Life Insurance
and Annuity Company of New York and Annuity Company of New York
70 West Red Oak Lane, 4th Floor c/o T. Rowe Price Variable Annuity
White Plains, New York 10604 Service Center
1-800-355-4570 P.O. Box 750106
Topeka, Kansas 66675-0106
1-800-469-6587
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current Prospectus for the T. Rowe Price Variable
Annuity dated May 1, 1999. A copy of the Prospectus may be obtained from the T.
Rowe Price Variable Annuity Service Center by calling 1-800-469-6587 or by
writing P.O. Box 750106, Topeka, Kansas 66675-0106.
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
General Information and History ............................................ 1
Distribution of the Contract ............................................... 1
Limits on Premiums Paid Under Tax-Qualified Retirement Plans ............... 1
Experts .................................................................... 2
Performance Information .................................................... 2
Financial Statements ....................................................... 4
<PAGE>
GENERAL INFORMATION AND HISTORY
- --------------------------------------------------------------------------------
For a description of the Individual Flexible Premium Deferred Variable
Annuity Contract (the "Contract"), First Security Benefit Life Insurance and
Annuity Company of New York (the "Company"), and the T. Rowe Price Variable
Annuity Account of First Security Benefit Life Insurance and Annuity Company
of New York (the "Separate Account"), see the Prospectus. This Statement of
Additional Information contains information that supplements the information
in the Prospectus. Defined terms used in this Statement of Additional
Information have the same meaning as terms defined in the section entitled
"Definitions" in the Prospectus.
SAFEKEEPING OF ASSETS
The Company is responsible for the safekeeping of the assets of the
Subaccounts. These assets, which consist of shares of the Portfolios of the
Funds in non-certificated form, are held separate and apart from the assets
of the Company's General Account and its other separate accounts.
DISTRIBUTION OF THE CONTRACT
- --------------------------------------------------------------------------------
T. Rowe Price Investment Services, Inc. ("Investment Services"), a Maryland
corporation formed in 1980 as a wholly-owned subsidiary of T. Rowe Price
Associates, Inc., is Principal Underwriter of the Contract. Investment
Services is registered as a broker/ dealer with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. ("NASD"). The
offering of the Contract is continuous.
Investment Services serves as Principal Underwriter under a Distribution
Agreement with the Company. Investment Services' registered representatives
are required to be authorized under applicable state regulations to make the
Contract available to its customers. Investment Services is not compensated
under its Distribution Agreement with the Company.
LIMITS ON PREMIUMS PAID UNDER TAX-QUALIFIED RETIREMENT PLANS
- --------------------------------------------------------------------------------
SECTION 408
Premiums (other than rollover contributions) paid under a Contract used in
connection with an individual retirement annuity (IRA) that is described in
Section 408 of the Internal Revenue Code are subject to the limits on
contributions to IRA's under Section 219(b) of the Internal Revenue Code.
Under Section 219(b) of the Code, contributions (other than rollover
contributions) to an IRA are limited to the lesser of $2,000 per year or the
Owner's annual compensation. An additional $2,000 may be contributed if the
Owner has a spouse with little or no compensation for the year, provided
distinct accounts are maintained for the Owner and his or her spouse, and no
more than $2,000 is contributed to either account in any one year. The
extent to which an Owner may deduct contributions to an IRA depends on the
modified adjusted gross income of the Owner and his or her spouse for the
year and whether either participates in another employer-sponsored
retirement plan.
Premiums under a Contract used in connection with a simplified employee
pension plan described in Section 408 of the Internal Revenue Code are
subject to limits under Section 402(h) of the Internal Revenue Code. Section
402(h) currently limits employer contributions and salary reduction
contributions (if permitted) under a simplified employee pension plan to the
lesser of (a) 15% of the compensation of the participant in the Plan, or (b)
$30,000. Salary reduction contributions, if any, are subject to additional
annual limits. Salary reduction simplified employee pensions ("SARSEPs")
have been repealed; however, SARSEPs established prior to January 1, 1997
may continue to receive contributions.
EXPERTS
- --------------------------------------------------------------------------------
Ernst & Young LLP, independent auditors, perform certain auditing services
for the Company and the Separate Account. The financial statements of the
Company at December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998, are contained in this Statement of
Additional Information. The financial statements of the Separate Account as
of December 31, 1998, and for the years ended December 31, 1998 and 1997,
are also included in this Statement of Additional Information. The financial
statements have been audited by Ernst & Young LLP, as set forth in their
reports thereon appearing herein and are included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Performance information for the Subaccounts of the Separate Account,
including the yield and total return of all Subaccounts, may appear in
advertisements, reports, and promotional literature provided to current or
prospective Owners.
Quotations of yield for the Prime Reserve Subaccount will be based on the
change in the value, exclusive of capital changes, of a hypothetical
investment in a Contract over a particular seven day period, less a
hypothetical charge reflecting deductions from the Contract during the
period (the "base period") and stated as a percentage of the investment at
the start of the base period (the "base period return"). The base period
return is then annualized by multiplying by 365/7, with the resulting yield
figure carried to at least the nearest one hundredth of one percent. Any
quotations of effective yield for the Prime Reserve subaccount assume that
all dividends received during an annual period have been reinvested.
Calculation of "effective yield" begins with the same "base period return"
used in the yield calculation, which is then annualized to reflect weekly
compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)^365/7] - 1
For the seven-day period ended December 31, 1998, the yield of the Prime
Reserve Subaccount was 4.35% and the effective yield of the Subaccount was
4.44%.
Quotations of yield for the Subaccounts, other than the Prime Reserve
Subaccount, will be based on all investment income per Accumulation Unit
earned during a particular 30-day period, less expenses accrued during the
period ("net investment income"), and will be computed by dividing net
investment income by the value of the Accumulation Unit on the last day of
the period, according to the following formula:
YIELD = 2[(a - b + 1)^6 - 1]
-----
cd
where a = net investment income earned during the period by the
Portfolio attributable to shares owned by the Subaccount,
b = expenses accrued for the period (net of any reimbursements),
c = the average daily number of Accumulation Units outstanding
during the period that were entitled to receive dividends,
and
d = the maximum offering price per Accumulation Unit on the last
day of the period.
For the 30-day period ended December 31, 1998, the yield of the Limited-Term
Bond Subaccount was 5.48%.
Quotations of average annual total return for any Subaccount will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in a Contract over a period of one, five and ten
years (or, if less, up to the life of the Subaccount), calculated pursuant
to the following formula: P(1 + T)^n = ERV (where P = a hypothetical initial
payment of $1,000, T = the average annual total return, n = the number of
years, and ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period). All total return figures
reflect the deduction of the mortality and expense risk charge. Quotations
of total return may simultaneously be shown for other periods.
Where the Portfolio in which a Subaccount invests was established prior to
inception of the Subaccount, quotations of total return will include
quotations for periods beginning prior to the Subaccount's date of
inception. Such quotations of total return are based upon the performance of
the Subaccount's corresponding Portfolio adjusted to reflect deduction of
the mortality and expense risk charge.
For the one-year period ended December 31, 1998, the average annual total
return of New America Growth Subaccount, International Stock Subaccount,
Equity Income Subaccount, Personal Strategy Balanced Subaccount, Mid-Cap
Growth Subaccount and Limited-Term Bond Subaccount was 17.84%, 15.20%,
8.39%, 13.75%, 21.42% and 6.47%, respectively. For the period from March 31,
1994 (Portfolio date of inception) to December 31, 1998, the average annual
total return for the New America Growth Subaccount, International Stock
Subaccount, and Equity Income Subaccount was 21.90%, 9.08%, and 19.20%,
respectively. For the period from December 30, 1994 (Portfolio date of
inception) to December 31, 1998, the average annual total return for the
Personal Strategy Balanced Subaccount was 18.02%. For the period from May
13, 1994 (Portfolio date of inception) to December 31, 1998, the average
annual total return for the Limited-Term Bond Subaccount was 5.77%. For the
period from December 31, 1996 (Portfolio date of inception) to December 31,
1998, the average annual total return for the Mid-Cap Growth Subaccount was
19.75%.
Performance information for a Subaccount may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P
500"), Dow Jones Industrial Average ("DJIA"), Donoghue Money Market
Institutional Averages, the Lehman Brothers Government Corporate Index, the
Morgan Stanley Capital International's EAFE Index, or other indices that
measure performance of a pertinent group of securities so that investors may
compare a Subaccount's results with those of a group of securities widely
regarded by investors as representative of the securities markets in general
or representative of a particular type of security; (ii) other variable
annuity separate accounts, insurance product funds, or other investment
products tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds and other investment companies by
overall performance, investment objectives, and assets, or tracked by The
Variable Annuity Research and Data Service ("VARDS"), an independent service
which monitors and ranks the performance of variable annuity issues by
investment objectives on an industry-wide basis or tracked by other
services, companies, publications, or persons who rank such investment
companies on overall performance or other criteria; and (iii) the Consumer
Price Index (measure for inflation) to assess the real rate of return from
an investment in the Contract. Unmanaged indices may assume the reinvestment
of dividends but generally do not reflect deductions for administrative and
management costs and expenses.
Performance information for any Subaccount reflects only the performance of
a hypothetical Contract under which an Owner's Contract Value is allocated
to a Subaccount during a particular time period on which the calculations
are based. Performance information should be considered in light of the
investment objectives and policies, characteristics, and quality of the
Portfolio of the Funds in which the Subaccount invests, and the market
conditions during the given time period, and should not be considered as a
representation of what may be achieved in the future.
Reports and promotional literature may also contain other information
including (i) the ranking of any Subaccount derived from rankings of
variable annuity separate accounts, insurance product funds, or other
investment products tracked by Lipper Analytical Services, Inc.,
Morningstar, Inc. or by other rating services, companies, publications, or
other persons who rank separate accounts or other investment products on
overall performance or other criteria, (ii) the effect of a 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, and
(iii) personal hypothetical illustrations of accumulation and payout period
Contract Values and annuity payments.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of the Company at December 31, 1998 and 1997, and
for each of the three years in the period ended December 31, 1998 and the
financial statements of the Separate Account as of December 31, 1998, and
for the years ended December 31, 1998 and 1997, are set forth herein,
starting on page 5.
The financial statements of the Company, which are included in this
Statement of Additional Information, should be considered only as bearing on
the ability of the Company 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.
T. Rowe Price Variable Annuity Account
of First Security Benefit Life Insurance
and Annuity Company of New York
Financial Statements
Years ended December 31, 1998 and 1997
CONTENTS
- --------------------------------------------------------------------------------
Report of Independent Auditors ......................................... 5
Audited Financial Statements
Balance Sheet .......................................................... 6
Statements of Operations and Changes in Net Assets ..................... 8
Notes to Financial Statements .......................................... 10
<PAGE>
Report of Independent Auditors
The Contract Owners of T. Rowe Price Variable Annuity
Account of First Security Benefit Life Insurance and
Annuity Company of New York and the Board of
Directors of First Security Benefit Life Insurance and
Annuity Company of New York
We have audited the accompanying balance sheet of T. Rowe Price Variable Annuity
Account of First Security Benefit Life Insurance and Annuity Company of New York
(the Account) (comprised of the individual series as indicated therein) as of
December 31, 1998 and the related statements of operations and changes in net
assets for each of the two years in the period then ended. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of December 31, 1998 by correspondence with
the transfer agent. An audit also includes assessing the accounting principles
used and significant estimates made by management as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the individual series of T.
Rowe Price Variable Annuity Account of First Security Benefit Life Insurance and
Annuity Company of New York at December 31, 1998 and the results of their
operations and changes in their net assets for each of the two years in the
period then ended in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 5, 1999
<PAGE>
T. Rowe Price Variable Annuity Account
of First Security Benefit Life Insurance
and Annuity Company of New York
Balance Sheet
December 31, 1998
(DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
T. Rowe Price Portfolios:
New America Growth Portfolio - 172,709 shares at net asset
value of $24.74 per share (cost, $3,371) $ 4,273
International Stock Portfolio - 131,338 shares at net asset
value of $14.52 per share (cost, $1,725) 1,907
Equity Income Portfolio - 362,391 shares at net asset value
of $19.24 per share (cost, $6,278) 6,972
Personal Strategy Balanced Portfolio - 105,605 shares at net
asset value of $16.16 per share (cost, $1,569) 1,707
Limited-Term Bond Portfolio - 102,684 shares at net asset
value of $5.02 per share (cost, $511) 515
Mid-Cap Growth Portfolio - 156,109 shares at net asset value
of $14.27 per share (cost, $1,870) 2,228
Prime Reserve Portfolio - 1,092,990 shares at net asset
value of $1.00 per share (cost, $1,093) 1,093
-------
Total assets $18,695
=======
<PAGE>
NUMBER UNIT
OF UNITS VALUE AMOUNT
---------------------------------------
NET ASSETS
Net assets are represented by (NOTE 3):
New America Growth Subaccount:
Accumulation units 188,096 $22.72 $4,273
International Stock Subaccount:
Accumulation units 126,224 15.08 $ 1,903
Annuity reserves 236 15.08 4 1,907
-------
Equity Income Subaccount:
Accumulation units 341,036 20.42 6,964
Annuity reserves 413 20.42 8 6,972
-------
Personal Strategy Balanced Subaccount:
Accumulation units 94,177 18.04 1,699
Annuity reserves 447 18.04 8 1,707
-------
Limited-Term Bond Subaccount:
Accumulation units 40,576 12.37 502
Annuity reserves 1,089 12.37 13 515
-------
Mid-Cap Growth Subaccount:
Accumulation units 155,295 14.34 2,228
Prime Reserve Subaccount:
Accumulation units 99,654 10.97 1,093
--------
Total net assets $18,695
========
SEE ACCOMPANYING NOTES.
<PAGE>
T. Rowe Price Variable Annuity Account
of First Security Benefit Life Insurance
and Annuity Company of New York
Statement of Operations and Changes in Net Assets
Year ended December 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERSONAL
NEW AMERICA INTERNATIONAL EQUITY STRATEGY LIMITED- MID-CAP PRIME
GROWTH STOCK INCOME BALANCED TERM BOND GROWTH RESERVE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ - $ 22 $ 134 $ 48 $ 27 $ - $ 52
Expenses (NOTE 2):
Mortality and expense risk fee (21) (10) (36) (9) (3) (9) (6)
-------------------------------------------------------------------------------------------------
Net investment income (loss) (21) 12 98 39 24 (9) 46
Capital gain distributions 85 7 213 61 2 32 -
Realized gain on investments 200 63 379 68 3 65 -
Unrealized appreciation
(depreciation) on investments 347 167 (167) 24 2 238 -
-------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 632 237 425 153 7 335 -
-------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 611 249 523 192 31 326 46
Net assets at beginning of year 3,296 1,620 6,053 1,218 500 1,077 790
Variable annuity deposits
(NOTES 2 AND 3) 1,057 471 1,652 581 206 1,058 2,018
Terminations and withdrawals
(NOTES 2 AND 3) (691) (432) (1,255) (284) (220) (233) (1,761)
Annuity payments (NOTES 2 AND 3) - (1) (1) - (2) - -
-------------------------------------------------------------------------------------------------
Net assets at end of year $4,273 $1,907 $6,972 $1,707 $515 $2,228 $1,093
=================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
T. Rowe Price Variable Annuity Account
of First Security Benefit Life Insurance
and Annuity Company of New York
Statement of Operations and Changes in Net Assets
Year ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERSONAL
NEW AMERICA INTERNATIONAL EQUITY STRATEGY LIMITED- MID-CAP PRIME
GROWTH STOCK INCOME BALANCED TERM BOND GROWTH RESERVE
SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT SUBACCOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend distributions $ - $ 15 $ 108 $ 30 $ 22 $ - $ 25
Expenses (NOTE 2):
Mortality and expense risk fee (15) (8) (25) (5) (2) (3) (3)
-------------------------------------------------------------------------------------------------
Net investment income (loss) (15) 7 83 25 20 (3) 22
Capital gain distributions 8 21 182 18 - - -
Realized gain (loss) on investments 63 48 122 10 (1) 4 -
Unrealized appreciation
(depreciation) on investments 452 (50) 680 90 3 120 -
-------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 523 19 984 118 2 124 -
-------------------------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 508 26 1,067 143 22 121 22
Net assets at beginning of year 2,301 1,101 2,664 536 365 - -
Variable annuity deposits
(NOTES 2 AND 3) 1,004 815 2,969 603 281 1,210 1,714
Terminations and withdrawals
(NOTES 2 AND 3) (517) (322) (647) (64) (168) (254) (946)
------------------------------------------------------------------------------------------------
Net assets at end of year $3,296 $1,620 $6,053 $1,218 $500 $1,077 $ 790
=================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
T. Rowe Price Variable Annuity Account
of First Security Benefit Life Insurance
and Annuity Company of New York
Notes to Financial Statements
December 31, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
T. Rowe Price Variable Annuity Account (the Account) is a separate account of
First Security Benefit Life Insurance and Annuity Company of New York (FSBL).
The Account is registered as a unit investment trust under the Investment
Company Act of 1940 as amended. The Account currently is divided into seven
subaccounts. Each subaccount invests exclusively in shares of a single
corresponding mutual fund or series thereof. Purchase payments received by the
Account are invested in one of the portfolios of either T. Rowe Price Equity
Series, Inc., T. Rowe Price Fixed Income Series, Inc. or T. Rowe Price
International Series, Inc. mutual funds not otherwise available to the public.
As directed by the owners, purchase payments are invested in shares of New
America Growth Portfolio - emphasis on long-term capital growth through
investments in common stocks of domestic companies, International Stock
Portfolio - emphasis on long-term capital growth through investments in common
stocks of established foreign companies, Equity Income Portfolio - emphasis on
substantial dividend income and capital appreciation by investing primarily in
dividend-paying common stocks, Personal Strategy Balanced Portfolio - emphasis
on both capital appreciation and income, Limited-Term Bond Portfolio - emphasis
on income with moderate price fluctuation by investing in short- and
intermediate-term investment-grade debt securities, Mid-Cap Growth Portfolio -
emphasis on long-term capital appreciation through investments in companies with
proven products or services and Prime Reserve Portfolio - emphasis on
preservation of capital and liquidity while generating the highest possible
current income by investing primarily in high-quality money market securities.
T. Rowe Price Associates, Inc. (T. Rowe Price) serves as the investment advisor
to each portfolio except the International Stock Portfolio, which is managed by
Rowe Price-Fleming International, Inc., an affiliate of T. Rowe Price. The
investment advisors are responsible for managing the portfolios' assets in
accordance with the terms of the investment advisory contracts.
INVESTMENT VALUATION
Investments in mutual fund shares are carried in the balance sheet at market
value (net asset value of the underlying mutual fund). The first-in, first-out
cost method is used to determine gains and losses. Security transactions are
accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold for the
year ended December 31 were as follows:
1998 1997
-------------------------------------------------
COST OF PROCEEDS COST OF PROCEEDS
PURCHASES FROM SALES PURCHASES FROM SALES
-------------------------------------------------
(IN THOUSANDS)
New America Growth Portfolio $1,184 $ 754 $1,029 $549
International Stock Portfolio 540 483 861 340
Equity Income Portfolio 2,107 1,400 3,293 706
Personal Strategy Balanced
Portfolio 738 341 656 74
Limited-Term Bond Portfolio 279 269 293 160
Mid-Cap Growth Portfolio 1,112 264 1,248 295
Prime Reserve Portfolio 2,072 1,769 1,766 976
ANNUITY RESERVES
Annuity reserves relate to contracts that have matured and are in the payout
stage. Such reserves are computed on the basis of published mortality tables
using assumed interest rates that will provide reserves as prescribed by law. In
cases where the payout option selected is life contingent, FSBL periodically
recalculates the required annuity reserves, and any resulting adjustment is
either charged or credited to FSBL and not to the Account.
REINVESTMENT OF DIVIDENDS
Dividend and capital gains distributions paid by the mutual fund to the Account
are reinvested in additional shares of each respective portfolio. Dividend
income and capital gains distributions are recorded as income on the ex-dividend
date.
FEDERAL INCOME TAXES
The operations of the account are part of the operations of FSBL. Under current
law, no federal income taxes are allocated by FSBL to the operations of the
Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. VARIABLE ANNUITY CONTRACT CHARGES
Mortality and expense risks assumed by FSBL are compensated for by a fee
equivalent to an annual rate of 0.55% of the average daily net assets of each
account.
When applicable, an amount for state premium taxes is deducted as provided by
pertinent state law either from the purchase payments or from the amount applied
to effect an annuity at the time annuity payments commence.
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
--------------------------------
Year ended December 31
--------------------------------
1998 1997
--------------------------------
(IN THOUSANDS)
New America Growth Subaccount:
Variable annuity deposits 51 58
Terminations, withdrawals and annuity payments 34 31
International Stock Subaccount:
Variable annuity deposits 33 61
Terminations, withdrawals and annuity payments 31 23
Equity Income Subaccount:
Variable annuity deposits 86 180
Terminations, withdrawals and annuity payments 66 40
Personal Strategy Balanced Subaccount:
Variable annuity deposits 36 41
Terminations, withdrawals and annuity payments 19 4
Limited-Term Bond Subaccount:
Variable annuity deposits 17 24
Terminations, withdrawals and annuity payments 19 14
Mid-Cap Growth Subaccount:
Variable annuity deposits 82 116
Terminations, withdrawals and annuity payments 18 25
Prime Reserve Subaccount:
Variable annuity deposits 188 168
Terminations, withdrawals and annuity payments 164 92
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Financial Statements
Years ended December 31, 1998, 1997 and 1996
CONTENTS
Report of Independent Auditors................................................15
Audited Financial Statements
Balance Sheets................................................................16
Statements of Income..........................................................17
Statements of Changes in Stockholder's Equity.................................18
Statements of Cash Flows......................................................19
Notes to Financial Statements.................................................20
<PAGE>
Report of Independent Auditors
The Board of Directors
First Security Benefit Life Insurance
and Annuity Company of New York
We have audited the accompanying balance sheets of First Security Benefit Life
Insurance and Annuity Company of New York (the Company), an indirect
wholly-owned subsidiary of Security Benefit Mutual Holding Company, as of
December 31, 1998 and 1997, and the related statements of income, changes in
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Security Benefit Life
Insurance and Annuity Company of New York at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
February 5, 1999
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Balance Sheet
DECEMBER 31
1998 1997
-------------------------------------
(IN THOUSANDS)
ASSETS
Fixed maturities available-for-sale $ 6,729 $ 6,752
Cash 495 508
Accrued investment income 108 95
Reinsurance recoverable 209 219
Deferred policy acquisition costs 62 58
Other assets 150 132
Separate account assets 18,695 14,554
-------------------------------------
$26,448 $22,318
=====================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy reserves and annuity
account values $ 555 $ 586
Deferred income taxes 86 102
Other liabilities 74 101
Separate account liabilities 18,695 14,554
-------------------------------------
Total liabilities 19,410 15,343
Stockholder's equity:
Common capital stock, par
value $10 per share;
200,000 shares authorized,
issued and outstanding 2,000 2,000
Additional paid-in capital 4,600 4,600
Accumulated other comprehensive income 119 118
Retained earnings 319 257
-------------------------------------
Total stockholder's equity 7,038 6,975
-------------------------------------
$26,448 $22,318
=====================================
SEE ACCOMPANYING NOTES.
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Statement of Income
YEAR ENDED DECEMBER 31
1998 1997 1996
---------------------------------------
(IN THOUSANDS)
Revenues:
Net investment income $441 $478 $474
Asset based fees 92 60 19
---------------------------------------
Total revenues 533 538 493
Benefits and expenses:
Interest credited to annuity
account balances 16 20 16
Operating expenses 418 336 357
Amortization of deferred
policy acquisition costs 9 7 2
---------------------------------------
Total benefits and expenses 443 363 375
---------------------------------------
Income before income taxes 90 175 118
Income taxes 28 63 48
---------------------------------------
Net income $ 62 $112 $ 70
=======================================
SEE ACCOMPANYING NOTES.
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Statement of Changes in Stockholder's Equity
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED
STOCK CAPITAL INCOME EARNINGS TOTAL
--------------------------------------------------
(IN THOUSANDS)
Balance at December 31, 1995 $2,000 $4,600 $233 $ 75 $6,908
Comprehensive income:
Net income - - - 70 70
Other comprehensive
income, net - - (117) - (117)
--------
Comprehensive income (47)
---------------------------------------------------
Balance at December 31, 1996 2,000 4,600 116 145 6,861
Comprehensive income:
Net income - - - 112 112
Other comprehensive
income, net - - 2 - 2
--------
Comprehensive income 114
---------------------------------------------------
Balance at December 31, 1997 2,000 4,600 118 257 6,975
Comprehensive income:
Net income - - - 62 62
Other comprehensive,
income, net - - 1 - 1
--------
Comprehensive income 63
---------------------------------------------------
Balance at December 31, 1998 $2,000 $4,600 $119 $319 $7,038
===================================================
SEE ACCOMPANYING NOTES.
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Statement of Cash Flows
YEAR ENDED DECEMBER 31
1998 1997 1996
---------------------------------------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $ 62 $112 $ 70
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Decrease in reinsurance recoverable 10 21 7
Policy acquisition costs deferred (13) (30) (37)
Policy acquisition costs amortized 9 7 2
Provision for deferred income taxes (19) 9 12
Decrease in policy reserves (11) (20) (7)
Interest credited to annuity account
balances 16 20 16
Increase (decrease) in other liabilities (27) 75 (505)
Other (30) 17 43
--------------------------------------
Net cash provided by (used in)
operating activities (3) 211 (399)
INVESTING ACTIVITIES
Sale, maturity or repayment of fixed
maturities available-for-sale 1,521 558 1,022
Acquisition of fixed maturities
available-for-sale (1,495) (323) (855)
-------------------------------------
Net cash provided by investing activities 26 235 167
FINANCING ACTIVITIES
Deposits credited to annuity account
balances 113 227 470
Withdrawals from annuity account
balances (149) (240) (702)
-------------------------------------
Net cash used in financing activities (36) (13) (232)
-------------------------------------
Net increase (decrease) in cash (13) 433 (464)
Cash at beginning of year 508 75 539
-------------------------------------
Cash at end of year $ 495 $508 $ 75
=====================================
SEE ACCOMPANYING NOTES.
<PAGE>
First Security Benefit Life Insurance
and Annuity Company of New York
Notes to Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
First Security Benefit Life Insurance and Annuity Company of New York (the
Company) is licensed to transact life insurance business in New York and Kansas
and was organized to offer insurance products in New York. The Company's
business activities are concentrated in a variable annuity product with separate
account assets managed by a single investment advisor. The Company is a
wholly-owned subsidiary of Security Benefit Group, Inc., which is an indirect
wholly-owned subsidiary of Security Benefit Mutual Holding Company (SBMHC).
SBMHC was formed July 31, 1998 in conjunction with the conversion of Security
Benefit Life Insurance Company (the Company's previous ultimate parent) from a
mutual life insurance company to a stock life insurance company under a mutual
holding company structure.
RECLASSIFICATION
Certain prior year balances have been reclassified to conform to current year
presentation.
USE OF ESTIMATES
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accom-panying notes. Actual results could differ from those estimates.
INVESTMENTS
Fixed maturities are classified as available-for-sale and are stated at fair
value with the unrealized gain or loss, net of deferred income taxes, reported
as a separate component of accumulated other comprehensive income. Premiums and
discounts are recognized over the estimated lives of the assets adjusted for
prepayment activity.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits,
commissions and other policy-issue, underwriting and marketing costs that are
primarily related to the acquisition or renewal of deferred annuity business
have been deferred.
For deferred annuity business, deferred policy acquisition costs are amortized
in proportion to the present value (discounted at the crediting rate) of
expected gross profits from investment, mortality and expense margins. That
amortization is adjusted retrospectively when estimates of current or future
gross profits to be realized from a group of products are revised.
SEPARATE ACCOUNT
The separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the benefit of
contractholders who bear the investment risk. The separate account is
established in conformity with New York insurance laws and is not chargeable
with liabilities that arise from any other business of the Company. Assets held
in the separate account are carried at quoted market values or, where quoted
market values are not available, at fair market value as determined by the
investment manager. The separate account assets recorded by the Company are
invested in subaccounts which are managed by T. Rowe Price Associates, Inc. (or
an affiliated company). Revenues and expenses related to the separate account
assets and liabilities, to the extent of benefits paid or provided to the
separate account contractholders, are excluded from the amounts reported in the
accompanying statements of income. Investment income and gains or losses arising
from the separate account accrue directly to the contractholders and are,
therefore, not included in investment earnings in the accompanying statements of
income. Revenues to the Company from the separate account consist principally of
mortality and expense risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES
Liabilities for future policy benefits for deferred annuity products represent
accumulated contract values, without reduction for potential surrender charges
that are amortized over the life of the policy. Interest on accumulated contract
values is credited to contracts as earned. Crediting rates ranged from 3.40% to
4.75% during 1998, from 4.85% to 5.70% during 1997 and from 4.35% to 5.55%
during 1996.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
the financial reporting and income tax bases of assets and liabilities and are
measured using the enacted tax rates and laws. Deferred income tax expenses or
benefits reflected in the Company's statements of income are based on changes in
deferred tax assets or liabilities from period to period (excluding unrealized
gains or losses on available-for-sale securities).
RECOGNITION OF REVENUES
Revenues from investment-type contracts (deferred annuities) consist of
mortality and expense risk charges assessed against contractholder account
balances during the period.
ACCOUNTING CHANGE
In 1998, the Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this statement had no impact on the Company's net
income or stockholder's equity. SFAS No. 130 requires unrealized gains or losses
on the Company's available-for-sale securities, which prior to adoption were
reported separately in equity, to be included in other comprehensive income.
Prior year financial statements have been reclassified to conform to the
requirements of SFAS No. 130.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and short-term investments: The carrying amounts reported in the balance
sheets for these instruments approximate their fair values.
Investment securities: Fair values for fixed maturities are based on quoted
market prices, if available. For fixed maturities not actively traded, fair
values are estimated using values obtained from independent pricing services
or estimated by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality and maturity of the investments.
Investment-type contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming
company would realize from the business is calculated. Those amounts are then
discounted at a rate of return commensurate with the rate presently offered
by the Company on similar contracts. The carrying amounts reported in the
balance sheets approximate their fair values.
STATUTORY FINANCIAL INFORMATION
The Company prepares statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by the New York insurance
regulatory authorities. Accounting practices used to prepare statutory-basis
financial statements for regulatory filings of stock life insurance companies
differ in certain instances from generally accepted accounting principles
(GAAP). Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners (NAIC), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed; such practices may differ from state to state, may differ from
company to company within a state and may change in the future. In addition, in
March 1998, the NAIC adopted the codification of Statutory Accounting Principles
(the Codification). Once implemented, the definitions of what comprises
prescribed versus permitted statutory accounting practices may result in changes
to accounting policies that insurance enterprises use to prepare their statutory
financial statements. The implementation date is ultimately dependent on an
insurer's state of domicile. The Company does not expect a material impact on
its statutory financial statements resulting from the implementation of
codification. The New York Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company and for determining its solvency
under the New York insurance laws. The following reconciles the Company's net
income and statutory surplus determined in accordance with accounting practices
prescribed or permitted by the New York Insurance Department with net income and
stockholder's equity on a GAAP basis.
NET INCOME STOCKHOLDER'S EQUITY
--------------------------------------------------
YEAR ENDED DECEMBER 31 DECEMBER 31
1998 1997 1996 1998 1997
--------------------------------------------------
IN THOUSANDS
Based on statutory
accounting practices $ 27 $ 97 $47 $6,758 $6,689
Investment carrying amounts - - - 201 199
Deferred policy acquisition
costs 4 23 35 62 58
Income taxes 23 (24) (23) (86) (102)
Investment reserve - - - 6 7
Nonadmitted assets - - - 82 122
Other 8 16 11 15 2
--------------------------------------------------
Based on GAAP $62 $112 $70 $7,038 $6,975
==================================================
Under the laws of the state of New York, the Company is required to maintain
minimum capital and surplus of $6,000,000.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses, and
fair values of the Company's portfolio of fixed maturities available-for-sale at
December 31, 1998 and 1997 is as follows:
1998
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
(IN THOUSANDS)
U.S. Treasury securities $4,442 $161 $ - $4,603
Corporate securities 1,121 18 - 1,139
Asset-backed securities 153 3 - 156
Mortgage-backed securities 812 19 - 831
----------------------------------------------------
Total fixed maturities $6,528 $201 $ - $6,729
====================================================
1997
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------------------------------------------------
(IN THOUSANDS)
U.S. Treasury securities $3,987 $149 $ - $4,136
Corporate securities 482 10 - 492
Asset-backed securities 339 2 - 341
Mortgage-backed securities 1,745 38 - 1,783
----------------------------------------------------
Total fixed maturities $6,553 $199 $ - $6,752
====================================================
The amortized cost and fair value of fixed maturities available-for-sale at
December 31, 1998, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
AMORTIZED FAIR
COST VALUE
--------------------------------------
(IN THOUSANDS)
Due in one year or less $1,610 $1,625
Due after one year through five years 3,720 3,850
Due after five years through 10 years 233 267
Due after 10 years - -
Asset-backed securities 153 156
Mortgage-backed securities 812 831
--------------------------------------
$6,528 $6,729
======================================
The composition of the Company's portfolio of fixed maturities by quality rating
at December 31, 1998 is as follows:
QUALITY RATING CARRYING AMOUNT %
------------------------------------------------------------------------
(IN THOUSANDS)
AAA $5,991 89.0%
AA 354 5.3
A 384 5.7
---------------------------------------------
$6,729 100.0%
=============================================
At December 31, 1998, fixed maturities available-for-sale with a carrying amount
of $568,000 were held in joint custody with the New York Insurance Department to
comply with statutory regulations.
Major categories of net investment income for the years ended December 31, 1998,
1997 and 1996 are summarized as follows:
1998 1997 1996
----------------------------------------
(IN THOUSANDS)
Interest on fixed maturities $452 $500 $497
Other 17 7 7
----------------------------------------
Total investment income 469 507 504
Less investment expenses 28 29 30
----------------------------------------
Net investment income $441 $478 $474
========================================
There were no proceeds from sales of fixed maturities available-for-sale and
related realized gains and losses, including valuation adjustments for the years
ended December 31, 1998 and 1997. There were proceeds from sales in the amount
of $574,000 with gross realized gains and losses of $3,000 and $5,000,
respectively, for the year ended December 31, 1996.
3. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return with
SBMHC. Income taxes are allocated to the Company on the basis of its filing a
separate return. The provision for income taxes includes current federal income
tax expense or benefit and deferred income tax expense or benefit due to
temporary differences between the financial reporting and income tax bases of
assets and liabilities. Such differences relate principally to deferred policy
acquisition costs.
Income tax expense (benefit) consists of the following for the years ended
December 31, 1998, 1997 and 1996:
1998 1997 1996
------------------------------------------------
(IN THOUSANDS)
Current $47 $54 $36
Deferred (19) 9 12
------------------------------------------------
Income tax expense $28 $63 $48
================================================
Income taxes paid by the Company were $51,000, $89,000 and $32,000 during 1998,
1997 and 1996, respectively.
Net deferred tax liabilities primarily consist of the unrealized appreciation on
fixed maturities available for sale.
4. RELATED-PARTY TRANSACTIONS
The Company paid $152,000 in 1998 and $144,000 in 1997 and 1996 to affiliates
for providing management, investment and administrative services.
5. REINSURANCE
Principal reinsurance transactions for the years ended December 31, 1998, 1997
and 1996 are summarized as follows:
1998 1997 1996
------------------------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid $3 $ 2 $4
================================================
Claim recoveries $8 $13 $9
================================================
In the accompanying financial statements, premiums and benefits are reported net
of reinsurance ceded; policy liabilities and accruals are reported gross of
reinsurance ceded. The Company remains liable to policyholders if the reinsurer
is unable to meet its contractual obligations under the applicable reinsurance
agreement. At December 31, 1998 and 1997, the Company had established a
receivable totaling $209,000 and $219,000, respectively, for reinsurance claims
and other receivables from its reinsurer.
6. IMPACT OF YEAR 2000 (UNAUDITED)
Over the past few years, SBL has been assessing the potential impact of the year
2000 on its systems, procedures, customers and business processes (some of which
are used by the Company). SBL will continue to use internal and external
resources to modify, replace and test the year 2000 changes. All identified
modifications to critical operating systems have been completed as of December
31, 1998, and SBL continues to validate completed systems to ensure ongoing
compliance. Management estimates 100% of the identified modifications to other
less important operating systems will be completed by June 30, 1999. In any
event, all identified modifications are expected to be completed prior to any
anticipated impact on the Company's operations.
The Company does face the risk that one or more of its critical suppliers or
customers (external relationships) will not be able to interact with the Company
due to the third party's inability to resolve its own year 2000 issues. SBL
completed an inventory of external relationships, is engaged in discussions with
third parties and is requesting information as to those parties' year 2000 plans
and state of readiness. The Company, however, is unable to predict with
certainty whether all of its external relationships will be year 2000 ready.
However, third-party vendors of the Company's primary administrative systems
have represented to the Company that the systems are or will be year 2000 ready.
While the Company believes that it has addressed its year 2000 concerns, the
Company has begun to strengthen its contingency/recovery plans aimed at ensuring
the continuity of critical business functions before, on and after December 31,
1999. The year 2000 contingency plans will be reviewed periodically throughout
1999 and revised as needed. The Company believes its year 2000 contingency
plans, coupled with existing "disaster recovery" and "business resumption"
plans, minimize the impact year 2000 issues may have on its business and
customers.
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) Certified Resolution of the Board of Directors of First
Security Benefit Life Insurance and Annuity Company of New
York authorizing establishment of the Separate Account
(2) Not Applicable
(3) Distribution Agreement (Amended and Restated)
(4) (a) Individual Contract (Form FSB201 11-96)(a)
(b) Unisex Individual Contract (Form FSB201U R11-96)(a)
(c) TSA Endorsement (Form FSB202 R2-97)(a)
(d) IRA Endorsement (Form FSB203 R2-97)(a)
(e) Dollar Cost Averaging Endorsement (Form FSB211 4-94)(a)
(f) Asset Rebalancing Endorsement (Form FSB212 4-94)(a)
(5) Form of Application(a)
(6) (a) Declaration and Certificate of Incorporation of First
Security Benefit Life Insurance and Annuity Company of
New York(a)
(b) Bylaws of First Security Benefit Life Insurance and
Annuity Company of New York(a)
(7) Not Applicable
(8) (a) Participation Agreement
(b) Master Agreement (Amended and Restated)
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Schedule of Computation of Performance
(14) Not Applicable
(15) Powers of Attorney of Howard R. Fricke, Donald J. Schepker,
James R. Schmank, Roger K. Viola, John E. Hayes, Jr., Kris
A. Robbins, Katherine White, Stephen R. Herbert and Jane
Boisseau
(a) Incorporated herein by reference to the Exhibits filed with the
Registrant's Post-Effective Amendment No. 5 under the Securities Act of
1933 and Amendment No. 8 under the Investment Company Act of 1940, File No.
33-83240 (April 30, 1998).
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
Howard R. Fricke* CEO and Chairman of the Board
Peggy S. Avey Assistant Secretary and Chief
70 West Red Oak Lane-4th Floor Administrative Officer
White Plains, New York 10604
Donald J. Schepker* Vice President and Director
James R. Schmank* Director, Vice President and
Treasurer
Roger K. Viola* Secretary, Vice President, General
Counsel and Director
Kris A. Robbins* President and Director
Jane Boisseau Director
125 W. 55th Street
New York, NY 10019-5389
John E. Hayes, Jr. Director
200 Gulf Blvd.
Belleair Shore, FL 33786
Stephen R. Herbert Director
1100 Summer Street
Stamford, CT 06905
Katherine White Director
32 Avenue of the Americas
125 W. 55th Street
New York, NY 10019-5389
Leland Kling* Assistant Vice President
J. Timothy Gaule* Valuation Actuary
Ken Abitz* Internal Auditor
*Located at 700 Harrison Street, Topeka, Kansas 66636.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
The Depositor, First Security Benefit Life Insurance and Annuity
Company of New York, is wholly owned by Security Benefit Group, Inc.,
which is wholly owned by Security Benefit Life Insurance Company
(SBL). SBL is wholly owned by Security Benefit Corp. Security Benefit
Corp. is wholly owned by Security Benefit Mutual Holding Company
(SBMHC). No one person holds more than approximately 0.0004% of the
voting power of SBMHC. The Registrant is a segregated asset account of
First Security Benefit Life Insurance and Annuity Company of New York.
The following chart indicates the persons controlled by or under
common control with T. Rowe Price Variable Annuity Account of First
Security Benefit Life Insurance and Annuity Company of New York or
First Security Benefit Life Insurance and Annuity Company of New York:
<TABLE>
<CAPTION>
PERCENT OF VOTING
JURISDICTION OF SECURITIES OWNED BY SBMHC
NAME INCORPORATION (DIRECTLY OR INDIRECTLY)
<S> <C> <C>
Security Benefit Corp. Kansas 100%
(Holding Company)
Security Benefit Life Insurance Company Kansas 100%
(Stock Life Insurance Company)
Security Benefit Group, Inc.
(Holding Company) Kansas 100%
Security Management Company, LLC
(Investment Adviser) Kansas 100%
Security Distributors, Inc. (Broker/Dealer, Kansas 100%
Principal Underwriter of Mutual Funds)
Security Benefit Academy, Inc.
(Daycare Company) Kansas 100%
Creative Impressions, Inc.
(Advertising Agency) Kansas 100%
First Advantage Insurance Agency, Inc. Kansas 100%
</TABLE>
First Security Benefit Life Insurance and Annuity Company of New York
is also the depositor of the following separate accounts: None
ITEM 27. NUMBER OF CONTRACT OWNERS
As of January 31, 1999, there were 438 owners of T. Rowe Price
Variable Annuity Account of First Security Benefit Life Insurance and
Annuity Company of New York Contracts.
ITEM 28. INDEMNIFICATION
Article IX, Section 1(c) of the By-laws of First Security Benefit Life
Insurance and Annuity Company of New York include the following
provision:
The Corporation may indemnify any person made, or threatened to be
made, a party to an action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or she,
his or her testator or intestate, is or was a director or officer of
the Corporation, or is or was serving at the request of the
Corporation as a director or officer of any other corporation of any
type or kind, domestic or foreign, of any partnership, joint venture,
trust, employee benefit plan or any other enterprise, against amounts
paid in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him or her in connection with the
defense or settlement of such action, or in connection with an appeal
therein, if such director or officer acted, in good faith, for a
purpose which he or she reasonably believed to be in or in the case of
service for other corporation or any partnership, joint venture,
trust, employee benefit plan or other enterprise, not opposed to the
best interests of the corporation, except that no indemnification
under this paragraph shall be made in respect of (1) a threatened
action, or a pending action which is settled or otherwise disposed of,
or (2) any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation, unless and only to the
extent that the court in which the action was brought, or, if no
action was brought, any court of competent jurisdiction, determines
upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such
portion of the settlement and expenses as the court deems proper.
Insofar as indemnification for a 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 Depositor has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment 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 Depositor will, unless in the opinion
of its counsel the matter has been settled by a 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 UNDERWRITER
(a) T. Rowe Price Investment Services, Inc. ("Investment Services"),
a Maryland corporation formed in 1980 as a wholly-owned
subsidiary of T. Rowe Price Associates, Inc., serves as the
distributor of the T. Rowe Price Variable Annuity Account
contracts. Investment Services receives no compensation for
distributing the Contracts. Investment Services also serves as
principal underwriter for the following investment companies:
T. Rowe Price Growth Stock Fund, Inc.; T. Rowe Price New Horizons
Fund, Inc.; T. Rowe Price New Era Fund, Inc.; T. Rowe Price New
Income Fund, Inc.; T. Rowe Price Growth & Income Fund, Inc.; T.
Rowe Price Prime Reserve Fund, Inc. (which includes T. Rowe Price
Prime Reserve Fund - PLUS class); T. Rowe Price Tax-Free Income
Fund, Inc.; T. Rowe Price Tax-Exempt Money Fund, Inc. (which
includes T. Rowe Price Tax-Exempt Money Fund PLUS class); T. Rowe
Price Short-Term Bond Fund, Inc.; T. Rowe Price Tax-Free
Intermediate Bond Fund, Inc.; T. Rowe Price Tax-Free
Short-Intermediate Fund, Inc.; T. Rowe Price High Yield Fund,
Inc.; T. Rowe Price Tax-Free High Yield Fund, Inc.; T. Rowe Price
GNMA Fund; T. Rowe Price Equity Income Fund; T. Rowe Price New
America Growth Fund; T. Rowe Price Capital Appreciation Fund; T.
Rowe Price Capital Opportunity Fund, Inc.; T. Rowe Price Science
& Technology Fund, Inc.; T. Rowe Price Health Science Fund, Inc.;
T. Rowe Price Small-Cap Value Fund, Inc.; T. Rowe Price U.S.
Treasury Funds, Inc. (which includes U.S. Treasury Money Fund,
U.S. Treasury Intermediate Fund and U.S. Treasury Long-Term
Fund); T. Rowe Price State Tax-Free Income Trust (which includes
Maryland Tax-Free Bond Fund, New York Tax-Free Bond Fund, New
York Tax-Free Money Fund, Virginia Short-Term Tax-Free Bond Fund,
Virginia Tax-Free Bond Fund, New Jersey Tax-Free Bond Fund,
Georgia Tax-Free Bond Fund, Florida Intermediate Tax-Free Fund,
and Maryland Short-Term Tax-Free Bond Fund); T. Rowe Price
California Tax-Free Income Trust (which includes California
Tax-Free Bond Fund and California Tax-Free Money Fund); T. Rowe
Price Index Trust, Inc. (which includes the T. Rowe Price Equity
Index 500 Fund, T. Rowe Price Extended Equity Market Index Fund
and T. Rowe Price Total Equity Market Index Fund); T. Rowe Price
Spectrum Fund, Inc. (which includes the Spectrum Growth Fund,
Spectrum International Fund and Spectrum Income Fund); T. Rowe
Price Short-Term U.S. Government Fund, Inc.; T. Rowe Price Value
Fund, Inc.; T. Rowe Price Balanced Fund, Inc.; T. Rowe Price
Mid-Cap Growth Fund, Inc.; T. Rowe Price Small Cap Stock Fund,
Inc. (formerly known as T. Rowe Price OTC Fund); T. Rowe Price
Blue Chip Growth Fund, Inc.; T. Rowe Price Dividend Growth Fund,
Inc.; T. Rowe Price Summit Funds, Inc. (which includes T. Rowe
Price Summit Cash Reserves Fund, T. Rowe Price Summit
Limited-Term Bond Fund and T. Rowe Price Summit GNMA Fund); T.
Rowe Price Summit Municipal Funds, Inc. (which includes T. Rowe
Price Summit Municipal Money Market Fund, T. Rowe Price Summit
Municipal Intermediate Fund, T. Rowe Price Summit Municipal
Income Fund); T. Rowe Price Corporate Income Fund, Inc.; T. Rowe
Price Equity Series, Inc., (which includes T. Rowe Price Equity
Income Portfolio, T. Rowe Price New America Growth Portfolio, T.
Rowe Price Mid-Cap Growth Portfolio and T. Rowe Price Personal
Strategy Balanced Portfolio); T. Rowe Price Fixed Income Series,
Inc. (which includes T. Rowe Price Limited-Term Bond Portfolio
and T. Rowe Price Prime Reserve Portfolio); T. Rowe Price
International Series, Inc. (which includes T. Rowe Price
International Stock Portfolio); T. Rowe Price Personal Strategy
Funds, Inc. (which includes T. Rowe Price Personal Strategy
Income Fund, T. Rowe Price Personal Strategy Balanced Fund and T.
Rowe Price Personal Strategy Growth Fund); T. Rowe Price
International Funds, Inc. (which includes the T. Rowe Price
International Stock Fund, T. Rowe Price International Bond Fund,
T. Rowe Price International Discovery Fund, T. Rowe Price
European Stock Fund, T. Rowe Price New Asia Fund, T. Rowe Price
Global Bond Fund, T. Rowe Price Japan Fund, T. Rowe Price Latin
America Fund, T. Rowe Price Emerging Markets Stock Fund, T. Rowe
Price Global Stock Fund, and T. Rowe Price Emerging Markets Bond
Fund); Frank Russell Investment Securities Fund; the RPF
International Bond Fund; the Institutional International Funds,
Inc. (which includes the Foreign Equity Fund); T. Rowe Price
Diversified Small-Cap Growth Fund, Inc; T. Rowe Price Financial
Services Fund, Inc.; T. Rowe Price Media & Telecommunications
Fund, Inc.; T. Rowe Price Mid-Cap Value Fund, Inc.; T. Rowe Price
Real Estate Fund, Inc.; T. Rowe Price Tax-Efficient Balanced
Fund, Inc.; Reserved Investment Funds, Inc. (which includes
Reserve Investment Fund and Government Reserve Investment Fund);
Institutional Equity Funds, Inc. (which includes Mid-Cap Equity
Growth Fund).
(b) NAME AND PRINCIPAL POSITION AND OFFICES
BUSINESS ADDRESS* WITH UNDERWRITER
------------------ ------------------
James S. Riepe Chairman of the Board of Directors
Patricia M. Archer Vice President
Edward C. Bernard President and Director
Joseph C. Bonasorte Vice President
Darrell N. Braman Vice President
Ronae M. Brock Vice President
Meredith C. Callanan Vice President
Ann R. Campbell Vice President
Christine M. Carolan Vice President
Joseph A. Carrier Vice President
Laura H. Chasney Vice President
Renee M. Christoff Vice President
Christopher W. Dyer Vice President
Christine Fahlund Vice President
Forrest R. Foss Vice President
Thomas A. Gannon Vice President
Andrea G. Griffin Vice President
Douglas E. Harrison Vice President
David J. Healy Vice President
Joseph P. Healy Vice President
Walter J. Helmlinger Vice President
Henry H. Hopkins Vice President and Director
Eric G. Knauss Vice President
Valerie King-Calloway Vice President
Sharon R. Krieger Vice President
Jeanette M. LeBlanc Vice President
Keith Wayne Lewis Vice President
Kim Lewis-Collins Vice President
Sarah McCafferty Vice President
Maurice Albert Minerbi Vice President
Mark Mitchell Vice President
Nancy M. Morris Vice President
George A. Murnaghan Vice President
Steven E. Norwitz Vice President
Kathleen M. O'Brien Vice President
Barbara O'Connor Vice President and Controller
David Oestreicher Vice President
Robert Petrow Vice President
Pamela D. Preston Vice President
George D. Riedel Vice President
Lucy Beth Robins Vice President
John Richard Rockwell Vice President
Kenneth J. Rutherford Vice President
Kristin E. Seeberger Vice President
Donna B. Singer Vice President
Charles E. Vieth Vice President and Director
William F. Wendler, II Vice President
Jane F. White Vice President
Thomas R. Woolley Vice President
Alvin M. Younger, Jr. Treasurer and Secretary
*Unless otherwise indicated, the business address of each of
Investment Services' officers and directors is 100 East Pratt
Street, Baltimore, Maryland 21202.
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by First Security
Benefit Life Insurance and Annuity Company of New York at its
administrative offices--70 West Red Oak Lane, 4th Floor, White Plains,
New York 10604.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective
amendment to this Registration Statement as frequently as
necessary to ensure that the audited financial statements in the
Registration Statement are never more than sixteen (16) months
old for so long as payments under the Variable Annuity contracts
may be accepted.
(b) Registrant undertakes that it will provide, as part of the
Application Kit, a box for the applicant to check if he or she
wishes to receive a copy of the 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
to First Security Benefit Life Insurance and Annuity Company of
New York at the address or phone number listed in the prospectus.
(d) Subject to the terms and conditions of Section 15(d) of the
Securities Exchange Act of 1934, the Registrant hereby undertakes
to file with the Securities and Exchange Commission such
supplementary and periodic information, documents, and reports as
may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority
conferred in that Section.
(e) Registrant represents that the fees and charges deducted under
the contract, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the
risks assumed by the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has caused this
Registration Statement to be signed on its behalf, in the City of Topeka, and
State of Kansas, on this 22nd day of February, 1999.
SIGNATURES AND TITLES
Howard R. Fricke FIRST SECURITY BENEFIT LIFE INSURANCE
Chairman of the Board, Chief AND ANNUITY COMPANY OF NEW YORK
Executive Officer and Directo (THE DEPOSITOR)
By: ROGER K. VIOLA
Donald J. Schepker ------------------------------------
Vice President and Director Roger K. Viola, Secretary, Vice
President and Director as Attorney-
in-Fact for the Officers and
James R. Schmank Directors Whose Names Appear Opposite
Vice President, Director
and Treasurer
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF
FIRST SECURITY BENEFIT LIFE INSURANCE AND
Roger K. Viola ANNUITY COMPANY OF NEW YORK
Secretary, Vice President, (THE REGISTRANT)
General Counsel and Director
By: FIRST SECURITY BENEFIT LIFE INSURANCE
John E. Hayes, Jr. AND ANNUITY COMPANY OF NEW YORK
Director (THE DEPOSITOR)
Kris A. Robbins By: HOWARD R. FRICKE
President and Director -------------------------------------
Howard R. Fricke, Chairman of the
Board and Chief Executive Officer
Stephen R. Herbert
Director By: JAMES R. SCHMANK
-------------------------------------
James R. Schmank, Vice President and
Katherine White Treasurer
Director (Principal Financial Officer)
(ATTEST): ROGER K. VIOLA
Jane Boisseau -------------------------------
Director Roger K. Viola, Secretary,
Vice President and Director
Date: February 22, 1999
<PAGE>
EXHIBIT INDEX
(1) Certified Resolution of the Board of Directors of First Security Benefit
Life Insurance and Annuity Company of New York authorizing establishment
of the Separate Account
(2) None
(3) Distribution Agreement (Amended and Restated)
(4) None
(5) None
(6) None
(7) None
(8) (a) Participation Agreement
(b) Master Agreement (Amended and Restated)
(9) Opinion of Counsel
(10) Consent of Independent Auditors
(11) None
(12) None
(13) Schedule of Computation of Performance
(14) None
(15) Powers of Attorney of Howard R. Fricke, Donald J. Schepker, James R.
Schmank, Roger K. Viola, John E. Hayes, Jr., Kris A. Robbins, Katherine
White, Stephen R. Herbert, and Jane Boisseau.
<PAGE>
CERTIFICATION
The undersigned hereby certifies that she is the duly elected Secretary and
Chief Administrative Officer of FIRST SECURITY BENEFIT LIFE INSURANCE AND
ANNUITY COMPANY OF NEW YORK, a corporation organized and existing under the laws
of the State of New York. The Board of Directors of said FIRST SECURITY BENEFIT
LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK did hereby adopt the following
resolution at their meeting held November 11, 1994:
Dated this 20th day of March, 1995.
ANITA F. LARSON
------------------------------------------
Anita F. Larson
Secretary and Chief Administrative Officer
<PAGE>
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
RESOLUTION RATIFYING ESTABLISHMENT OF SEPARATE ACCOUNT
RESOLVED, that the resolution of the Board of Directors of Pioneer National Life
Insurance Company establishing a Separate Account, the resolution being in the
form presented to the meeting, be and hereby is ratified by the Board of
Directors of First Security Benefit Life Insurance and Annuity Company of New
York and that a copy of that resolution be attached to the minutes of the
meeting.
<PAGE>
RESOLUTIONS RE: ESTABLISHMENT OF SEPARATE ACCOUNT
WHEREAS, Pioneer National Life Insurance Company, a Kansas-domiciled stock
life insurance company (the "Company"), anticipates a merger with and into a New
York-domiciled stock life insurance company with the New York company being the
surviving corporation following such merger;
WHEREAS, it is desired that the Company establish a funding vehicle for its
variable annuity policies;
WHEREAS, such funding vehicle should be established in compliance with both
Kansas law and New York law;
WHEREAS, Kansas Statutes Annotated Sections 40-436 and 40-437 and New York
Insurance Law Sections 4240 permit the establishment of one or more separate
accounts;
NOW, THEREFORE, BE IT RESOLVED, that the Company, shall establish a
separate account referred to as herein as the "T. Rowe Price Variable Annuity
Account of First Security Benefit Life Insurance and Annuity Company of New
York" ("Separate Account") in accordance with and under the provisions of
Sections 40-436 and 40-437 of the Kansas Statutes Annotated, and that hereafter
Separate Account shall be deemed to be and shall be established as a separate
account in accordance with and under the provisions of said Sections 40-436 and
40-437, as heretofore or hereafter amended.
FURTHER RESOLVED, that in anticipation of the merger of the Company with
and into a newly-formed corporation, to be organized under the laws of the State
of New York, Separate Account shall be established and operated as a separate
account in accordance with the requirements of New York Insurance Law Section
4240, as heretofore or hereafter amended.
FURTHER RESOLVED, that Separate Account is hereby empowered to:
(a) to the extent required by the Investment Company Act of 1940,
register under such Act and make applications for such exemptions or
orders under such provisions thereof as may appear to be necessary or
desirable;
(b) to the extent required by the Securities Act of 1933, effect one or
more registrations thereunder and, in connection with such
registrations, file one or more registration statements thereunder,
or amendments thereto, including any documents or exhibits required
as a part thereof;
(c) provide for the sale of policies issued by the Company as the
officers of the Company may deem necessary and appropriate, to the
extent such policies provide for allocation of amounts to Separate
Account;
(d) provide for custodial or depository arrangements for assets allocated
to Separate Account as the officers of the Company may deem necessary
and appropriate including self custodianship or safekeeping
arrangements by the Company;
(e) select an independent public accountant to audit the books and
records of Separate Account;
(f) invest or reinvest the assets of Separate Account in securities
issued by the following investment companies registered under the
Investment Company Act of 1940 and portfolios thereof: (1) T. Rowe
Price International Series, Inc.; (2) T. Rowe Price Equity Series,
Inc.; and (3) T. Rowe Price Fixed Income Series, Inc.
(g) divide Separate Account into subaccounts with each subaccount
investing in shares of designated classes or series of designated
investment companies or other appropriate securities; and
(h) perform such additional functions and take such additional action as
may be necessary or desirable to carry out the foregoing and the
intent and purpose thereof;
FURTHER RESOLVED, that the assets of Separate Account shall be derived
solely from (a) the sale of variable annuity products, (b) funds corresponding
to dividend accumulation with respect to investment of such assets, and (c)
advances made by the Company in connection with the operation of Separate
Account;
FURTHER RESOLVED, that pursuant to New York Insurance Law Section 4240 the
assets of Separate Account shall be legally segregated and, to the extent so
provided in the applicable agreements, shall not be chargeable with liabilities
arising out of any other business of the Company;
FURTHER RESOLVED, that the Company shall maintain in Separate Account
assets with a fair market value at least equal to the statutory valuation
reserves for the variable annuity policies;
FURTHER RESOLVED, that assets allocated to Separate Account shall be valued
at their market value at the date as of which valued in accordance with the
terms of the variable annuity policies issued by the Company providing for
allocation to Separate Account;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized in their discretion as they may deem appropriate from time
to time in accordance with applicable laws and regulations (a) to divide the
separate account into subaccounts, (b) to modify or eliminate any such
subaccounts, (c) to change the designation of Separate Account to another
designation and (d) to designate further any subaccount thereof, and (e) to
deregister Separate Account under the Investment Company Act of 1940 and to
deregister the policies or units of interest thereunder under the Securities Act
of 1933;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized to invest cash from the Company's general account in
Separate Account or in any division thereof as may be deemed necessary or
appropriate to facilitate the commencement of Separate Account's operations or
to meet any minimum capital requirements under the Investment Company Act of
1940, and to transfer cash or securities from time to time between the Company's
general account and Separate Account as deemed necessary or appropriate so long
as such transfers are not prohibited by law and are consistent with the terms of
the variable annuity policies issued by the Company providing for allocations to
Separate Account;
FURTHER RESOLVED, that pursuant to the Kansas Statutes Annotated Section
40-436(c) and New York Insurance Law Section 4240 the income, gains and losses
(whether or not realized) from assets allocated to Separate Account shall, in
accordance with any variable annuity policies issued by the Company providing
for allocations to Separate Account, be credited to or charged against such
Separate Account without regard to other income, gains or losses of the Company;
FURTHER RESOLVED, that authority is hereby delegated to the Chairman or the
President of the Company to adopt procedures providing for, among other things,
criteria by which the Company shall institute procedures to provide for a
pass-through of voting rights to the owners of variable annuity policies issued
by the Company providing for allocation to Separate Account with respect to the
shares of any investment companies which are held in Separate Account;
FURTHER RESOLVED, that the officers of the Company are authorized and
directed, with the assistance of accountants, legal counsel, and other
consultants, to prepare and execute any necessary agreements to enable Separate
Account to invest and reinvest the assets of Separate Account in securities
issued by any investment companies registered under the Investment Company Act
of 1940, or other appropriate securities as the officers of the Company may
designate pursuant to the provisions of the variable annuity policies issued by
the Company providing for allocations to Separate Account;
FURTHER RESOLVED, that fiscal year of Separate Account shall end on the
31st day of December each year;
FURTHER RESOLVED, that the officers of the Company, with the assistance of
accountants, legal counsel, and other consultants, are authorized to prepare,
execute, and file all periodic reports required under the Investment Company Act
of 1940 and the Securities Exchange Act of 1934;
FURTHER RESOLVED, that the Company may register under the Securities Act of
1933 variable annuity policies, or units of interest thereunder, under which
amounts will be allocated by the Company to Separate Account to support reserves
for such policies and, in connection therewith, that the officers of the Company
be, and each of them hereby is, authorized, with the assistance of accountants,
legal counsel, and other consultants, to prepare, execute, and file with the
Securities and Exchange Commission, in the name and on behalf of the Company,
registration statements under the Securities Act of 1933, including
prospectuses, supplements, exhibits, and other documents relating thereto, and
amendments to the foregoing, in such form as the officer executing the same may
deem necessary or appropriate;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized, with the assistance of accountants, legal counsel, and
other consultants, to take all actions necessary to register Separate Account as
a unit investment trust under the Investment Company Act of 1940 and to take
such related actions as they deem necessary and appropriate to carry out the
foregoing;
FURTHER RESOLVED, that the Chief Administrative Officer or the President of
the Company, or in his or her absence, a Senior Vice President, be and each of
them is hereby authorized, empowered and directed to sign a form of Notification
of Registration under the 1940 Act, and such Registration Statement as may be
required by the 1940 Act and the 1933 Act, in the name of Separate Account by
the Company as sponsor and depositor, and that the appropriate officers of the
Company be, and they hereby are, fully authorized, empowered and directed to
execute and cause to be filed for and on behalf of Separate Account and the
Company said Notification of Registration and said Registration Statement, and
the appropriate officers of empowered to execute and cause to be filed, for and
on behalf of the Separate Account and the Company, and the President and each
Senior Vice President of the Company hereby is fully authorized and the Company
be, and hereby is, fully authorized and empowered to execute in the name of
Separate Account and the Company, such amendments to, and such instruments,
exhibits and documents in connection with, said Notification of Registration and
Registration Statement, as they, or any of them may upon advice of counsel, deem
necessary or advisable;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized to prepare, execute, and file, with the assistance of
accountants, legal counsel, and other consultants, with the Securities and
Exchange Commission applications and amendments thereto for such exemptions from
or orders under the Investment Company Act of 1940, and to request from the
Securities and Exchange Commission no action and interpretative letters, as they
may from time to time deem necessary or desirable;
FURTHER RESOLVED, that the General Counsel of the Company is hereby
appointed as agent for service under any such registration statement and is duly
authorized to receive communications and notices form the Securities and
Exchange Commission with respect thereto and to exercise powers given to such
agent by the Securities Act of 1933 and the rules thereunder, and any other
necessary acts;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized, with the assistance of accountants, legal counsel, and
other consultants, to effect in the name of and on behalf of the Company all
such registrations, filings, and qualifications under blue sky or other
applicable securities laws and regulations and under insurance securities laws
and insurance laws and regulations of such states and other jurisdictions, as
they may deem necessary or appropriate with respect to the Company and with
respect to any variable annuity policies under which amounts will be allocated
by the Company to Separate Account to support reserves for such policies; such
authorization shall include registration, filing, and qualification of the
Company and of said policies, as well as registration, filing, and qualification
of officers, employees, and agents of the Company as brokers, dealers, agents,
salespersons, or otherwise; and such authorization shall also include, in
connection therewith, authority to prepare, execute, acknowledge, and file all
such applications, applications for exemptions, certificates, affidavits,
covenants, consents to service of process, and other instruments and to take all
such action as the officer executing the same or taking such action may deem
necessary or desirable;
FURTHER RESOLVED, that the officers of the Company be, and each of them
hereby is, authorized to execute and deliver all such documents and papers and
to do or cause to be done all such acts and things as they may deem necessary or
desirable to carry out the foregoing resolutions and the intent and purpose
thereof.
Dated this 25th day of July, 1994 at Topeka, Kansas
GARY EISENBARTH HOWARD R. FRICKE
- --------------------------------------- ---------------------------------
Gary L. Eisenbarth, Chairman Howard R. Fricke
J. PANTAGES MALCOLM E. ROBINSON
- --------------------------------------- ---------------------------------
Jeffrey B. Pantages Malcolm E. Robinson
RICHARD K RYAN D. J. SCHEPKER
- --------------------------------------- ---------------------------------
Rick K Ryan Donald J. Schepker
ROGER K. VIOLA JAMES L. WOODS
- --------------------------------------- ---------------------------------
Roger K. Viola James L. Woods
<PAGE>
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
BETWEEN
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
AND
T. ROWE PRICE INVESTMENT SERVICES, INC.
THIS DISTRIBUTION AGREEMENT, made as of the 11th day of October, 1995,
amended and restated as of May 1, 1998 by and between FIRST SECURITY BENEFIT
LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK ("INSURER"), a life insurance
company organized under the laws of the State of New York, for itself and on
behalf of the T. Rowe Price Variable Annuity Account of First Security Benefit
Life Insurance and Annuity Company of New York (the "SEPARATE ACCOUNT"), a
separate account established and maintained by Insurer under the laws of the
State of New York, and T. ROWE PRICE INVESTMENT SERVICES, INC., a corporation
organized and existing under the laws of the State of Maryland ("UNDERWRITER").
WITNESSETH:
WHEREAS, the Separate Account has been established by Insurer to support a
certain class of variable annuity contracts issued by Insurer;
WHEREAS, the Separate Account has been registered as a unit investment trust
under the federal Investment Company Act of 1940, as amended ("ICA-40");
WHEREAS, the Separate Account is sub-divided into various subaccounts (the
"SUBACCOUNTS");
WHEREAS, certain companies registered as open-end management investment
companies under ICA-40 will serve as the underlying investment vehicles for the
Separate Account;
WHEREAS, such investment companies are authorized to issue shares of capital
stock ("Shares") in separate series, with each such series representing the
interests in a separate portfolio of securities and other assets;
WHEREAS, each subaccount will purchase Shares of a corresponding investment
company;
WHEREAS, Underwriter is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended, ("SEA-34") and is a member of the National
Association of Securities Dealers, Inc.("NASD");
WHEREAS, Underwriter, together with T. Rowe Price Insurance Agency, Inc.
(the "AGENCY"), an insurance agency that is affiliated with Underwriter, desire
to distribute the variable annuity contracts supported by the Separate Account
and offered by Insurer; and
WHEREAS, Insurer desires to issue such variable annuity contracts described
more fully below to the public through Underwriter acting as the principal
underwriter and the Agency acting as the insurance agency for such contracts;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. ADDITIONAL DEFINITIONS
(a) AFFILIATE -- With respect to a person, any other person controlling,
controlled by, or under common control with, such person.
(b) APPLICATION -- An application for a Contract and any other forms
required to be completed before a Contract is issued.
(c) CONTRACTS -- The class or classes of variable annuity contracts set
forth on SCHEDULE 1 to this Agreement as in effect at the Effective
Date, and such other classes of variable insurance products that may be
added to SCHEDULE 1 from time to time in accordance with Section 18 of
this Agreement, and including any riders to such Contracts and any
other contracts offered in connection therewith. For purposes of
Sections 3 and 14 of this Agreement, Contracts shall include Premiums
for the Contracts.
(d) DISTRIBUTOR -- A person registered as a broker-dealer and licensed as a
life insurance agent or affiliated with a person so licensed, who in
the future will be authorized to distribute the Contracts under
arrangements that the parties may subsequently agree to as described in
Section 2.A. of this Agreement.
(e) EFFECTIVE DATE -- The date as of which this Agreement is executed.
(f) FUND -- An investment company established and/or distributed by
Underwriter or an Affiliate, specified on SCHEDULE 2 to this Agreement
as in effect at the Effective Date, and such other investment companies
that may be added to SCHEDULE 2 from time to time in accordance with
Section 18 of this Agreement.
(g) PREMIUM -- A payment made under a Contract by an applicant or purchaser
to purchase benefits under the Contract.
(h) PROSPECTUS -- The prospectus and statement of additional information,
if any, included within a Registration Statement, except that, if the
most recently filed prospectus and statement of additional information
filed pursuant to Rule 497 under SA-33 subsequent to the date on which
a Registration Statement became effective differs from the prospectus
and statement of additional information included within such
Registration Statement at the time it became effective, the term
"Prospectus" shall refer to the most recently filed prospectus and
statement of additional information filed under Rule 497 under SA-33,
from and after the date on which they each shall have been filed. For
purposes of Section 14 of this Agreement, the term "any Prospectus"
means any document which is or at any time was a Prospectus within the
meaning of this definition.
(i) REGISTRATION STATEMENT -- At any time that this Agreement is in effect,
each currently effective registration statement, or currently effective
post-effective amendment thereto, relating to the Contracts, including
financial statements included in, and all exhibits to, such
registration statement or post-effective amendment. For purposes of
Section 14 of this Agreement, the term "Registration Statement" means
any document which is or at any time was a Registration Statement
within the meaning of this definition.
(j) REGULATIONS -- The rules and regulations promulgated by the SEC under
SA-33, SEA-34 and ICA-40.
(k) REPRESENTATIVE -- When used with reference to Underwriter or a
Distributor, an individual who is an associated person, as that term is
defined in SEA-34, thereof.
(l) SA-33 -- The Securities Act of 1933, as amended.
(m) SEC -- The Securities and Exchange Commission.
2. SALE OF CONTRACTS
(a) PRINCIPAL UNDERWRITER
Insurer, on its behalf and on behalf of the Separate Account,
authorizes Underwriter, on an exclusive basis, and Underwriter accepts
such authority, to be the distributor and principal underwriter of the
Contracts in the State of New York. Underwriter will use all reasonable
efforts to distribute the Contracts, consistent with its other
business, market and regulatory conditions, and any other restrictions
that may become applicable to its activities. As exclusive distributor
and principal underwriter, Underwriter shall have sole authority to
solicit Applications and Premiums directly from customers and
prospective customers located in the State of New York. Underwriter
reserves the right to authorize third parties as Distributors to engage
in distribution activities involving the solicitation of Applications
and Premiums directly from customers and prospective customers, in each
case as Underwriter may in its sole discretion so provide or limit, but
in all such cases, subject to such general terms and conditions
regarding arrangements with Distributors as the parties hereto may
subsequently agree upon in writing, provided that Insurer reserves the
right, which shall not be exercised unreasonably, to require that
Underwriter not enter into a sales agreement with a proposed
Distributor. Insurer shall appoint in the State of New York such
Distributors or Distributor Representatives, provided that Insurer
reserves the right, which right shall not be exercised unreasonably, to
refuse to appoint as agent any Distributor or Distributor
Representative, if any, or, once appointed, to terminate the same at
any time with or without cause. Underwriter shall be an independent
contractor and neither Underwriter, nor any of its officers, directors,
employees, or agents is or shall be an employee of Insurer in the
performance of Underwriter's duties hereunder. Underwriter is not
hereby obligated to register or maintain its registration as a broker
or dealer under the State securities laws of New York if, in the
discretion of Underwriter, such registration is not practical,
necessary for its duties under this Agreement, or feasible, nor does it
restrict Underwriter from entering into distribution arrangements with
other issuers or investment companies, except as otherwise agreed to in
writing by the parties.
(b) INSURANCE AGENCY
It is understood that, pursuant to an insurance agency agreement,
Insurer will appoint the Agency as its insurance agent for the sale of
the Contracts. Underwriter agrees that no Underwriter Representative
shall engage in any solicitation activities on behalf of Underwriter
unless such Representative is associated with Agency and subject to the
supervision of Agency respecting compliance with New York State
insurance law.
(c) NO ALTERATION, DISCHARGE, ETC., OF CONTRACTS
Underwriter shall not have authority, and shall not grant authority to
Underwriter Representatives, Distributors or Distributor
Representatives, on behalf of Insurer: to make, alter, waive, change or
discharge any Contract or other contract entered into pursuant to a
Contract; to waive any Contract forfeiture provision; to extend the
time of paying any Premium; to endorse checks or money orders payable
to Insurer, or to receive any monies or Premiums (except for the sole
purpose of forwarding monies or Premiums to Insurer). Underwriter shall
not expend, nor contract for the expenditure of, the funds of Insurer.
Underwriter shall not possess or exercise any authority on behalf of
Insurer other than that expressly conferred on Underwriter by this
Agreement. To the extent that Underwriter receives a check payable to
"T. Rowe Price," Underwriter, or an affiliate thereof, and all or part
of such check represents a Premium, such check shall be processed in
accordance with mutually agreed upon procedures.
(d) OPINION OF INSURER'S COUNSEL
The obligations of Underwriter under this Agreement are subject to the
accuracy of the representations and warranties of Insurer contained in
this Agreement, to the performance by Insurer of its obligations
hereunder, and to the condition that (i) prior to the time that
Underwriter begins offering the Contracts, Underwriter shall have
received an opinion of the general counsel or an associate general
counsel of Insurer, such opinion to be substantially to the effect set
forth in EXHIBIT A hereto; and (ii) each time, during the period in
which Underwriter is offering the Contracts, that an amendment to a
Registration Statement becomes effective under Rule 485(a) under SA-33,
Underwriter shall have received an opinion from the general counsel or
associate general counsel to Insurer, that is reasonably acceptable to
Underwriter, such opinion to be substantially to the effect set forth
in EXHIBIT A hereto.
3. SOLICITATION ACTIVITIES, APPLICATIONS AND PREMIUMS
Underwriter agrees that its solicitation activities with respect to the
Contracts shall be subject to applicable laws and regulations, procedures
provided by Insurer, and the rules set forth herein:
(a) Underwriter shall use Applications and other materials approved by
Insurer for use in the solicitation activities with respect to the
Contracts. Insurer shall notify Underwriter and the Agency in writing
if the State of New York requires delivery of a statement of additional
information for the Contracts with a prospectus to a prospective
purchaser.
(b) All Premiums paid by check or money order that are collected by
Underwriter or any Underwriter Representative shall be remitted in full
promptly, and in any event not later than two business days (except to
the extent of any commissions deducted from Premiums in accordance with
an insurance agency agreement), together with any Applications, forms
and any other required documentation, to Insurer, P.O. Box 2788,
Topeka, Kansas 66601-9804. Checks or money orders in payment of
Premiums shall be drawn to the order of "First Security Benefit Life
Insurance and Annuity Company." Premiums may be transmitted by wire
order from Underwriter or the Agency to Insurer in accordance with the
procedures reasonably agreed upon by the parties. If any Premium is
held at any time by Underwriter, Underwriter shall hold such Premium in
a fiduciary capacity and such Premium shall be remitted in full
promptly, and in any event not later than two business days, to
Insurer. All such Premiums, whether by check, money order or wire,
shall be the property of Insurer.
(c) Underwriter acknowledges that Insurer shall have the right to reject,
in whole or in part, any Application, but only for reasonable cause and
only after giving prior notice to Underwriter. In the event an
Application is rejected, any Premium submitted therewith shall be
returned by Insurer to the applicant. Insurer shall promptly notify
Underwriter and, if applicable, the Distributor who submitted the
Application, of such action. In the event that a purchaser exercises
his or her free look right under their Contract, any amount to be
refunded as provided in such Contract shall be so refunded to the
purchaser by Insurer. Insurer shall notify Underwriter and, if
applicable, the Distributor who solicited the Contract, of such action.
(d) Underwriter intends that no recommendations will be made to prospects
for the Contracts. To the extent that Underwriter or Underwriter
Representatives make recommendations, or to the extent required by
applicable securities laws, Underwriter and Underwriter Representatives
will comply with Section 2310 of the NASD's Conduct Rules.
(e) During the term of this Agreement, neither Underwriter nor any
Underwriter Representative shall intentionally encourage a Contract
owner to exchange his or her Contract for any other insurance contract
except (i) with Insurer's consent or (ii) to comply with applicable
laws, regulations or rules, including but not limited to the NASD's
Conduct Rules.
(f) All solicitation and sales activities engaged in by Underwriter and
Underwriter Representatives in regard to the Contracts shall be in
compliance with all applicable federal and New York State securities
laws and regulations, as well as all applicable New York State
insurance laws and regulations. No Underwriter Representative shall
solicit the sale of a Contract unless at the time of such solicitation
such individual is:
(1) Properly licensed by the NASD and New York State insurance and
securities regulatory authorities; and
(2) Appointed as an insurance agent of Insurer, except as may be
otherwise agreed to by Insurer.
(g) Neither Underwriter nor any Underwriter Representative shall give any
written information or make any written or oral representation in
regard to a class of Contracts in connection with the offer or sale of
such class of Contracts that is inconsistent with the then-currently
effective Prospectus for such class of Contracts, or in the
then-currently effective prospectus or statement of additional
information for a Fund, or in current advertising materials for such
class of Contracts which have been authorized by Insurer.
(h) Neither Underwriter nor any Underwriter Representative shall offer,
attempt to offer, or solicit Applications for the Contracts or deliver
the Contracts, in any State other than New York.
4. ADMINISTRATION
(a) Insurer shall administer the Contracts in accordance with their terms
and applicable laws and regulations, such administration to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. Neither Insurer nor its
officers, directors, employees or agents (which, for these purposes
shall not include Underwriter Representatives or Distributor
Representatives) shall give any written information or make any written
or oral representation in regard to a class of Contracts in connection
with the offer or sale of such class of Contracts that is inconsistent
with the then currently effective Prospectus for such class of
Contracts, or the then currently effective prospectus or statement of
additional information for a Fund, or in current advertising materials
for such class of Contracts which have been authorized by Underwriter.
(b) Insurer, as agent for Underwriter, shall confirm to each applicant for
and purchaser of a Contract in accordance with Rule 10b-10 under SEA-34
acceptance of premiums and such other transactions as are required to
be confirmed by Rule 10b-10 or administrative interpretations
thereunder, or any NASD requirements. Insurer shall not be separately
compensated for these services.
(c) Insurer shall maintain and preserve such books and records with respect
to the Contracts in conformity with the requirements of Rules 17a-3 and
17a-4 under SEA-34 including, to the extent such requirements apply,
all books and records with respect to confirmations provided under Rule
10b-10. Insurer shall maintain all such books and records, which shall
be considered the joint property of Insurer and Underwriter, and
Insurer acknowledges that such books and records are at all times
subject to inspection by the SEC and the NASD in accordance with
Section 17(a) of SEA-34 and shall provide copies thereof upon
Underwriter's request. Insurer shall not be separately compensated for
these services.
(d) Insurer shall not sub-contract with another person other than an
affiliate of Insurer to perform any of the functions contemplated by
this Section or maintain any information, books and records
contemplated by this Agreement without first obtaining such person's
undertaking, in writing, to comply with the provisions of this
Agreement to keep confidential all proprietary information obtained by
such person, and to acknowledge that such information, books and
records are at all times subject to inspection by the SEC, NASD or any
state regulatory body, administrative agency or any other governmental
instrumentality, and further, without obtaining Underwriter's prior
written consent. In addition, such person shall be required, upon the
request of Underwriter, and at the expense of the Insurer, to furnish
such information, books and records to Underwriter.
5. MARKETING
Underwriter shall have responsibility for and control over the marketing
name, marketing arrangements, marketing materials and marketing practices,
respecting the Contracts and, subject to the effectiveness of the
Registration Statement respecting the Contracts and approval of the
Contracts in the State of New York, the timing and commencement of the
offering of the Contracts. Underwriter shall be responsible for the design
and preparation of all promotional, sales and advertising material relating
to the Contracts. Insurer may propose any additional or alternative
marketing arrangements for the Contracts, including any proposed marketing
name, arrangements, materials and practices, which shall be subject to
Underwriter's prior review and approval. No promotional, sales or
advertising material may be used by any party without the approval of the
other party. Prior to any use with members of the public, the following
procedures shall be observed:
(a) Each party shall provide to the other party copies of all promotional,
sales and advertising material developed by such party, if any, for
such other party's review and written approval, and each party shall be
given a reasonable amount of time to complete its review.
(b) Each party shall respond on a prompt and timely basis in approving any
such material and shall act reasonably in connection therewith.
(c) Insurer shall be responsible for filing all promotional, sales or
advertising material, whether developed by Underwriter or Insurer, as
required, with any state insurance regulatory authorities.
(d) Underwriter shall be responsible for filing all promotional, sales or
advertising material, whether developed by Underwriter or Insurer, as
required, with the NASD, and New York State securities regulatory
authorities.
(e) Each party shall notify the other party expeditiously of any comments
provided by the NASD or any securities or insurance regulatory
authority on such material, and will cooperate expeditiously in
resolving and implementing any comments, as applicable.
(f) Each party shall deliver to the other party ten final print copies of
all promotional, sales and advertising material developed by such
party.
The parties acknowledge that such material, to the extent it identifies or
discusses a Fund, may be subject to review and approval procedures
implemented by that Fund. Each party reserves the right, after having
approved a piece of material, to object to further use of such material and
may require the other party to cease use of such material.
6. COMPENSATION
Insurer may pay marketing allowance expenses, if any, to the Agency with
respect to Contracts sold pursuant to this Agreement in the amounts and
under the rules and procedures set forth in an insurance agency agreement.
7. EXPENSES
(a) INSURER
With respect to this Agreement, Insurer shall pay (or will enter into
arrangements providing that persons other than Insurer shall pay) all
expenses in connection with:
(1) the preparation and filing of each Registration Statement for the
Contracts (including each pre-effective and post-effective
amendment thereto) and the preparation and filing of each
Prospectus for the Contracts (including any preliminary and each
definitive Prospectus);
(2) the preparation, insurance underwriting, issuance and
administration of the Contracts; provided that Insurer shall not
be responsible for expenses, including the expense of a leased
line, incurred by Underwriter in connection with the service
center operated by Underwriter;
(3) any registration, qualification or approval of the Contracts for
offer and sale required under the securities, blue-sky or
insurance laws of the State of New York;
(4) all registration fees for the Contracts payable to the SEC and the
NASD; and
(5) the printing of the Prospectus for the Contracts (or its pro rata
share of expenses in the event the Prospectuses for the Contracts
and the Funds are printed together in one document) and any
supplements thereto for distribution to existing contract owners
and its pro rata share of expenses of mailing the Prospectuses for
the Contracts and the Funds to existing Contract owners.
(b) UNDERWRITER
With respect to this Agreement, Underwriter shall pay (or will enter
into arrangements providing that persons other than Underwriter shall
pay) the following expenses related to its distribution of the
Contracts:
(1) the compensation of Underwriter Representatives and employees, and
Distributors, if any;
(2) expenses associated with the registration and training of
Underwriter Representatives and other employees involved in the
distribution of the Contracts;
(3) expenses incurred in connection with its registration as a broker
or dealer or the registration or qualification of its officers,
directors or Representatives under federal and New York State
laws;
(4) the costs of any promotional, sales and advertising material,
including Applications and any other materials included in the
fulfillment kit, that Underwriter develops for its use in
connection with the sale of the Contracts; and
(5) expenses of printing and mailing the Prospectuses for the
Contracts and the Funds (and any supplements thereto) for
distribution to prospective customers.
(c) OTHER EXPENSES
Other than as specifically provided in this Agreement or in an
insurance agency agreement, Insurer shall pay all expenses that it
incurs in connection with this Agreement and Underwriter shall pay all
expenses that it incurs in connection with this Agreement; it being
understood that neither Underwriter nor the Agency shall be responsible
for any expenses relating to the Contracts or the processing of
Contracts, Premiums or Applications, including without limitation any
expenses incurred in connection with the return of Premiums solicited
by Distributors, if any, for Applications rejected by Insurer, or
relating to any of the matters or acts contemplated by this Agreement,
except to the extent expressly set forth herein. Except as specifically
provided above or as otherwise agreed to in writing by the parties, it
is further understood that Insurer shall not bear any responsibility
for the expenses of the Underwriter and Underwriter Representatives,
nor for printing the prospectuses and statements of additional
information for the Funds, nor for the preparation of the registration
statements for the Funds nor for providing seed capital for the Funds,
nor for any other expenses relating to the Funds.
8. REPRESENTATIONS AND WARRANTIES OF INSURER
(a) Insurer represents and warrants to Underwriter on the Effective Date
that:
(1) Insurer has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of New
York with full power and authority to own, lease and operate its
properties and conduct its business, is duly qualified to transact
the business of a life insurance company and to issue variable
insurance products.
(2) The execution and delivery of this Agreement and the consummation
of the transactions contemplated herein have been duly authorized
by all necessary corporate action by Insurer, and when so executed
and delivered this Agreement shall be the valid and binding
obligation of Insurer enforceable in accordance with its terms.
(3) The consummation of the transactions contemplated herein, and the
fulfillment of the terms of this Agreement, shall not conflict
with, result in any breach in any material respect of any of the
terms and provisions of, or constitute (with or without notice or
lapse of time) a default in any material respect under, the
articles of incorporation or bylaws of Insurer, or any indenture,
agreement, mortgage, deed of trust, or other instrument to which
Insurer is a party or by which it is bound, or, to the best of
Insurer's knowledge, violate in any material respect any law, any
order, rule or regulation applicable to Insurer of any court or of
any federal or state regulatory body, administrative agency or any
other governmental instrumentality having jurisdiction over
Insurer or any of its properties.
(b) Insurer further represents and warrants to Underwriter on the effective
date of the initial Registration Statement for the Contracts, and
undertakes to use its best efforts to ensure as of the effective date
of each subsequent Registration Statement, that:
(1) Insurer has filed with the SEC all statements, notices and other
documents required for registration of the Contracts (or the
interests therein) and the Separate Account under the provisions
of ICA-40 and SA-33 and the Regulations thereunder; further, there
are no contracts or documents of Insurer or relating to the
Contracts or the Separate Account which are required to be filed
as exhibits to such Registration Statement by SA-33, ICA-40 or the
Regulations which have not been so filed.
(2) Such Registration Statement has been declared effective by the SEC
or has become effective in accordance with the Regulations.
(3) Insurer has not received any notice from the SEC with respect to
such Registration Statement pursuant to Section 8(e) of ICA-40 and
no stop order under SA-33 has been issued and no proceeding
therefor has been instituted or threatened by the SEC.
(4) Insurer has obtained, or prior to the commencement of the offering
of the Contracts will obtain, all necessary or customary orders of
exemption or approval from the SEC to permit the distribution of
the Contracts pursuant to this Agreement and to permit the
operation of the Separate Account supporting such Contracts as
contemplated in the related Prospectus, and such orders apply to
Underwriter, as principal underwriter for the Contracts and the
Separate Account to the extent necessary.
(5) The Insurer has represented in the Registration Statement that the
fees and charges deducted under the Contracts, in the aggregate,
are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Insurer. In
addition, Insurer complies with all other applicable provisions of
Section 26 of the ICA-40, as if it were trustee or custodian of
the Separate Account; Insurer has filed with the New York
Insurance Department an annual statement of its financial
condition with indicates that Insurer has capital and surplus or
unassigned surplus of not less than $1 million or such other
amount as prescribed by SEC rule; and Insurer, together with its
registered separate accounts, is supervised and examined
periodically by the New York Insurance Department.
(6) Such Registration Statement and the related Prospectus comply in
all material respects with the provisions of SA-33 and ICA-40 and
the Regulations, and neither the Registration Statement nor the
Prospectus contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light
of the circumstances in which they were made; provided, however,
that none of the representations and warranties in this Section
8(b)(5) shall apply to statements or omissions from a Registration
Statement or Prospectus made in reliance upon and in conformity
with information furnished to Insurer in writing by Underwriter
expressly for use in such Registration Statement or Prospectus.
(7) The Separate Account has been duly established by Insurer and
conforms to the description thereof in the Registration Statement
and the Prospectus for the Separate Account.
(8) The form of the Contracts has been approved to the extent required
by the New York Superintendent of Insurance on the pertinent date
of each Registration Statement.
(9) The Contracts have been duly authorized by Insurer and conform to
the descriptions thereof in the Registration Statement for the
Contracts and the related Prospectus and, when issued as
contemplated by such Registration Statement, shall constitute
legal, validly issued and binding obligations of Insurer in
accordance with their terms.
(10) No other consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or
sale of the Contracts, the establishment or operation of the
Separate Account, or for the consummation of the transactions
contemplated by this Agreement, that has not been obtained.
9. UNDERTAKINGS OF INSURER
Insurer undertakes as follows:
(a) Insurer shall use its best efforts to maintain the registration of the
Contracts (or interests therein) and the Separate Account with the SEC
and to maintain any registrations and approvals of the Contracts and
the Separate Account with the securities or insurance regulatory bodies
or administrative agencies of the State of New York, and Insurer shall
maintain the registration of the Contracts (or interests therein) and
the Separate Account with such state securities regulatory bodies and
any other governmental instrumentalities of the State of New York as
Insurer deems appropriate.
(b) Insurer shall take all action necessary to cause the Contracts to
comply, and to continue to comply, as annuity contracts under the
insurance laws of the State of New York and federal tax laws. In the
event of a change in applicable law that renders it impracticable or
impossible to maintain the Contracts as annuity contracts, Insurer
shall consult with Underwriter and shall take no action respecting the
Contracts without the consent of Underwriter.
(c) Insurer shall take all action necessary to cause the Separate Account
to comply, and to continue to comply, with the provisions of ICA-40 and
the Regulations applicable to the Separate Account as a registered
investment company classified as a unit investment trust and a separate
account, and deemed to be issuing periodic payment plan certificates.
(d) Insurer shall not deduct any amounts from the assets of the Separate
Account or enter into a transaction or arrangement involving the
Contracts or the Separate Account or cause the Separate Account to
enter into any such transaction or arrangement without obtaining any
necessary or customary approvals or exemptions from the SEC or any
no-action assurance deemed necessary from the SEC staff and without
ensuring that such approval, exemption or assurance applies to
Underwriter as the principal underwriter for the Contracts, to the
extent necessary or appropriate.
(e) Insurer shall provide Underwriter with preliminary drafts of any
amendments to Registration Statements, supplements to Prospectuses,
exemptive applications or no-action requests to be filed with the SEC
in connection with the Contracts, the Separate Account, or both.
Insurer shall provide Underwriter with a reasonable opportunity to
review and comment on such drafts before any such materials are filed
with the SEC. Insurer shall furnish Underwriter with copies of any such
materials or amendments thereto, as filed with the SEC, promptly after
the filing thereof, and any SEC communications or orders with respect
thereto, promptly after receipt thereof. Insurer shall maintain and
keep on file in its principal executive office any file memoranda or
any supplemental materials referred to in such Registration Statements,
exemptive applications and no-action requests and shall maintain and,
as necessary, amend such memoranda or materials and shall provide or
otherwise make available copies of such memoranda and materials to
Underwriter.
(f) Insurer shall notify Underwriter immediately upon discovery or in any
event as soon as possible under the following circumstances:
(1) Of any event which makes any material statement made in the
Registration Statement or the Prospectus untrue in any material
respect or results in a material omission in the Registration
Statement or the Prospectus;
(2) Of any request by the SEC for any amendment to the Registration
Statement, or any supplement to the Prospectus, or statement of
additional information;
(3) Of the issuance by the SEC of any notice pursuant to Section 8(e)
of ICA-40, any stop order with respect to the Registration
Statement or any amendment thereto, or the initiation of any
proceedings for that purpose or for any other purpose relating to
the registration and/or offering of the Contracts;
(4) Of any event of the Contracts' or the Separate Account's
noncompliance with the applicable requirements of the Internal
Revenue Code or regulations, rulings, or interpretations
thereunder that could jeopardize the Contracts' status as annuity
contracts;
(5) Of any change in applicable insurance laws or regulations of the
State of New York materially adversely affecting the insurance
status of the Contracts or Underwriter's obligations with respect
to the distribution of the Contracts;
(6) Of any loss or suspension of the approval of the Contracts or
distribution thereof by the securities or insurance regulatory
body, administrative agency, or any other governmental
instrumentality of, the State of New York, any loss or suspension
of Insurer's certificate of authorization to do business or to
issue variable insurance contracts in such State, or of the lapse
or termination of the Contracts' or the Separate Account's
registration, approval or clearance in such State;
(7) Of any termination of the authorization or approval of the sale of
the Contracts in the State of New York;
(8) Of any material adverse change in the condition (financial or
otherwise) of Insurer or the Separate Account that would cause the
information in the Registration Statement to be materially
misleading; and
(9) Of any event which causes a representation or warranty of Insurer
contained in this Agreement to no longer be true.
(g) Insurer shall notify Underwriter in a reasonably timely manner under
the circumstances:
(1) When a Registration Statement has become effective or any
post-effective amendment with respect to a Registration Statement
becomes effective thereafter;
(2) When any registration of the Contracts (or interests therein)
under the securities or blue sky laws of the States of New York
has become effective to the extent not yet obtained as of the
Effective Date; and
(3) When approval of the Contract forms under the applicable insurance
laws of the State of New York has been obtained to the extent not
yet obtained as of the Effective Date.
(h) Insurer shall provide Underwriter access to such records, officers and
employees of Insurer at reasonable times as is necessary to enable
Underwriter to fulfill its obligation, as the underwriter under SA-33
for the Contracts and as principal underwriter for the Separate Account
under ICA-40, to perform due diligence and to use reasonable care.
(i) Insurer shall use its best efforts to timely file each post-effective
amendment to a Registration Statement, Prospectus, annual reports on
Form N-SAR, and all other reports, notices, statements and amendments
required to be filed by or for Insurer and the Separate Account with
the SEC under SA-33, SEA-34 and/or ICA-40 or any applicable
Regulations. Insurer shall timely file Rule 24f-2 notices required to
be filed by or for Insurer and the Separate Account with the SEC under
SA-33 and/or ICA-40 or any applicable Regulations. To the extent there
occurs an event or development (including, without limitation, a change
of applicable law, regulation or administrative interpretation)
warranting an amendment to the Registration Statement or supplement to
the Prospectus, Insurer shall endeavor to promptly prepare and file
such amendment or supplement with the SEC.
(j) To the extent that Insurer is responsible for printing under Section 7,
Insurer shall provide Underwriter with as many copies of the Prospectus
(and any amendments or supplements to the Prospectus) as Underwriter
may reasonably request.
(k) Insurer shall deliver to Underwriter, as soon as practicable after it
becomes available, the annual statement for Insurer and for the
Separate Account in the form filed with the State of New York.
(l) Insurer shall furnish to Underwriter without charge promptly after
filing ten (10) complete copies of each Registration Statement and any
pre-effective or post-effective amendment thereto, including financial
statements and all exhibits not incorporated therein by reference.
10. REPRESENTATIONS AND WARRANTIES OF UNDERWRITER
Underwriter represents and warrants to Insurer on the Effective Date as
follows:
(a) Underwriter has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland
with full power and authority to own, lease and operate its properties
and to conduct its business, and is in good standing, in each state in
which its business so requires.
(b) The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by all
necessary corporate action by Underwriter, and when so executed and
delivered this Agreement shall be the valid and binding obligation of
Underwriter enforceable in accordance with its terms.
(c) The consummation of the transactions contemplated herein, and the
fulfillment of the terms of this Agreement, shall not conflict with,
result in any breach in any material respect of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default in any material respect under, the articles of incorporation
or bylaws of Underwriter, or any indenture, agreement, mortgage, deed
of trust, or other instrument to which Underwriter is a party or by
which it is bound, or to the best of Underwriter's knowledge violate in
any material respect any law, or, to the best of Underwriter's
knowledge, any order, rule or regulation applicable to Underwriter of
any court or of any federal or state regulatory body, administrative
agency or any other governmental instrumentality having jurisdiction
over Underwriter or any of its properties.
(d) Underwriter is registered as a broker-dealer under SEA-34, is a member
of the NASD, and is duly registered as a broker-dealer under the
securities laws of the State of New York to the extent required in
connection with its obligations under this Agreement, and its
Representatives, together with Agency, are or shall be fully licensed
in accordance with New York State insurance laws to the extent
necessary to perform their obligations under this Agreement.
(e) Underwriter is and shall remain during the term of this Agreement in
compliance with Section 9(a) of ICA-40.
11. UNDERTAKINGS OF UNDERWRITER
Underwriter undertakes as follows:
(a) Underwriter shall train, supervise and be solely responsible for the
conduct of its Representatives in their solicitation of Contracts, and
shall supervise their compliance with applicable rules and regulations
of any New York State securities regulatory agency that has
jurisdiction over variable annuity sales activities.
(b) Underwriter will use its best efforts to maintain its registration as a
broker-dealer under SEA-34 and its membership with the NASD, and will
use its best efforts to maintain its registration as a broker-dealer
with the applicable securities authorities under the laws of the State
of New York where necessary in connection with its obligations under
this Agreement.
(c) Underwriter shall be responsible for its own conduct and the
employment, control, and conduct of its officers, employees and agents
and for injury to such officers, employees or agents or to others
through its officers, employees or agents. Underwriter assumes full
responsibility for its officers, employees and agents under applicable
laws, rules and regulations and agrees to pay all employee taxes
thereunder.
(d) Underwriter will notify Insurer if its SEC or New York State
broker-dealer registration or NASD membership is terminated or if it is
the subject of any proceeding that, in its reasonable judgment, is
likely to result in such termination.
(e) Underwriter shall notify Insurer immediately upon discovery or in any
event as soon as possible under the following circumstances:
(1) Of any material adverse change in the condition (financial or
otherwise) of Underwriter that would materially affect
Underwriter's obligations with respect to the distribution of the
Contracts; and
(2) Of any event which causes a representation or warranty of
Underwriter contained in this Agreement to no longer be true.
12. RECORDS
Insurer and Underwriter each shall maintain such accounts, books,
records and other documents as are required to be maintained by each of
them by applicable laws and regulations and shall preserve such
accounts, books, records and other documents for the periods prescribed
by such laws and regulations. The accounts, books, records and other
documents of Insurer, the Separate Account and Underwriter as to all
transactions hereunder shall be maintained so as to clearly and
accurately disclose the nature and details of the transactions,
including such accounting information as necessary to support the
reasonableness of the amounts paid by Insurer hereunder. Each party
shall have the right to inspect and audit such accounts, books, records
and other documents of the other party during normal business hours
upon reasonable written notice to the other party. Each party shall
keep confidential all information obtained pursuant to such an
inspection or audit, and shall disclose such information to third
parties only upon receipt of written authorization from the other party
or as otherwise described in Section 15, below.
13. INVESTIGATIONS AND PROCEEDINGS
(a) COOPERATION
Underwriter and Insurer shall cooperate fully in any insurance or
securities regulatory investigation or proceeding or judicial
proceeding with respect to Insurer, Underwriter, their Affiliates and
their agents, Representatives or employees to the extent that such
investigation or proceeding is in connection with the offering, sale or
distribution of the Contracts distributed under this Agreement. Without
limiting the foregoing, Insurer and Underwriter shall notify each other
promptly of any notice of any regulatory investigation or proceeding or
judicial proceeding, arising in connection with the offering, sale or
distribution of the Contracts distributed under this Agreement,
received by either party with respect to Insurer, Underwriter or any of
their Affiliates, agents, Representatives or employees or which may
affect Insurer's issuance or Underwriter's distribution of any Contract
marketed under this Agreement.
(b) CUSTOMER COMPLAINT
Insurer and Underwriter shall notify each other promptly in the case of
a substantive customer complaint arising in connection with the
offering, sale or distribution of the Contracts distributed under this
Agreement. In addition, Underwriter and Insurer shall cooperate in
investigating such complaint and any response by either party to such
complaint shall be sent to the other party for written approval not
less than five business days prior to its being sent to the customer or
any regulatory authority, except that if a more prompt response is
required, the proposed response shall be communicated by telephone or
facsimile. In any event, neither party shall release any such response
without the other party's prior written approval.
14. INDEMNIFICATION
(a) BY UNDERWRITER
Underwriter agrees to indemnify and hold harmless Insurer and each of
its directors and officers and each person, if any, who controls
Insurer within the meaning of Section 15 of SA-33 (collectively, the
"Indemnified Parties" for purposes of this Section 14(a)), against any
and all losses, claims, expenses, damages, liabilities (including
amounts paid in settlement with the written consent of 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 expenses,
damages, liabilities (or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact or omission or alleged
omission to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading,
in light of the circumstances in which they were made, contained
in any Registration Statement or in any Prospectus; to the extent,
but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission: (i) was made in
reliance upon information furnished in writing to Insurer by
Underwriter specifically for use in the preparation of any such
Registration Statement or any amendment thereof or supplement
thereto; or (ii) was contained in (A) any registration statement,
or any post-effective amendment thereto which becomes effective,
filed by or on behalf of a Fund with the SEC relating to Shares,
including any financial statements included in, or any exhibit to,
such registration statement or post-effective amendment, (B) any
prospectus of a Fund relating to the Shares either contained in
any such registration statement or post-effective amendment or
filed pursuant to Rule 497(c) or Rule 497(e) under SA-33, or (C)
in any promotional, sales or advertising material or written
information relating to the Shares authorized by or on behalf of a
Fund; or
(2) result because of any use by Underwriter or any Underwriter
Representative of promotional, sales or advertising material not
authorized by Insurer or any written or oral misrepresentations by
Underwriter or any Underwriter Representative or any unlawful
sales practices concerning the Contracts by Underwriter or any
Underwriter Representative under federal securities laws or NASD
regulations or other applicable law, or from the failure to
deliver the Prospectus or prospectuses for the Funds to the extent
required; or
(3) result from any claims by agents or Representatives or employees
of Underwriter for commissions or other compensation or
remuneration of any type; or
(4) arise out of or result from any material breach by Underwriter or
any Underwriter Representative of any provision of this Agreement.
This indemnification shall be in addition to any liability that
Underwriter may otherwise have; provided, however, that no Indemnified
Party shall be entitled to indemnification pursuant to this provision
if such loss, claim, expense, damage, liability or litigation is due to
the 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 Insurer.
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 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
Underwriter of any such claim shall not relieve 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, Underwriter will be entitled to participate, at its own expense,
in the defense thereof. Underwriter also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in
the action. After notice from Underwriter to such party of
Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional legal counsel
retained by it, and 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.
Underwriter agrees to promptly notify Insurer of the commencement of
any litigation or proceedings against it or a Fund or any of
Underwriter's directors, officers, employees or agents in connection
with the sale of any Contracts.
(b) BY INSURER
Insurer agrees to indemnify and hold harmless Underwriter and each of
its directors and officers and each person, if any, who controls
Underwriter within the meaning of Section 15 of SA-33 (collectively,
the "Indemnified Parties" for purposes of this Section 14(b)), against
any and all losses, claims expenses, damages, liabilities (including
amounts paid in settlement with the written consent of Insurer) 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 expenses,
damages, liabilities (or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact or omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light
of the circumstances in which they were made, contained in any
Registration Statement or in any Prospectus; provided that Insurer
shall not be liable in any such case to the extent that such loss,
liability, damage, claim or expense arises out of, or is based
upon, an untrue statement or alleged untrue statement or omission
or alleged omission: (i) was made in reliance upon information
furnished in writing to Insurer by Underwriter specifically for
use in the preparation of any such Registration Statement or any
amendment thereof or supplement thereto; or (ii) was contained in
(A) any registration statement, or any post-effective amendment
thereto which becomes effective, filed by or on behalf of a Fund
with the SEC relating to Shares, including any financial
statements included in, or any exhibit to, such registration
statement or post-effective amendment, (B) any prospectus of a
Fund relating to the Shares either contained in any such
registration statement or post-effective amendment or filed
pursuant to Rule 497(c) or Rule 497(e) under SA-33, or (C) in any
promotional, sales or advertising material or written information
relating to the Shares authorized by or on behalf of a Fund; or
(2) result because of the terms of any Contract or because of any
material breach by Insurer or any of its officers, directors,
employees or agents (which, for these purposes, shall not include
Underwriter Representatives or Distributor Representatives) of any
provision of this Agreement or of any Contract; or
(3) result because of any use by Underwriter or any Underwriter
Representative of promotional, sales and/or advertising material
prepared by Insurer or any written or oral misrepresentations by
Insurer, its officers, directors, employees or agents (which, for
these purposes, shall not include Underwriter Representatives or
Distributor Representatives), or any unlawful sales practices
concerning the Contracts by Insurer, its officers, directors,
employees, or agents (which, for these purposes, shall not include
Underwriter Representatives or Distributor Representatives) under
the federal securities laws or NASD regulations or other
applicable law; or
(4) arise out of or result from any material breach by Insurer of any
provision of this Agreement.
This indemnification shall be in addition to any liability that Insurer
may otherwise have; provided, however, that no Indemnified Party shall
be entitled to indemnification pursuant to this provision if such loss,
claim, expense, damage, liability or litigation is due to the 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
Underwriter.
Insurer 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 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 Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify
Insurer of any such claim shall not relieve 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 Party, Insurer
will be entitled to participate, at its own expense, in the defense
thereof. Insurer also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from Insurer to such party of Insurer's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional legal counsel retained by it, and Insurer will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
Insurer agrees to promptly notify Underwriter of the commencement of
any litigation or proceedings against it or any of its directors,
officers, employees or agents in connection with the sale of any
Contracts.
(c) SURVIVAL OF INDEMNIFICATION
The indemnification provisions contained in this Section 14 shall
remain operative in full force and effect, regardless of (1) any
investigation made by or on behalf of Insurer or Underwriter or by or
on behalf of any controlling person thereof, (2) delivery of any
Contracts and Premiums therefor, and (3) any termination of this
Agreement. A successor by law of Underwriter or Insurer, as the case
may be, shall be entitled to the benefits of the indemnification
provisions contained in this Section 14.
15. CONFIDENTIAL AND PROPRIETARY INFORMATION
At all times throughout the term of this Agreement, and following any
termination or expiration of this Agreement, each party and all of its
respective Affiliates, and each officer, director, shareholder,
employee or agent thereof, shall maintain the confidentiality of (i)
this Agreement, (ii) the transactions and other matters contemplated
herein, (iii) any proprietary or other information provided by one
party to the other party to facilitate the transactions contemplated
herein, provided that this obligation of confidentiality shall not
apply to: (i) disclosures required to be made to any regulatory bodies,
administrative agencies or other governmental instrumentalities or
disclosures deemed by such party to be desirable to disclose to any
such entity; (ii) disclosures made to attorneys, accountants and other
representatives in order to assist in the consummation of the
transactions and other matters contemplated herein; (iii) disclosures
otherwise required by applicable law; or (iv) disclosures to which the
other party consents; provided further that, with respect to the
immediately foregoing clauses (i) and (iii), any party that makes such
a disclosure shall so notify the other party prior to or simultaneously
with making such disclosure to the extent reasonably practicable; and
provided further that, with respect to the foregoing clause (ii), a
party shall make disclosures regarding this Agreement and the
transactions contemplated herein only to such party's attorneys,
accountants and other third party representatives who agree to keep
such information confidential in accordance with this Section.
16. DURATION AND TERMINATION OF THIS AGREEMENT
(a) TERM
This Agreement shall become effective upon the Effective Date and shall
remain in effect for five years from the Effective Date and from year
to year thereafter, unless terminated as provided herein.
(b) TERMINATION
After the initial term, this Agreement may be terminated at any time,
on 60 days written notice, without the payment of any penalty, by
Underwriter or Insurer.
(c) ASSIGNMENT
This Agreement will automatically terminate in the event of its
assignment, as such term is defined in ICA-40, without the prior
written consent of the other party.
(d) TERMINATION UPON MATERIAL BREACH
This Agreement may be terminated at the option of either party to this
Agreement upon the other party's material breach of any provision of
this Agreement or of any representation made in this Agreement, unless
such breach has been cured within 10 days after receipt of notice of
breach from the non-breaching party.
(e) TERMINATION OF FUND PARTICIPATION AGREEMENT
Either party has the right to terminate this Agreement in the event of
termination of the Fund Participation Agreement between Underwriter,
Insurer, and the Funds.
(f) EFFECT OF TERMINATION
Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (1) the obligation to settle accounts
hereunder, including commissions, if any, on Premiums subsequently
received for Contracts in effect at the time of termination or issued
pursuant to Applications received by Insurer prior to termination; and
(2) the obligations contained in Sections 2(d), 6, 7, 8(b), 9 (but not
clause (h) thereof), 12, 13, 14, and 15 hereof.
17. AMENDMENT OF THIS AGREEMENT
No provisions of this Agreement may be changed, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge, or
termination is sought.
18. AMENDMENT OF SCHEDULES
The parties to this Agreement may amend Schedules 1 and 2 to this
Agreement from time to time to reflect additions of or changes in any
class of Contracts, Separate Accounts, subaccounts and Funds that have
been agreed upon. The provisions of this Agreement shall be equally
applicable to each such class of Contracts, Separate Accounts,
subaccounts and Funds that may be added to the Schedules, unless the
context otherwise requires.
19. MISCELLANEOUS
(a) CAPTIONS
The captions in this Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
(b) COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) RIGHTS, REMEDIES, ETC., ARE CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws. Failure of either party to insist upon
strict compliance with any of the conditions of this Agreement shall
not be construed as a waiver of any of the conditions, but the same
shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
(d) INTERPRETATION; JURISDICTION
This Agreement constitutes the whole agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all
prior oral or written understandings, agreements or negotiations
between the parties with respect to such subject matter. No prior
writings by or between the parties with respect to the subject matter
hereof shall be used by either party in connection with the
interpretation of any provision of this Agreement. This Agreement shall
be construed and its provisions interpreted under and in accordance
with the internal laws of the state of Maryland without giving effect
to principles of conflict of laws.
(e) SEVERABILITY
This is a severable Agreement. In the event that any provision of this
Agreement would require a party to take action prohibited by applicable
federal or state law or prohibit a party from taking action required by
applicable federal or state law, then it is the intention of the
parties hereto that such provision shall be enforced to the extent
permitted under the law, and, in any event, that all other provisions
of this Agreement shall remain valid and duly enforceable as if the
provision at issue had never been a part hereof.
(f) REGULATION
This Agreement shall be subject to the provisions of SA-33, SEA-34 and
ICA-40 and the Regulations and the rules and regulations of the NASD,
from time to time in effect, including such exemptions from ICA-40 as
the SEC may grant, and the terms hereof shall be interpreted and
construed in accordance therewith. Without limiting the generality of
the foregoing, the term "assigned" shall not include any transaction
exempted from Section 15(b)(2) of ICA-40.
20. NOTICE, CONSENT AND REQUEST
Any notice, consent or request required or permitted to be given by
either party to the other shall be deemed sufficient if sent by
facsimile transmission followed by Federal Express or other overnight
carrier, or if sent by registered or certified mail, postage prepaid,
addressed by the party giving notice to the other party at the
following address (or at such other address for a party as shall be
specified by like notice):
if to Insurer:
First Security Benefit Life Insurance and
Annuity Company of New York
Attn: Peg Avey
70 West Red Oak Lane, Fourth Floor
White Plains, New York 10604
Copy to:
Security Benefit Life Insurance Company
Attn: Amy J. Lee, Esq.
700 Harrison Street
Topeka, Kansas 66636
and if to Underwriter:
T. Rowe Price Investment Services, Inc.
Attn: Henry Hopkins, Esq.
100 East Pratt Street
Baltimore, Maryland 21202.
IN WITNESS WHEREOF, Insurer and Underwriter have each duly executed this
Agreement as of the day and year first above written.
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
By Its Authorized Officer
By:___________________________
Roger K. Viola
Title: SECRETARY
Date: MAY 1, 1998
T. ROWE PRICE INVESTMENT SERVICES, INC.
By Its Authorized Officer
By:___________________________
Darrell N. Braman
Title: VICE PRESIDENT
Date: MAY 1, 1998
<PAGE>
EXHIBIT A
FORM OF OPINION PURSUANT TO SECTION 2
T. Rowe Price Investment Services, Inc.
Dear Sirs:
You have requested our opinion with respect to certain matters in connection
with the execution of the distribution agreement dated as of October 11, 1995
(the "Agreement") entered into between you ("Underwriter) and First Security
Benefit Life Insurance and Annuity Company of New York ("Insurer"). The
Agreement relates to your distribution of certain variable insurance contracts,
described more specifically in a registration statement, as amended, on Form N-4
filed with the Securities and Exchange Commission ("SEC"), File No. 33-83240,
which are to be issued by Insurer and supported by the T. Rowe Price Variable
Annuity Account of Insurer. All capitalized terms contained herein not otherwise
defined shall have the meaning assigned to them in the Agreement.
We are of the following opinion:
(1) Insurer has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of New York
with full power and authority to own, lease and operate its properties
and conduct its business, is duly qualified to transact the business of
a life insurance company and to issue variable insurance products.
(2) The execution and delivery of the Agreement and the consummation of the
transactions contemplated therein have been duly authorized by all
necessary corporate action by Insurer, and when so executed and
delivered the Agreement shall be the valid and binding obligation of
Insurer enforceable in accordance with its terms.
(3) The consummation of the transactions contemplated by the Agreement, and
the fulfillment of its terms, shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or bylaws of Insurer, or to the best of our knowledge,
any indenture, agreement, mortgage, deed of trust, or other instrument
to which Insurer is a party or by which it is bound, or violate any
law, or, to the best of our knowledge, any order, rule or regulation
applicable to Insurer of any court or of any federal or state
regulatory body, administrative agency or any other governmental
instrumentality having jurisdiction over Insurer or any of its
properties.
(4) Insurer has filed with the SEC all statements, notices and other
documents required for registration of the Contracts and the Separate
Account under the provisions of ICA-40 and SA-33 and the Regulations
thereunder; further, there are no contracts or documents of Insurer or
relating to the Contracts or the Separate Account which are required to
be filed as exhibits to the Registration Statement by SA-33, ICA-40 or
the Regulations which have not been so filed.
(5) The Registration Statement has been declared effective by the SEC or
has become effective in accordance with the Regulations.
(6) Insurer has not received any notice from the SEC with respect to the
Registration Statement pursuant to Section 8(e) of ICA-40 and no stop
order under SA-33 has been issued and no proceeding therefor has been
instituted or threatened by the SEC.
(7) Insurer has obtained all necessary or customary orders of exemption or
approval from the SEC to permit the distribution of the Contracts
pursuant to the Agreement and to permit the operation of the Separate
Account as contemplated in the related Prospectus, and such orders
apply to Underwriter, as principal underwriter for the Contracts and
the Separate Account.
(8) The Registration Statement and the related Prospectus comply in all
material respects with the provisions of SA-33 and ICA-40 and the
Regulations.
(9) We have no reason to believe that the Registration Statement (other
than any financial statements included therein and any statements or
omissions made in reliance upon information furnished to the Company by
the Distributor or a Fund (and confirmed in writing) specifically for
use in the preparation of the Registration Statement, as to which no
opinion is rendered), at the time it became effective, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they
were made, nor do we have any reason to believe that the Prospectus
(other than any financial statements included therein and any
statements or omissions made in reliance upon information furnished to
the Company by the Distributor or a Fund (and confirmed in writing)
specifically for use in the preparation of the Registration Statement
or Prospectus, as to which no opinion is rendered), as amended or
supplemented as of the date hereof, contains an untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements therein not misleading, in light of the
circumstances under which they were made.
(10) We have no reason to believe that the statements made in the Prospectus
under the caption "Tax Status," to the extent that they constitute
matters of law or legal conclusions with respect thereto, are not
correct in any material respect.
(11) The Separate Account has been duly established by Insurer and conforms
to the description thereof in the Registration Statement and the
Prospectus for the Separate Account.
(12) The form of the Contracts has been approved to the extent required by
the New York Superintendent of Insurance.
(13) The Contracts have been duly authorized by Insurer and conform to the
descriptions thereof in the Registration Statement for the Contracts
and the related Prospectus and, when issued as contemplated by the
Registration Statement, shall constitute legal, validly issued and
binding obligations of Insurer in accordance with their terms.
(14) The Contracts and the Separate Account have been duly registered with
the state securities regulatory bodies, administrative agencies, or any
other governmental instrumentality with which the Contracts or Separate
Account must be registered of the State of New York, to the extent such
registration requirements apply.
(15) To the best of our knowledge, no other consent, approval, authorization
or order of any court or governmental authority or agency is required
for the issuance or sale of the Contracts, the establishment or
operation of the Separate Account, or for the consummation of the
transactions contemplated by the Agreement, that has not been obtained.
Very truly yours,
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
By:____________________________
Name:
Title:
<PAGE>
October 11, 1995
First Security Benefit Life Insurance
and Annuity Company of New York
Re: Registration Statement No. 33-83240 for
T. Rowe Price Variable Annuity Account of First
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
Dear Sirs:
This letter is delivered to you in connection with (a) the Distribution
Agreement dated as of October 11, 1995 between you and T. Rowe Price Investment
Services, Inc. ("Underwriter") relating to its distribution of certain variable
annuity contracts (the "Contracts"), interests in which have been registered
with the Securities and Exchange Commission (the "SEC") pursuant to the
Registration Statement identified above, and (b) the Participation Agreement
dated as of October 11, 1995, between you and the undersigned relating to the
Separate Account's investment in the undersigned. For purposes of such
agreements, this letter identifies information we have provided to you for
inclusion in the Registration Statement, as amended on Form N-4, filed with the
SEC, and the definitive versions of the related prospectus and statement of
additional information for the Contracts (the "Prospectus" and "SAI,"
respectively), as filed with the SEC on _________ in accordance with Rule 497 of
the Securities Act of 1933.
References herein to pages, paragraphs, or sentences are references to such
in the definitive versions of the Prospectus and SAI. Capitalized terms used
herein and not defined herein have the same meaning as in the Prospectus and
SAI.
The Fund hereby confirms that it has furnished the following information to
you specifically for use in the preparation of the Registration Statement, the
Amendment, the Prospectus, and SAI (to the extent that the following applies to
or describes the Fund and not with respect to information regarding any other
mutual fund):
* The names of the portfolios of the Fund, as they appear on page 2 of the
prospectus and page 7 of the prospectus.
* The definition of the Fund on page 6 of the prospectus.
* The "Management Fee," "Other Expenses," and "Total Portfolio Expenses"
shown for the portfolios of the Fund in the Expense Table on page 10, and
accompanying note.
* The section entitled "The Funds" beginning on page 12 and ending on page
14, except for the sentence to the effect that ". . . if the Company
believes that any Fund's response to any of these events or conflicts
insufficiently protects Owners, it will take appropriate action on its
own."
* The section entitled "The Investment Advisers," on page 14.
* The section entitled "Fund Expenses," on page 25.
* * *
Very truly yours,
T. ROWE PRICE EQUITY SERIES, INC.
By: _________________________
Name:
Title: Vice President
<PAGE>
October 11, 1995
First Security Benefit Life Insurance
and Annuity Company of New York
Re: Registration Statement No. 33-83240 for
T. Rowe Price Variable Annuity Account of First
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
Dear Sirs:
This letter is delivered to you in connection with (a) the Distribution
Agreement dated as of October 11, 1995 between you and T. Rowe Price Investment
Services, Inc. ("Underwriter") relating to its distribution of certain variable
annuity contracts (the "Contracts"), interests in which have been registered
with the Securities and Exchange Commission (the "SEC") pursuant to the
Registration Statement identified above, and (b) the Participation Agreement
dated as of October 11, 1995, between you and the undersigned relating to the
Separate Account's investment in the undersigned. For purposes of such
agreements, this letter identifies information we have provided to you for
inclusion in the Registration Statement, as amended, on Form N-4, filed with the
SEC, and the definitive versions of the related prospectus and statement of
additional information for the Contracts (the "Prospectus" and "SAI,"
respectively), as filed with the SEC on _________ in accordance with Rule 497 of
the Securities Act of 1933.
References herein to pages, paragraphs, or sentences are references to such
in the definitive versions of the Prospectus and SAI. Capitalized terms used
herein and not defined herein have the same meaning as in the Prospectus and
SAI.
The Fund hereby confirms that it has furnished the following information to
you specifically for use in the preparation of the Registration Statement, the
Amendment, the Prospectus, and SAI (to the extent that the following applies to
or describes the Fund and not with respect to information regarding any other
mutual fund):
* The names of the portfolios of the Fund, as they appear on page 2 of the
prospectus and page 7 of the prospectus.
* The definition of the Fund on page 6 of the prospectus.
* The "Management Fee," "Other Expenses," and "Total Portfolio Expenses"
shown for the portfolios of the Fund in the Expense Table on page 10, and
accompanying note.
* The section entitled "The Funds" beginning on page 12 and ending on page
14, except for the sentence to the effect that ". . . if the Company
believes that any Fund's response to any of these events or conflicts
insufficiently protects Owners, it will take appropriate action on its
own."
* The section entitled "The Investment Advisers," on page 14.
* The section entitled "Fund Expenses," on page 25.
* * *
Very truly yours,
T. ROWE PRICE FIXED INCOME SERIES, INC.
By: _________________________
Name:
Title: Vice President
<PAGE>
October 11, 1995
First Security Benefit Life Insurance
and Annuity Company of New York
Re: Registration Statement No. 33-83240 for
T. Rowe Price Variable Annuity Account of First
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
Dear Sirs:
This letter is delivered to you in connection with (a) the Distribution
Agreement dated as of October 11, 1995 between you and T. Rowe Price Investment
Services, Inc. ("Underwriter") relating to its distribution of certain variable
annuity contracts (the "Contracts"), interests in which have been registered
with the Securities and Exchange Commission (the "SEC") pursuant to the
Registration Statement identified above, and (b) the Participation Agreement
dated as of October 11, 1995 between you and the undersigned relating to the
Separate Account's investment in the undersigned. For purposes of such
agreements, this letter identifies information we have provided to you for
inclusion in the Registration Statement, as amended, on Form N-4, filed with the
SEC, and the definitive versions of the related prospectus and statement of
additional information for the Contracts (the "Prospectus" and "SAI,"
respectively), as filed with the SEC on _________ in accordance with Rule 497 of
the Securities Act of 1933.
References herein to pages, paragraphs, or sentences are references to such
in the definitive versions of the Prospectus and SAI. Capitalized terms used
herein and not defined herein have the same meaning as in the Prospectus and
SAI.
The Fund hereby confirms that it has furnished the following information to
you specifically for use in the preparation of the Registration Statement, the
Amendment, the Prospectus, and SAI (to the extent that the following applies to
or describes the Fund and not with respect to information regarding any other
mutual fund):
* The names of the portfolios of the Fund, as they appear on page 2 of the
prospectus and page 7 of the prospectus.
* The definition of the Fund on page 6 of the prospectus.
* The "Management Fee," "Other Expenses," and "Total Portfolio Expenses"
shown for the portfolios of the Fund in the Expense Table on page 10, and
accompanying note.
* The section entitled "The Funds" beginning on page 12 and ending on page
14, except for the sentence to the effect that ". . . if the Company
believes that any Fund's response to any of these events or conflicts
insufficiently protects Owners, it will take appropriate action on its
own."
* The section entitled "The Investment Advisers," on page 14.
* The section entitled "Fund Expenses," on page 25.
* * *
Very truly yours,
T. ROWE PRICE INTERNATIONAL SERIES, INC.
By: _________________________
Name:
Title: Vice President
<PAGE>
October 11, 1995
First Security Benefit Life Insurance
and Annuity Company of New York
Re: Registration Statement No. 33-83240 for
T. Rowe Price Variable Annuity Account of First
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
Dear Sirs:
This letter is delivered to you in connection with the Distribution Agreement
(the "Agreement") dated as of October 11, 1995 between you and the undersigned
relating to our distribution of certain variable annuity contracts, interests in
which have been registered with the Securities and Exchange Commission (the
"SEC") pursuant to the Registration Statement identified above. This letter
identifies information we have provided to you for inclusion in the Registration
Statement, as amended, on Form N-4, filed with the SEC, and the definitive
versions of the related prospectus and statement of additional information for
the Contracts (the "Prospectus" and "SAI," respectively), as filed with the SEC
on _________ in accordance with Rule 497 of the Securities Act of 1933.
References herein to pages, paragraphs, or sentences are references to the
definitive versions of the Prospectus and SAI. Capitalized terms used herein and
not defined herein have the same meaning as in the Prospectus and SAI.
We have provided the following information to you specifically for use in the
preparation of the Registration Statement, the Amendment, the Prospectus, and
the SAI:
* The second and third sentences under the caption, "Application for a
Contract," on page 15 to the extent of references to the Underwriter's
effectuation of redemptions from the T. Rowe Price mutual funds.
* The fourth sentence under the heading "Purchase Payments," on page 16, to
the extent of references to redemption of Fund shares.
* The paragraph captioned "Distribution of the Contracts," on page 42.
* Item 29 of Part C of the Amendment, which lists officers of Underwriter.
Further, to the extent Investment Services has agreed to perform an
administrative or operational service specifically described in the Prospectus
and not referred to in the preceding paragraph, you may rely upon the fact that
Investment Services shall perform such service.
* * *
It is understood that the opinion of counsel to First Security Benefit Life
Insurance and Annuity Company of New York to be furnished to us in accordance
with section 2 of the Distribution Agreement will not cover (I.E., will
specifically exclude) all of the information referred to above, as well as all
information confirmed in writing by or on behalf of the Funds as being provided
by the Funds, and any omissions relating to, arising out of, or pertaining to
such provided information.
Very truly yours,
T. ROWE PRICE INVESTMENT SERVICES, INC.
By: _________________________
Name: Nancy M. Morris
Title: Vice President
<PAGE>
SCHEDULE 1
Contracts Subject to Agreement
- --------------------------------------------------------------------------------
CONTRACT MARKETING NAME POLICY FORM NOS. SEC REGISTRATION NO.
- --------------------------------------------------------------------------------
T. Rowe Price No-Load FSB 200; File No. 33-83240
Variable Annuity FSB 201 (4-94);
FSB 201 (4-94)U; File No. 811-8726
FSB 202 (4-94);
FSB 203 (4-94
FSB 211 (4-94)
FSB 212 (4-94)
T. Rowe Price No Load FSB 214 File No. 33-83240
Immediate Variable Annuity File No. 811-8724
<PAGE>
SCHEDULE 2
SEPARATE ACCOUNTS, SUBACCOUNTS AND FUNDS
AVAILABLE UNDER THE CONTRACTS
- --------------------------------------------------------------------------------
Separate Account Subaccount Funds
- --------------------------------------------------------------------------------
T. Rowe Price Variable T. Rowe Price Equity
Annuity Account of First Series, Inc.
Security Benefit Life
Insurance and Annuity
Company of New York
* New America * T. Rowe Price New America
Growth Subaccount Growth Portfolio
* Equity Income * T. Rowe Price Equity
Subaccount Income Portfolio
* Personal Strategy * T. Rowe Price Personal
Balanced Subaccount Strategy Balanced
Portfolio
* Mid-Cap Growth * T. Rowe Price Mid-Cap
Subaccount Growth Portfolio
- --------------------------------------------------------------------------------
T. Rowe Price International
Series, Inc.
* International Stock * T. Rowe Price
Subaccount International
Stock Portfolio
- --------------------------------------------------------------------------------
T. Rowe Price Fixed
Income Series, Inc.
* Limited-Term * T. Rowe Price Limited-
Bond Subaccount Term Bond Portfolio
* Prime Reserve * T. Rowe Price Prime
Subaccount Reserve Portfolio
- --------------------------------------------------------------------------------
<PAGE>
PARTICIPATION AGREEMENT
AMONG
T. ROWE PRICE FIXED INCOME SERIES, INC.,
T. ROWE PRICE EQUITY SERIES, INC.,
T. ROWE PRICE INTERNATIONAL SERIES, INC.,
AND
T. ROWE PRICE INVESTMENT SERVICES, INC.
AND
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of this 11th day of October, 1995 by
and among First Security Benefit Life Insurance and Annuity Company of New York
(hereinafter, the "Company"), a New York life 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 T. Rowe Price Fixed Income
Series, Inc., T. Rowe Price Equity Series, Inc., and T. Rowe Price International
Series, Inc., each a corporation organized under the laws of Maryland (each
Fund, 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, if and 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," and all references
hereinafter to "Adviser" shall refer to the investment adviser for a Fund, as
pertinent) 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
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts (or interests in a separate account
funding such 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, or
by the Executive Committee of the Board, 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 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 or 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, III and VII of this Agreement is in effect to govern such sales.
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 rules thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus. Cash
redemptions ordinarily shall be paid not later than one Business Day, as defined
below, following receipt by the Fund or its designee of the request for
redemption unless, as described herein, the Fund exercises its rights under
Section 22(e) of the 1940 Act and any rules thereunder. Cash payments shall be
made in federal funds transmitted by wire.
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 one Business Day after an order to
purchase Fund shares is made in accordance with the provisions of Section 1.5
hereof. Payment shall be in federal funds transmitted by wire by 3:00 p.m.
Baltimore time. If payment in Federal Funds for any purchase is not received or
is received by the Fund after 3:00 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.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts (or interests in a
separate account funding such Contracts) are or will be registered under the
1933 Act; that the Contracts will be issued in compliance in all material
respects with all applicable federal and state laws; and that the Company will
require any person authorized to sell the Contract to do so in compliance in all
material respects with all applicable federal and state laws. The Company
further represents and warrants that it is an insurance company duly organized,
validly existing, 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 New York 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 New York and all applicable
federal and state securities laws and that the Fund is and shall remain
registered as an open-end management investment company 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 New York to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized, validly existing, and
in good standing 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 New York 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 Fund in compliance in
all material respects with the laws of the State of New York and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
respective 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, investment advisers, and other individuals/entities employed or
controlled by the Company dealing with the money and/or securities of the
Account are and shall continue to be at all times 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 shall be issued by a
reputable bonding company. The Company agrees to hold for the benefit of the
Fund and to pay to the Fund any amounts lost from larceny, embezzlement or other
events covered by the aforesaid bond to the extent such amounts properly belong
to the Fund pursuant to the terms of this Agreement.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1 Unless the parties otherwise agree in writing, 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. The expense of printing the Fund's
prospectus for distribution to existing owners of Contracts shall be borne by
the Underwriter or the Fund. The expense of printing the Fund's prospectus for
distribution to prospective customers shall be governed by a Distribution
Agreement between the Company and the Underwriter.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information ("SAI") for the Fund is available from the Company, and the
Underwriter (or the Fund), at its expense, shall print 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 (or the Underwriter), at its expense, shall provide the Company
with copies of the Fund's proxy material, reports to shareholders, and other
communications to shareholders in such quantity as the Company shall reasonably
require for distributing to Contract owners. The Fund (or the Underwriter) shall
bear the expense of mailing the Fund's proxy material and other communications
to contract owners. The Fund (or the Underwriter) shall bear the expense of
mailing Fund reports (including the Fund's semi-annual and annual reports) 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 portfolio for which instructions have
been received, 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 ten calendar days prior to its
use. No such material shall be used if the Fund or its designee reasonably
objects to such use within ten 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 objects.
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, the Contract, and/or its Account, is
named at least ten calendar days prior to its use. No such material shall be
used if the Company reasonably objects to such use within ten 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 inconsistent with the information or representations contained
in a registration statement or 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.
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 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract Owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following:
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.
ARTICLE V. OTHER 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. 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 Fund (or the Underwriter) shall bear the expenses of mailing the
Fund's prospectus to owners of Contracts issued by the Company. The expense of
mailing the Fund's prospectus to prospective owners of Contracts shall be
governed by a Distribution Agreement between the Company and the Underwriter.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity or life
insurance contracts, whichever is appropriate, under the Internal Revenue Code
of 1986, as amended (the "Code") and the regulations issued thereunder (or any
successor provisions). Without limiting the scope of the foregoing, each
Designated Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation Subsection 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 as promptly as
possible 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 each Designated Portfolio 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 The Company represents that the Contracts are currently, and at the time
of issuance shall be, treated as life insurance 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.
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 Account's investment in
the Fund and terminate this Agreement with respect to each 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 that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (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 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 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 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 are based upon any statements or
representations or the omission or alleged omission of any statements or
representations about the Contracts contained in sales literature for the
Contracts (or any amendment or supplement) that arise out of or are based upon
state insurance law; or
(iii) 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 (which shall not include any T.
Rowe Price Representative, or any Representative or employee of T. Rowe Price
Insurance Agency, as such persons are defined or referred to in the Distribution
Agreement), with respect to the sale or distribution of the Contracts or Fund
Shares; or
(iv) 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
(v) 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
(vi) 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
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, 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 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 its directors and officers, the Account, 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
(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 by or on
behalf of the Fund) 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 Underwriter or the Fund; or
(iv) arise as a result of any failure by the Underwriter or
the Fund to provide the services and furnish the
materials under the terms of this Agreement (including a
failure by the Fund, 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.
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, the Account, 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 which the Indemnified Parties 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.
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 after five (5) years from the effective
date of this Agreement, 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 based upon the Company's determination that shares of
the Fund 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 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 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 Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M or fails to comply with the Section
817(h) diversification requirements specified in Article VI
hereof, or if the Company reasonably believes that such 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, the Adviser 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 Underwriter by written notice to the Company,
upon a termination of the Master Agreement between the Company and
the Underwriter, or termination of the Distribution Agreement.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Underwriter,
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(f)
or (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, 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 except for a
redemption that arises in connection with the Company's right to make additions
to, deletions from, substitutions for, or combinations of the securities that
are held by the Account (hereinafter referred to as a "Substitution
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.
Substitution Redemptions will be governed by a Master Agreement between the
Company, the Underwriter, and certain affiliates of the Underwriter.
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.
ARTICLE XI. NOTICES
Any notice required or permitted to be given under any provision other than
Article I, 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:
First Security Benefit Life Insurance and Annuity Company of New York
70 West Red Oak Lane, Fourth Floor
White Plains, New York 10604
Attention: Anita Larson
Copy to:
Security Benefit Life Insurance Company
700 Harrison Street
Topeka, Kansas 66636
Attention: Amy J. Lee, Esq.
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins
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.
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 New York 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 the
New York 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.
12.9 The term "affiliated person" as used in this Agreement shall be defined
as provided in Section 2(a)(3) of the 1940 Act.
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: FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
By its authorized officer
By:
---------------------------------
Anita Larson
Title: Chief Administrative Officer
Date: October 11, 1995
FUND: T. ROWE PRICE FIXED INCOME SERIES, INC.
By its authorized officer
By:
---------------------------------
James S. Riepe
Title: Vice President
Date: October 11, 1995
FUND: T. ROWE PRICE EQUITY INCOME SERIES, INC.
By its authorized officer
By:
---------------------------------
James S. Riepe
Title: Vice President
Date: October 11, 1995
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By:
---------------------------------
James S. Riepe
Title: Vice President
Date: October 11, 1995
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:
---------------------------------
Nancy M. Morris
Title: Vice President
Date: October 11, 1995
<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 Variable Annuity T. Rowe Price No-Load T. ROWE PRICE EQUITY SERIES, INC.
Account of First Security Benefit Variable Annuity * T. Rowe Price New America Growth Portfolio
Life Insurance and Annuity * T. Rowe Price Equity Income Portfolio
Company of New York, * T. Rowe Price Personal Strategy Balanced Portfolio
November 11, 1994 * T. Rowe Price Mid-Cap Growth Portfolio
T. ROWE PRICE FIXED INCOME SERIES, INC.
* T. Rowe Price Limited-Term Bond Portfolio
* T. Rowe Price Prime Reserve Portfolio
T. ROWE PRICE INTERNATIONAL SERIES, INC.
* T. Rowe Price International Stock Portfolio
</TABLE>
AMENDED as of the 2nd day of January, 1997
COMPANY: FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
By its authorized officer
By: ROGER K. VIOLA
----------------------------------
Title: Secretary
----------------------------------
Date: January 2, 1997
----------------------------------
FUND: T. ROWE PRICE FIXED INCOME SERIES, INC.
By its authorized officer
By: HENRY H. HOPKINS
----------------------------------
Title: Vice President
----------------------------------
Date: January 2, 1997
----------------------------------
FUND: T. ROWE PRICE EQUITY INCOME SERIES, INC.
By its authorized officer
By: HENRY H. HOPKINS
----------------------------------
Title: Vice President
----------------------------------
Date: January 2, 1997
----------------------------------
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: HENRY H. HOPKINS
----------------------------------
Title: Vice President
----------------------------------
Date: January 2, 1997
----------------------------------
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By: DARRELL N. BRAMAN
----------------------------------
Title: Vice President
----------------------------------
Date: January 2, 1997
----------------------------------
<PAGE>
AMENDED AND RESTATED
MASTER AGREEMENT
AMONG
T. ROWE PRICE INVESTMENT SERVICES, INC.,
T. ROWE PRICE ASSOCIATES, INC.,
AND
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
THIS AGREEMENT is made as of the 11th day of October, 1995, amended and
restated as of May 1, 1998, by and among T. ROWE PRICE INVESTMENT SERVICES, INC.
("INVESTMENT SERVICES"), T. ROWE PRICE ASSOCIATES, INC. ("PRICE ASSOCIATES"),
both Maryland corporations with principal offices at 100 East Pratt Street,
Baltimore, Maryland 21202, and FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK ("SECURITY BENEFIT"), a New York insurance company with
principal offices at 70 West Red Oak Lane, Fourth Floor, White Plans, New York
10604.
WITNESSETH:
WHEREAS, Security Benefit is a stock life insurance and
annuity company authorized to conduct an insurance business in the State of New
York;
WHEREAS, Security Benefit issues, among other things, variable insurance
products;
WHEREAS, Investment Services markets various investment products;
WHEREAS, Price Associates is the parent company of Investment Services;
WHEREAS, the parties are desirous of entering into a relationship whereby
Investment Services will market and distribute a variable annuity product to be
issued by Security Benefit;
WHEREAS, this Agreement is intended to serve as the framework for setting
forth certain rights, responsibilities and obligations of the parties;
WHEREAS, at or about the same time as entering into this Agreement, Security
Benefit will enter into a Distribution Agreement with Investment Services, a
Participation Agreement with Investment Services and the Funds, and an Insurance
Agency Agreement ("AGENCY AGREEMENT") with T. Rowe Price Insurance Agency, Inc.
("AGENCY"); and
WHEREAS, this Agreement together with the Distribution Agreement, the
Participation Agreement, and the Agency Agreement are intended to serve as the
framework for setting forth the various rights, responsibilities and obligations
of the parties vis-a-vis one another with respect to the overall relationship;
NOW THEREFORE, it is agreed as follows:
ARTICLE 1
ADDITIONAL DEFINITIONS
1.1 AFFILIATE -- With respect to a party, any person controlling, controlled
by, or under common control with, such party, but shall not include a Fund or
Fund Series.
1.2 CONTRACTS -- The variable annuity products developed by the parties
in accordance with Article 2, which shall consist of the variable annuity
products identified on SCHEDULE 1 to this Agreement as of the Effective Date and
any class of variable insurance products that may be added to SCHEDULE 1 from
time to time in accordance with Article 2 of this Agreement. For this purpose
and under this Agreement generally, the phrase a "class of Contracts" shall mean
those Contracts: (i) issued by Security Benefit on the same contract form (but
allowing for state variations) with the same benefits, features and charges
distinguishing such class and reflected on the schedule pages included therein;
(ii) providing for investment in the same Subaccounts which in turn invest in
the same Funds; and (iii) covered by the same Registration Statement.
1.3 DISTRIBUTOR -- The same meaning as provided in the Distribution
Agreement.
1.4 EFFECTIVE DATE -- The date as of which this Agreement is executed.
1.5 FUND AND FUND SERIES -- An investment company or series thereof serving
as a funding medium for the Contracts or a class thereof, which shall include
those Funds and Fund Series named on SCHEDULE 2 to this Agreement as of the
Effective Date, and any other investment company or series thereof that may be
added to SCHEDULE 2 from time to time in accordance with Article 2 of this
Agreement.
1.6 GENERAL ACCOUNT -- The assets of Security Benefit other than those
allocated to a separate account.
1.7 ICA-40 -- The federal Investment Company Act of 1940, as amended.
1.8 INSURANCE COMMISSION -- The appropriate agency charged with
regulating insurance activities in New York State.
1.9 PROSPECTUS -- Unless the context otherwise requires, the prospectus and
statement of additional information, if any, included in a Registration
Statement or the definitive form thereof for any class of Contracts, including
any supplement thereto, as filed with the SEC under SA-33.
1.10 REGISTRATION STATEMENT -- Unless the context otherwise requires, a
registration statement or amendment thereto for a class of Contracts filed with
the SEC under SA-33.
1.11 RELATED AGREEMENT(S) -- The Distribution Agreement, the Participation
Agreement, and the Agency Agreement including the schedules to each, as such
Agreements and schedules may be amended from time to time.
1.12 SA-33 -- The Securities Act of 1933, as amended.
1.13 SEC -- The Securities and Exchange Commission.
1.14 SECURITIES COMMISSION -- The appropriate agency charged with regulating
securities activities in New York State, but not the SEC.
1.15 SEPARATE ACCOUNT -- Each separate account of Security Benefit
supporting a class of Contracts, which shall consist of the separate accounts
named or otherwise identified on SCHEDULE 3 to this Agreement as of the
Effective Date, and any other separate account of Security Benefit that may be
added to SCHEDULE 3 from time to time in accordance with Article 2 of this
Agreement.
1.16 SUBACCOUNT -- A sub-division of the Separate Account available under a
class of Contracts, which shall include those subaccounts named or otherwise
identified on SCHEDULE 3 to this Agreement as of the Effective Date, and any
other subaccount that may be added to SCHEDULE 3 from time to time in accordance
with Article 2 of this Agreement.
ARTICLE 2
PRODUCT DESIGN AND PRODUCT DEVELOPMENT
2.1 SCOPE. The parties intend that this Agreement shall govern certain
aspects of their relationship with respect to the development, administration
and offering of one or more classes of Contracts, to be marketed and distributed
by Investment Services or other Distributors and to be issued, underwritten and
administered by Security Benefit. Nothing contained in this Agreement creates
the relationship of employer-employee, joint venture, partnership or association
between Security Benefit on the one hand and Investment Services and Price
Associates on the other hand.
2.2 EXCLUSIVITY.
(a) Until May 1, 1999, neither Security Benefit, nor an Affiliate
thereof, shall commence, proceed with or finalize discussions or
negotiations with any mutual fund or brokerage complex, or any Affiliate
thereof, set forth on SCHEDULE 4 (the "SCHEDULE 4 COMPANIES") regarding the
development, registration or distribution of any variable annuity or
variable life insurance product without the prior written consent of
Investment Services. Until May 1, 1999, neither Investment Services nor any
Affiliate thereof shall commence, proceed with or finalize any discussions
or negotiations with any insurance company which is not Security Benefit or
an Affiliate thereof regarding the development, registration or distribution
in New York of any variable annuity product without the prior written
consent of Security Benefit. Until October 1, 2004, neither Investment
Services nor any Affiliate thereof shall commence, proceed with, or finalize
any discussion or negotiations with any insurance company which is not
Security Benefit or an Affiliate thereof regarding the development,
registration or distribution of any immediate variable annuity product
without the prior written consent of Security Benefit. Until October 1,
2003, neither Security Benefit, nor any Affiliate thereof, shall commence,
proceed with, or finalize negotiations or discussions with any of the
Schedule 4 Companies regarding the development, registration or distribution
of any immediate variable annuity product without the prior written consent
of Investment Services. In the event that, prior to May 1, 1999, Investment
Services determines to enter into an agreement for the development,
registration or distribution in New York of any variable life insurance
product for distribution by Investment Services, Investment Services will
consider Security Benefit, or an Affiliate thereof, for such product;
provided that Investment Services shall not be prohibited from entering into
such an agreement with any other party.
(b) Nothing in this Agreement shall prohibit:
(i) Funds managed by Price Associates or Rowe Price-Fleming
International, Inc. ("ROWE PRICE-FLEMING") or their
respective Affiliates from entering into agreements with
insurance companies other than Security Benefit to act as
investment vehicles for such companies' separate accounts; or
(ii) Price Associates, Rowe Price-Fleming or their respective
Affiliates from providing investment advisory services to
insurance companies other than Security Benefit, as a
sub-adviser or otherwise, with respect to such companies'
variable insurance products; or
(iii) Security Benefit, or an Affiliate thereof, from entering into
a participation agreement with a fund established or operated
by a Schedule 4 Company, to act as a funding vehicle for a
variable insurance product established or operated by
Security Benefit, or an Affiliate thereof, provided that such
variable insurance product is marketed and/or distributed by
Security Benefit or an Affiliate thereof; or
(iv) Security Benefit, or an Affiliate thereof, from entering into
an agreement with a Schedule 4 Company for the provision of
investment advisory services to an underlying investment
vehicle of a variable insurance product established or
operated by Security Benefit or an Affiliate thereof,
provided that such variable insurance product is marketed
and/or distributed by Security Benefit, or an Affiliate
thereof.
2.3 PRODUCT DESIGN. The first class of Contracts shall contain the features
indicated in SCHEDULE 5 and Sections 2.5 and 2.6, provided that such features
are not inconsistent with the features described in the initial Registration
Statement filed with the SEC and declared effective on or prior to the Effective
Date and as provided in the Contract filed as an exhibit thereto. Security
Benefit and Investment Services shall consult in good faith with each other in
connection with the development of any subsequent class of Contract with respect
to the parameters set forth in Sections 2.5 and 2.6, and the desired features
and benefits for each class of Contracts. The features and benefits may include,
among others:
(a) minimum and maximum initial and subsequent premium payments and
premium payment plans;
(b) premium payment allocations, including limits thereon;
(c) transfers among Subaccounts, including transfers made in connection
with various asset rebalancing and dollar cost averaging programs,
and limits thereon and charges therefor;
(d) full and partial withdrawals, including limits and charges thereon;
(e) minimum guaranteed death benefits;
(f) annuity options and modes, including any such options or modes that
Security Benefit has available, and partial annuitization;
(g) overall limits on charges and expenses, and any limits on
allocations thereof to subaccounts;
(h) funding media underlying the Subaccounts; and
(i) availability of a General Account option and terms and conditions
thereof.
(j) a liquidity feature for the withdrawal of contract value; and
(k) a minimum guarantee to the level of annuity payments.
Security Benefit shall be responsible for creating one or more Contract
forms, as appropriate for the states or jurisdictions agreed upon for the
marketing of the Contracts.
2.4 GEOGRAPHIC SCOPE OF MARKETING. Unless otherwise agreed in writing,
Security Benefit shall use its best efforts to make the Contracts available for
issuance in the State of New York. Security Benefit, recognizing the business
needs of Investment Services, will use its best efforts, as appropriate, to make
the Contracts available as promptly as practicable in New York. It is understood
that Security Benefit will make all reasonable efforts to have the first class
of Contracts approved, filed or otherwise cleared in New York so that the
Contracts can be offered no later than the third quarter of 1995.
2.5 SPECIFIC PARAMETERS. The specific parameters to be reflected in the
first class of Contracts and to be considered in the development of any
subsequent class of Contracts include the following:
(A) PREMIUM TAX. Assessments of a premium tax against a Contract only
upon annuitization, surrender or death, and not against premium payments
when accepted by Security Benefit; except that Security Benefit may reserve
the right to deduct premium taxes at any time;
(B) RESERVATION OF RIGHTS. That any right to restrict, terminate, or
otherwise limit transfer, premium payment allocation, or partial withdrawal
privileges, or to impose charges therefor, to deduct premium tax
assessments, or to impose or increase other expenses or charges related to
such Contracts and reserved by Security Benefit may not be exercised without
the written consent of Investment Services and without first having made
appropriate modifications to applicable Contract forms, Registration
Statements and Prospectuses;
(C) ANNUITY OPTIONS. The annuity options available shall be similar in
kind and number to those offered by competitors and include any annuity
options that Security Benefit or its Affiliates have available, and any
change or amendment to the assumed interest rate used in connection with
such annuity options from that used in the first class of Contracts may be
made only with the written consent of Investment Services; and
(D) GENERAL ACCOUNT. The General Account option shall be designed and
offered in a manner that will qualify the interests therein for the
exclusion provided by Section 3(a)(8) of SA-33. The General Account option
shall offer rates of interest determined, under normal circumstances, in
accordance with Security Benefit's normal interest rate crediting procedures
set forth in SCHEDULE 6 to this Agreement. Security Benefit shall consult
with Investment Services in advance with respect to the General Account's
current interest rates to be declared, and the views of Investment Services
shall be reasonably considered in the establishment of such rates; provided
that the determination of the current rate to be credited shall be made by
Security Benefit. Security Benefit and Investment Services have determined
to use interest rate crediting procedures that maintain sufficient liquidity
in the General Account to allow exchanges from such Account to any
Subaccount pursuant to the dollar cost averaging and asset rebalancing
options. Security Benefit and Investment Services agree that in the event
that short-term rates fall to a level such that it is difficult to maintain
the contractually guaranteed minimum interest rate of three (3) percent that
must be credited on the General Account, the parties hereto shall in good
faith enter into discussions with a view to changing the interest rate
crediting procedures, or taking other steps to allow Security Benefit to
support the contractually guaranteed interest rate, which steps may include
requiring the dollar cost averaging from the General Account be implemented
over a minimum period of time in excess of the one-year period currently
required.
2.6 SECTION 403(B) PLANS. Security Benefit has informed Investment Services
of its profitability concerns if the Contracts are used to fund plans under
Section 403(b) of the Internal Revenue Code of 1986, as amended ("403(b)
Plans"). As a result, Security Benefit reserves the right to cease offering the
first class of Contracts in connection with 403(b) Plans and to create a
separate contract for 403(b) Plans with different specifications than those of
the Contracts. Security Benefit shall consult with Investment Services prior to
creating such separate contracts and take such action only after obtaining
Investment Services' written consent, which shall not be unreasonably withheld.
Once such separate contracts are available, Investment Services will no longer
offer the first class of Contracts to fund 403(b) Plans; provided, however, that
403(b) Plans to which the Contracts have been offered prior to the creation of
such separate contracts may continue to offer the Contracts. Security Benefit
shall assist Investment Services in understanding its approach to marketing,
administering and processing 403(b) Plans.
2.7 CHANGES IN OR RELATING TO A CONTRACT FORM. After the initial
Registration Statement for a class of Contracts has been declared effective by
the SEC, the parties from time to time may mutually agree upon a material change
in the terms and provisions of a Contract form(s) for such class or an amendment
or rider to such Contract form(s). Except to the extent necessary to comply with
applicable laws, rules, regulations or orders, or to accommodate the termination
of a Fund or Fund Series pursuant to a decision of that Fund's management,
Security Benefit shall not change unilaterally in any material respect the terms
and provisions of a Contract form for a class of Contracts, including, but not
limited to, a change in the variable information included in schedule pages
distinguishing such class of Contracts, or a change in the Separate Account or
Subaccounts thereof designated to support such Contract or any Fund or other
funding media underlying any Subaccount, or make any amendment or rider to such
Contract form whatsoever, without first obtaining Investment Services' written
consent thereto, which shall not be unreasonably withheld. Any such change
agreed upon or consented to in accordance with this Section shall be reflected
on the Schedules to this Agreement, to the extent appropriate, in accordance
with the provisions of Section 2.9.
2.8 CHANGES RELATING TO OUTSTANDING CONTRACTS OR RELATED SEPARATE ACCOUNTS,
SUBACCOUNTS AND FUNDS. After a Contract has been issued and is outstanding,
Security Benefit shall not make any material change unilaterally to such
Contract or the class of Contracts including such Contract or to the Separate
Account or Subaccounts supporting such Contract or class, including, but not
limited to, reinsuring such Contract or such class with another insurer,
transferring a Separate Account or Subaccount to another insurer, substituting a
Fund or Fund Series or terminating investment therein, or adding new funding
media, without first giving Investment Services the opportunity to review such
change and obtaining Investment Services' written consent thereto, which shall
not be unreasonably withheld, except to the extent necessary to comply with
applicable laws, rules, regulations or orders, or to accommodate the termination
of a Fund or Fund Series pursuant to a decision of that Fund's management.
Notwithstanding the above, Security Benefit will not substitute a Fund or Fund
Series or terminate investment therein without the consent of Investment
Services and Price Associates unless it is necessary for the best interests of
Contract owners in all states in which the Contracts are held, the continuation
of such option would cause undue risk to Security Benefit, and Investment
Services and Price Associates shall have received an opinion from counsel,
acceptable to them, that the substitution or termination is in the best
interests of Contract owners in all states in which the Contracts are held and
the continuation of such option would cause undue risk to Security Benefit. Any
such change implemented in accordance with this Section shall be reflected on
the Schedules to this Agreement, to the extent appropriate, in accordance with
the provisions of Section 2.9.
2.9 SCHEDULES. The Schedules as in effect on the Effective Date provide
particular information concerning the class of Contracts agreed upon as of such
Date. . When the parties agree upon the features and benefits of another class
of Contracts, the parties shall execute an additional Schedule 5 to this
Agreement which shall be the proposed specifications reflecting the minimum
requirements for such Contracts. When the parties agree upon any change to any
class of Contracts pursuant to Section 2.7 or 2.8, the Schedules may be amended
and updated and signed by parties to reflect such changes, to the extent
appropriate. The provisions of this Agreement shall be equally applicable to
each such added class of Contracts, Separate Account(s) and Subaccounts
supporting such Contracts and Funds and Fund Series, unless the context
otherwise requires. With respect to SCHEDULE 7, Security Benefit shall update
such Schedule promptly or otherwise notify Investment Services in writing of any
changes to such Schedule.
ARTICLE 3
REGISTRATION, DISTRIBUTION AND ADMINISTRATION
OF THE CONTRACTS
3.1 REGISTRATION, FILINGS AND APPROVALS RELATING TO THE CONTRACTS.
(a) Security Benefit shall be solely responsible for developing and
preparing all necessary Contract forms and related applications,
Registration Statements, Prospectuses and other documents in the usual form,
and for establishing the appropriate Separate Accounts and Subaccounts to
support the Contracts and invest in the designated Funds. Security Benefit
may establish more than one Separate Account for this purpose; however, no
variable insurance products other than the Contracts shall be issued through
a Separate Account, nor shall the Funds be made available to any other
variable insurance products issued by Security Benefit, if any, without
Investment Services' prior written consent. Each Separate Account shall be
established in accordance with applicable state law.
(b) Security Benefit shall be responsible for filing all such Contract
forms, applications, Registration Statements, Prospectuses, exemptive
applications relating to the Contract features, and other documents with the
SEC and applicable Securities Commissions.
(c) Security Benefit shall be responsible for filing all such Contract
forms, applications and other documents relating to the Contracts and/or the
Separate Accounts, as required or customary, with Insurance Commissions.
Security Benefit shall be responsible for one year from the effective date
of this Agreement for informing Investment Services of any states or
jurisdictions requiring the registration of a Fund or Fund Series with a
regulatory body of such state or jurisdiction.
(d) Security Benefit shall be responsible for filing amendments to such
Contract forms, applications, Registration Statements, Prospectuses and
other documents to the extent appropriate or required by applicable law.
3.2 REGISTRATIONS, FILINGS AND APPROVALS RELATING TO THE FUNDS
(a) Investment Services shall be responsible for establishing any Fund
or Fund Series selected as a funding medium for a class of Contracts, to the
extent such Fund or Fund Series is not otherwise established or maintained
by another person.
(b) With respect to each Fund or Fund Series for which Investment
Services is responsible pursuant to paragraph (a) hereof, Investment
Services shall be responsible for filing all initial registration
statements, applications, prospectuses and other documents for the Fund and
its shares with the SEC and Securities Commission, it being understood that,
once a Fund has been established and has begun to offer its shares to
investors, such Fund shall thereafter be responsible for its own operations
and compliance with applicable requirements.
3.3 DISTRIBUTION. The Contracts shall be distributed solely through
Investment Services, any Affiliate thereof, or a Distributor, pursuant to the
Distribution Agreement. Investment Services and its Affiliates shall develop,
implement and manage the marketing programs for the Contracts, including, but
not limited to, the operation of the Investment Services telesales center(s).
3.4 AGENT LICENSING.
(a) Licensing of insurance agents to solicit applications for the
Contracts shall be governed by the Agency Agreement.
(b) Security Benefit shall be responsible for compliance with applicable
insurance laws governing agent appointment of all persons including persons
associated with Investment Services or an Affiliate thereof, or a
Distributor, engaged in the sale or solicitation of the Contracts. Security
Benefit shall provide such persons with an Agent and Administration Manual
("MANUAL"), substantially in the form attached hereto as EXHIBIT A. Security
Benefit shall inform Investment Services of any applicable insurance rules
and regulations of which it becomes aware and which it has reason to believe
Investment Services is not aware.
3.5 CONTRACT AND SEPARATE ACCOUNT ADMINISTRATION
(a) Security Benefit shall be responsible for the insurance
underwriting, issuance, service, and administration of the Contracts and for
the administration of the Separate Accounts, including, without limitation,
maintenance of a toll-free telephone service center, such function to be
performed in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. Security Benefit has
developed procedures for performing such underwriting, issuing, servicing
and administrative functions, which procedures are set forth in the Manual.
Security Benefit shall not materially amend or supplement the Manual or
adopt or implement any other administrative rules, procedures or systems
without first giving Investment Services an opportunity to review any such
material and obtaining Investment Services' written consent.
(b) Nothing in this Section 3.5 shall relieve Security Benefit of its
duty, or otherwise diminish such duty, to perform its obligations under this
Agreement, nor shall this Section relieve Security Benefit of its
liabilities, or otherwise diminish such liabilities, for its failure to
perform its obligations under this Agreement.
ARTICLE 4
COMPENSATION AND EXPENSES
4.1 COMPENSATION FOR SECURITY BENEFIT. Unless the parties otherwise agree in
writing, the sole source of compensation for Security Benefit for carrying out
its responsibilities and obligations assumed under this Agreement or the Related
Agreements shall be the revenues derived from the charges deducted in connection
with the Contracts.
4.2 COMPENSATION FOR INVESTMENT SERVICES Unless the parties otherwise agree
in writing, Investment Services shall receive no compensation for carrying out
its responsibilities and obligations assumed under this Agreement.
4.3 COMPENSATION FOR INVESTMENT ADVISORY SERVICES. Price Associates and/or
Rowe Price-Fleming have executed investment management agreements with the Funds
specified on SCHEDULE 2 as of the Effective Date. Security Benefit, other than
as a shareholder, bears no responsibility in any respect for payment of
investment advisory services to the Funds.
4.4 COMPENSATION FOR AGENCY, INC. Agency, an affiliate of Investment
Services, shall enter into an Agency Agreement with Security Benefit and shall
receive the compensation provided for therein, if any, subject to any amendment
to such agreement mutually agreed to by the parties thereto.
4.5 COMPENSATION FOR THE DISTRIBUTORS. Investment Services may enter into
sales agreements with Distributors under the terms specified in the Distribution
Agreement. Investment Services and the Agency shall be solely responsible for
the payment of compensation to the Distributors, if any, for solicitation
activities relating to the Contracts.
4.6 SEEDING OF FUNDS AND FUND SERIES. Investment Services or an Affiliate
thereof shall be responsible for providing seed capital for any Fund or Fund
Series for whose establishment it is responsible under Section 3.2(a).
4.7 OTHER INVESTMENT VEHICLES OF SEPARATE ACCOUNTS OF SECURITY BENEFIT. In
the event that Security Benefit or an Affiliate thereof is seeking an
unaffiliated investment manager for any mutual funds serving as investment
vehicles for other separate accounts established and operated by Security
Benefit or such Affiliate, Security Benefit will consider the appointment of
Price Associates or Rowe Price-Fleming, or an Affiliate of the foregoing, as a
sub-adviser for such funds, or, in the alternative, to enter into a
participation agreement with a fund managed by any of the foregoing; provided
that Security Benefit believes, in its sole discretion, that Price Associates or
Rowe Price-Fleming meets the criteria and standards, including marketing
standards, that the Company employs for selecting investment managers for such
mutual funds, and provided further that Security Benefit shall not be prohibited
from providing such recommendation of, or entering into an agreement with, any
other party.
4.8 EXPENSES. Except as otherwise provided herein and in the Related
Agreements, or in SCHEDULE 7 to this Agreement, each party shall bear the
expenses it incurs in carrying out its responsibilities and obligations assumed
under this Agreement or the Related Agreements.
ARTICLE 5
ADDITIONAL RESPONSIBILITIES AND OBLIGATIONS
5.1 RESOURCES. Security Benefit and Investment Services shall each allocate
sufficient technical support, human resources and all other resources reasonably
necessary to carry out their respective responsibilities and obligations assumed
under this Agreement and the related Agreements in a timely manner.
5.2 DUE DILIGENCE. Each party shall provide the other parties access to such
of its records, officers and employees at reasonable times as is necessary to
enable the parties to fulfill their obligations under this Agreement and any
Related Agreements and applicable law.
5.3 EXCHANGES AND REPLACEMENTS.
(A) SECURITY BENEFIT. During the term of this Agreement and subject to
Sections 9.1 and 9.3 hereof, neither Security Benefit nor any of its
Affiliates shall knowingly induce or cause, or attempt to induce or cause,
directly or indirectly, any Contract owner to lapse, terminate, surrender,
exchange or cancel his or her Contract, or to cease or discontinue making
premium payments thereunder except where such act or attempt to cause a
lapse, termination, surrender, exchange or cancellation is in response to an
enactment of federal or state legislation, order or decision of any court or
regulatory body, administrative agency, or any other governmental
instrumentality, a change in circumstances which makes the Contracts or
insurance contracts of that type (E.G., annuity contracts or life insurance
policies) an unsuitable investment for existing Contract owners, or is in
response to any event or occurrence which results or is likely to result in
material adverse publicity pertaining to any party to this Agreement.
(B) INVESTMENT SERVICES. Unless the parties otherwise agree in writing,
during the term of this Agreement and subject to Sections 9.1 and 9.2
hereof, neither Investment Services nor any of its Affiliates shall execute
a program to induce or cause, or attempt to induce or cause, directly or
indirectly, all or substantially all Contract owners of a class of Contracts
to lapse, terminate, surrender, exchange or cancel their Contracts, or to
cease or discontinue making premium payments thereunder except where such
lapse, termination, surrender, exchange or cancellation is in response to an
enactment of federal or state legislation, order or decision of any court or
regulatory body, administrative agency, or any other governmental
instrumentality, a change in circumstances which makes the contracts or
insurance contracts of that type (E.G., annuity contracts of life insurance
policies) an unsuitable investment for existing Contract owners, is in
response to any event or occurrence which results or is likely to result in
material adverse publicity pertaining to any party to this Agreement, or is
in response to normal marketing activities or practices of Investment
Services or its Affiliates.
(C) COMPLIANCE. Insurer shall be responsible for obtaining from owners
of the Contracts any replacement forms required by the insurance laws of
various states. Insurer will notify Investment services promptly of any
material changes in the required replacement forms. Insurer will maintain in
accordance with the recordkeeping requirements of the New York Insurance
Department any replacement forms received in connection with the Contracts.
5.4 SERVICE AND QUALITY STANDARDS. Security Benefit and Investment Services
have agreed to implement certain additional service and quality standards as set
forth in EXHIBIT B, which may be amended from time to time.
ARTICLE 6
PROPRIETARY MATTERS
6.1 TRADEMARKS
(A) T. ROWE PRICE LICENSED MARKS. Investment Services is a wholly owned
subsidiary of Price Associates, which acts as the investment adviser to a
number of registered investment companies (such investment companies,
Investment Services, Rowe Price-Fleming and Price Associates being referred
to herein as the "T. Rowe Price Family"). Investment Services acts as
principal underwriter for each registered investment company in the T. Rowe
Price Family, including T. Rowe Price Equity Series, Inc., T. Rowe Price
International Series, Inc. and T. Rowe Price Fixed Income Series, Inc., the
underlying investment media for the Contracts. Entities in the T. Rowe Price
Family own all right, title and interest in and to the names, trademarks and
service marks "T. Rowe Price," "Invest with Confidence," "Tele Access," "T.
Rowe Price Variable Annuity Analyzer," "Variable Annuity Analyzer," and the
"Bighorn Sheep" logo in the style shown in EXHIBIT C attached hereto, and
any other names, trademarks, service marks or logos later specified by
Investment Services or Price Associates (the "T. ROWE PRICE LICENSED MARKS"
or the "LICENSOR'S LICENSED marks"). Entities within the T. Rowe Price
Family use the T. Rowe Price licensed marks pursuant to various agreements
with one another. Investment Services and Price Associates hereby grant to
Security Benefit a non-exclusive license to use the T. Rowe Price licensed
marks in connection with its performance of the services contemplated under
this Agreement and the Related Agreements, subject to the terms and
conditions set forth in paragraph (c) hereof.
(B) SECURITY BENEFIT LICENSED MARKS. Security Benefit or its Affiliates
are the owners of all right, title and interest in and to the name,
trademark and service mark "Security Benefit" used in connection with the
sale and promotion of financial and insurance products and any other names,
trademarks, service marks or logos later specified by Security Benefit (the
"SECURITY BENEFIT LICENSED MARKS" or the "LICENSOR'S LICENSED MARKS").
Security Benefit hereby grants to Investment Services, Price Associates and
their Affiliates a non-exclusive license to use the Security Benefit
licensed marks in connection with their performance of the services
contemplated by this Agreement and the Related Agreements, subject to the
terms and conditions set forth in paragraph (c) hereof.
(C) TERMS AND CONDITIONS
(I) TERM. The grant of license by Investment Services and Security
Benefit (each, a "LICENSOR") to the other and Affiliates thereof (the
"LICENSEES") shall terminate automatically when the Contracts shall
cease to be outstanding or invested in a Fund or Fund Series or sooner
upon termination by the licensor, unless otherwise agreed in writing by
the parties. Upon automatic termination, every licensee shall cease to
use a licensor's licensed marks. Upon Investment Services' termination
of the grant of license, Security Benefit shall immediately cease to
issue new annuity contracts or life insurance contracts or service
existing Contracts under any of the Investment Services licensed marks,
and shall likewise cease any activity which suggests that it has any
right under any of the Investment Services licensed marks or that it has
any association with Investment Services or an Affiliate thereof in
connection with any such contracts. Similarly, upon Security Benefit's
termination of the grant of license, Investment Services shall
immediately cease to distribute new annuity contracts or life insurance
contracts or promotional, sales or advertising material relating to any
such contract under the Security Benefit licensed marks and shall
likewise cease any activity which suggests that it has any right under
the Security Benefit licensed marks or that it has any association with
Security Benefit or an Affiliate thereof in connection with any such
contracts.
(II) PRE-RELEASE APPROVAL OF TRADEMARK-BEARING MATERIALS. In
addition to any pre-release approvals that may be required under a
Related Agreement or a participation agreement, a licensee shall obtain
the prior written approval of the licensor for the public release by
such licensee of any materials bearing the licensor's licensed marks.
Such material shall include, but not be limited to, samples of each
Contract form and application, form correspondence with Contract owners,
Contract owner reports and any other materials that bear any of the
licensor's licensed marks.
(III) RECALL. During the term of this grant of license, a licensor
may request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks which were previously approved by the
licensor but, due to changed circumstances, the licensor may wish to
reconsider, or which were not previously approved in the manner set
forth above. If, on reconsideration or on initial review, respectively,
any such samples fail to meet with the written approval of the licensor,
then the licensee shall immediately cease distributing such disapproved
materials. The licensee shall obtain the prior written approval of the
licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(IV) ACKNOWLEDGEMENT OF OWNERSHIP. Each licensee hereunder: (1)
acknowledges and stipulates that the licensor's licensed marks are valid
and enforceable trademarks and/or service marks; and that such licensee
does not own the licensor's licensed marks and claims no rights therein
other than as a licensee under this Agreement; (2) agrees never to
contend otherwise in legal proceedings or in other circumstances; and
(3) acknowledges and agrees that the use of the licensor's licensed
marks pursuant to this grant of license shall inure to the benefit of
the licensor.
6.2 OWNERSHIP OF PROPRIETARY INFORMATION; CONFIDENTIALITY.
(A) INFORMATION AND PROSPECTS. The names, addresses and other
information relating to prospects or leads for the Contracts acquired by
Investment Services or its Affiliates or its agents or representatives in
connection with marketing activities shall be the exclusive property of, and
shall be exclusively owned by, Investment Services or its Affiliates, as the
case may be. The records created and maintained by Security Benefit, or by
any subcontractor on behalf of such Company, that pertain to Contract owners
and the servicing and administration of the Contracts shall be the exclusive
property of, and shall be exclusively owned by, Security Benefit. However,
to the extent that any information may come to the attention of Security
Benefit or any Affiliate thereof, or be entered into the records created or
maintained by or on behalf of such Company or an Affiliate thereof, as a
result of its relationship with Investment Services or an Affiliate thereof
and not from an independent source, such information shall be kept
confidential and shall not be used by Security Benefit or its Affiliates, or
their respective agents or employees for any purpose, including but not
limited to any marketing purpose, except in connection with the performance
of its duties and responsibilities hereunder or under a Related Agreement or
under the Contracts. In no event shall the names and addresses of such
customers and prospective customers be furnished by Security Benefit or its
Affiliate, or any agent or subcontractor thereof, to any other company or
person (except as required by law or regulation and then only upon prior
written notice to Investment Services).
(B) CONFIDENTIALITY. Each party to this Agreement shall keep
confidential the terms and provisions of this Agreement (except as otherwise
required by law or regulation), the parties' respective methods of doing
business, the names, addresses and other personal information relating to
customers or prospective customers for the Contracts, the names, addresses
and other personal information relating to Contract owners, and any other
information proprietary to any party to this Agreement, and shall not
reproduce, disseminate or otherwise publish the same to any person not a
party to this Agreement, without the prior written approval of the other
parties to this Agreement (except as required by law or regulation and then
only upon prior written notice to the other party).
(C) RETURN OF INFORMATION. Upon a party's written request to another
party, such other party shall return to the requesting party any information
or materials of a proprietary nature obtained by or on behalf of such other
party in the course of the performance of this Agreement or any Related
Agreement.
(D) OWNERSHIP OF CONTRACT, FORMS AND OTHER MATERIALS. Any Contract
forms, riders or materials developed or used by Security Benefit in
connection with the relationship between Security Benefit, Investment
Services, and Price Associates under this Agreement and the Related
Agreements shall remain the exclusive property of Security Benefit.
(E) GENERAL. The intent of this Section 6.2 is that no party or any
Affiliate thereof shall utilize, or permit to be utilized, its knowledge of
any other party or of any Affiliate thereof which is derived as a result of
the relationship created through the funding and sale of the Contracts or
the solicitation of sales of any product or service, except to the extent
necessary by the terms of this Agreement or to further the purposes of this
Agreement, or except as expressly permitted with the written consent of the
other parties. This Section 6.2 shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall survive
any such termination.
6.3 PUBLIC ANNOUNCEMENTS. To the extent reasonably feasible, the parties
shall confer with one another prior to the issuance of any reports, statements
or releases pertaining to this Agreement, the Contracts and the transactions
contemplated hereby, except that a party will in any event have the right to
issue any such reports, statements or releases if upon advice of its counsel
such issuance is required in order to comply with the requirements of any
applicable federal, state or local laws and regulations.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 ORGANIZATION AND GOOD STANDING. Each party hereto represents that it is
a corporation duly organized, validly existing and in good standing under the
laws of that jurisdiction set forth on page one of this Agreement; has all
requisite corporate power to carry on its businesses as it is now being
conducted and is qualified to do business in each jurisdiction in which it is
required to be so qualified; and is in good standing in each jurisdiction in
which such qualification is necessary under applicable law.
7.2 AUTHORIZATION. Each party hereto represents that the execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein have been duly authorized by all necessary corporate action by such
party, and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
7.3 NO CONFLICTS. Each party hereto represents that the consummation of the
transactions contemplated herein, and the fulfillment of the terms of this
Agreement, shall not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of such party, or any indenture,
agreement, mortgage, deed of trust, or other instrument to which such party is a
party or by which it is bound, or violate any law, or, to the best of such
party's knowledge, any order, rule or regulation applicable to such party of any
court or of any federal or state regulatory body, administrative agency or any
other governmental instrumentality having jurisdiction over such party or any of
its properties.
7.4 ADMINISTRATIVE SYSTEM. Security Benefit represents and warrants to
Investment Services and Price Associates that it has implemented the
administrative systems and procedures necessary to issue, underwrite for
insurance purposes, service and administer the Contracts and administer the
Separate Accounts in accordance with the terms and provisions of this Agreement.
ARTICLE 8
INDEMNIFICATION AND REMEDIES
8.1 INDEMNIFICATION
(A) INDEMNIFICATION BY SECURITY BENEFIT. In addition to any
indemnification liability Security Benefit may have under any of the Related
Agreements or otherwise, Security Benefit shall indemnify and hold harmless
Investment Services, Price Associates, and their Affiliates and any officer,
director, employee or agent of any of the foregoing, against any and all
losses, liabilities, damages, claims or expenses, joint or several
(including the reasonable costs of settling a claim, investigating or
defending any alleged loss, liability, damage, claim or expense and
reasonable legal counsel fees incurred in connection therewith), to which
Investment Services, Price Associates and/or any such person may become
subject under any statute or regulation, at common law or otherwise, insofar
as such losses, liabilities, damages, claims or expenses result because of a
material breach by Security Benefit of any provision of this Agreement or
which proximately result from any acts or omission of Security Benefit or
Security Benefits's officers, directors, employees, agents (which for these
purposes shall not include an Underwriter Representative or Distributor
Representative as those terms are defined in the Distribution Agreement) or
subcontractors that are not in accordance with this Agreement, including but
not limited to any violation of any federal or state statute or regulation.
Notwithstanding the above, no person shall be entitled to indemnification
pursuant to this Section 8.1(a) if such loss, liability, damage, claim or
expense is due to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking indemnification.
(B) INDEMNIFICATION BY INVESTMENT SERVICES. In addition to any
indemnification liability Investment Services may have under any of the
Related Agreements, Investment Services shall indemnify and hold harmless
Security Benefit and any Affiliate and any officer, director, employee or
agent of any of the foregoing, against any and all losses, liabilities,
damages, claims or expenses, joint or several (including the reasonable
costs of settling a claim, investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees
incurred in connection therewith), to which Security Benefit and/or any such
person may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, liabilities, damages, claims or expenses
result because of a material breach by Investment Services of any provision
of this Agreement, or which proximately result from any acts or omission of
Investment Services's officers, directors, employees, agents or
subcontractors that are not in accordance with this Agreement, including but
not limited to any violation of any federal or state statute or regulation.
Notwithstanding the above, no person shall be entitled to indemnification
pursuant to this Section 8.1(b) if such loss, liability, damage, claim or
expense is due to the willful misfeasance, bad faith, gross negligence or
reckless disregard of duty by the person seeking indemnification.
(C) INDEMNIFICATION BY PRICE ASSOCIATES. Price Associates shall
indemnify and hold harmless Security Benefit and any Affiliate and any
officer, director, employee or agent of any of the foregoing, against any
and all losses, liabilities, damages, claims or expenses, joint or several
(including the reasonable costs of settling a claim, investigating or
defending any alleged loss, liability, damage, claim or expense and
reasonable legal counsel fees incurred in connection therewith), to which
Security Benefit and/or any such person may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses,
liabilities, damages, claims or expenses result because of the material
breach by Price Associates of any provision of this Agreement, including but
not limited to any violation of any federal or state statute or regulation.
Further, Price Associates shall indemnify Security Benefit under this
Agreement and the Related Agreements to the extent that its Affiliates are
unable to fulfill their indemnification obligations under this Agreement or
any Related Agreements. Notwithstanding the above, no person shall be
entitled to indemnification pursuant to this Section 8.1(c) if such loss,
liability, damage, claim or expense is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the person seeking
indemnification.
(D) GENERAL. After receipt by a party entitled to indemnification
("indemnified party") under this Section 8.1 of notice of the commencement
of any action, if a claim in respect thereof is to be made against any
person obligated to provide indemnification under this Section 8.1
("indemnifying party"), such indemnified party will notify the indemnifying
party in writing of the commencement thereof 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 the indemnified party;
provided that the failure to so notify the indemnifying party shall not
relieve the indemnifying party from any liability under this Section 8.1
except to the extent that the indemnifying party shall have been prejudiced
as a result of the failure or delay in giving such notice. The indemnifying
party shall be entitled to participate, at its own expense, in the defense,
or, if the indemnifying party so elects, to assume the defense of any suit
brought to enforce any such claim, but, if the indemnifying party elects to
assume the defense, such defense shall be conducted by legal counsel chosen
by the indemnifying party and satisfactory to the indemnified party, to its
Affiliates and any officer, director, employee or agent of any of the
foregoing, in the suit. In the event that the indemnifying party elects to
assume the defense of any such suit and retain such legal counsel, the
indemnified party, its Affiliates and any officer, director, employee or
agent of any of the foregoing in the suit, shall bear the fees and expenses
of any additional legal counsel retained by them. If the indemnifying party
does not elect to assume the defense of any such suit, the indemnifying
party will reimburse the indemnified party, such Affiliates, officers,
directors, employees or agents in such suit for the reasonable fees and
expenses of any legal counsel retained by them.
(E) SUCCESSORS. A successor by law of Investment Services, Price
Associates, or Security Benefit, as the case may be, shall be entitled to
the benefits of the indemnification provisions contained in this Section
8.1.
8.2 RIGHTS, REMEDIES, ETC. ARE CUMULATIVE. The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws. Failure of a party
to insist upon strict compliance with any of the conditions of this Agreement
shall not be construed as a waiver of any of the conditions, but the same shall
remain in full force and effect. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
8.3 INTERPRETATION, JURISDICTION, ETC. This Agreement, together with the
Related Agreements, constitutes the whole agreement between the parties hereto
with respect to the subject matter hereof, and supersedes all prior oral or
written understandings, agreements or negotiations between the parties with
respect to such subject matter. No prior writings by or between the parties with
respect to the subject matter hereof shall be used by a party in connection with
the interpretation of any provision of this Agreement. This Agreement shall be
construed and its provisions interpreted under and in accordance with the
internal laws of the state of Maryland without giving effect to principles of
conflict of laws. This Section 8.3 shall not be construed to deny Security
Benefit, or an Affiliate thereof, of any rights to which it is entitled as an
owner of shares of the Fund.
8.4 SEVERABILITY. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action required
by applicable federal or state law, then it is the intention of the parties
hereto that such provision shall be enforced only to the extent permitted under
the law, and, in any event, that all other provisions of this Agreement shall
remain valid and duly enforceable as if the provision at issue had never been a
part hereof.
ARTICLE 9
TERM AND TERMINATION
9.1 TERMINATION. This Agreement shall terminate of its own accord when all
Contracts issued pursuant to this Agreement and the Related Agreements are no
longer outstanding and no owner, annuitant, or beneficiary thereof is receiving
any annuity benefits from Security Benefit, or after five years from the
Effective Date may be terminated by any party upon six months written notice to
the other parties. Upon termination of this Agreement, Articles 3, 6 and 8 shall
nevertheless survive and continue in full force and effect.
9.2 CHANGES RELATING TO SECURITY BENEFIT. Upon the occurrence of any of the
following events, Investment Services shall have the right, in its sole
discretion, to make arrangements for an exchange of all or a portion of the
Contracts then outstanding, into insurance contracts issued by another insurance
carrier mutually acceptable to the parties, and, upon being notified of
Investment Services' exercise of such right, Security Benefit shall cooperate in
effecting transactions entitled by such exchange in an expeditious manner, it
being understood that Security Benefit may structure the exchange as a
reinsurance or similar transaction, and that Security Benefit shall be entitled
to reasonable compensation from such insurance carrier in connection with such
transaction:
(a) Security Benefit shall have become insolvent or its surplus shall
have become impaired as such terms are defined under applicable
insurance law of Security Benefit's state of domicile;
(b) the A.M. Best & Co. rating of Security Benefit is not "A" (or if
such rating organization changes its rating system after the
Effective Date, an equivalent rating) or better;
(c) the Standard & Poor's claims paying ability rating of Security
Benefit is not "A-" (or if such rating organization changes its
rating system after the Effective Date, an equivalent rating) or
better;
(d) Investment Services determines that Security Benefit is in material
breach of any provision of this Agreement or of any Related
Agreement, unless such breach has been cured within ten (10) days
after receipt of notice of such breach;
(e) in Investment Services' good faith judgment, there is an event,
occurrence or circumstance (including the enactment of federal or
state legislation, court decision, a change in circumstances which
makes the Contracts or insurance contracts of that type (E.G.,
annuity contracts or life insurance policies) an ---- unsuitable
investment for prospective customers of Investment Services, or any
event, occurrence or circumstance which results or is likely to
result in material adverse publicity to any party to this Agreement
or an Affiliate thereof) which substantially and materially
undermines the distribution or servicing of the Contracts or the
reputation and goodwill of any party to this Agreement;
(f) an assignment or transfer of this Agreement by Security Benefit that
does not comply with the provisions of Section 9.4 of this
Agreement;
9.3 CHANGES RELATING TO INVESTMENT SERVICES. Security Benefit shall have the
right, in its sole discretion, to make changes in the Contracts, including
causing a substitution of a Fund or Fund Series, upon the occurrence or
determination of any of the following events:
(a) Investment Services, Price Associates, or an Affiliate thereof files
a voluntary petition in bankruptcy or for reorganization or shall be
the subject of an involuntary petition in bankruptcy for liquidation
or reorganization;
(b) Investment Services, Price Associates, or an Affiliate thereof has a
receiver, liquidator or trustee appointed over its affairs;
(c) Security Benefit determines that Investment Services or Price
Associates is in material breach of any provision of this Agreement
or of any Related Agreement, unless such breach is cured with ten
(10) days after receipt of notice of such breach;
(d) an assignment or transfer of this Agreement by Investment Services
or Price Associates that does not comply with the provisions of
Section 9.4 of this Agreement; or
(e) in Security Benefit's good faith judgment, there is an event,
occurrence or circumstance (including the enactment of federal or
state legislation, court decision, a change in circumstances which
makes the Contracts or insurance contracts of that type (E.G.,
annuity contracts or life insurance policies) an unsuitable
investment for prospective customers of Security Benefit, or any
event, occurrence or circumstance which results or is likely to
result in material adverse publicity to any party to this Agreement
or an Affiliate thereof) which substantially and materially
undermines the distribution or servicing of the Contracts or the
reputation and goodwill of any party to this Agreement.
9.4 ASSIGNMENT AND TRANSFER. This Agreement may not be assigned or
transferred by any party without the prior written consent of the other party
hereto.
ARTICLE 10
GENERAL PROVISIONS
10.1 NOTICE, CONSENT AND REQUEST. Any notice, consent or request required or
permitted to be given by a party to any other party shall be deemed sufficient
if sent by facsimile transmission followed by Federal Express or other overnight
carrier, or if sent by registered or certified mail, postage prepaid, addressed
by the party giving notice to the other party at the following addresses (or at
such other address for a party as shall be specified by like notice);
if to Security Benefit, to:
First Security Benefit Life Insurance and Annuity
Company of New York
Attn: Peg Avey
70 West Red Oak Lane, Fourth Floor
White Plains, New York 10604
copy to:
Security Benefit Life Insurance Company
Attn: Amy J. Lee, Esq.
700 Harrison Street
Topeka, Kansas 66636
if to Investment Services, to:
T. Rowe Price Investment Services, Inc.
Attn: Henry H. Hopkins, Esq.
100 East Pratt Street
Baltimore, Maryland 21202
if to Price Associates, to:
T. Rowe Price Associates, Inc.
Attn: Henry H. Hopkins, Esq.
100 East Pratt Street
Baltimore, Maryland 21202
10.2 CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
10.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which taken together shall be deemed to be one and the
same instrument.
10.4 AMENDMENT. No provisions of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought.
IN WITNESS WHEREOF, the parties hereto have each duly executed this
Agreement as of the day and year first above written.
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
By its authorized officer
BY:
---------------------------------
Roger K. Viola
Title: SECRETARY
Date: MAY 1, 1998
T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
BY:
--------------------------------
Darrell N. Braman
Title: VICE PRESIDENT
Date: MAY 1, 1998
T. ROWE PRICE ASSOCIATES, INC.
By its authorized officer
BY:
-------------------------------
Joseph P. Healy
Title: VICE PRESIDENT
Date: MAY 1, 1998
<PAGE>
SCHEDULE 1
CLASSES OF CONTRACTS
SUPPORTED BY SEPARATE ACCOUNTS
LISTED ON SCHEDULE 3
Effective as of the Effective Date, the following classes of Contracts are
subject to the Agreement:
- --------------------------------------------------------------------------------
Policy SEC 1933 Act Name of Annuity
Marketing Registration Supporting or Life
Name Number Account
- --------------------------------------------------------------------------------
T. Rowe Price
No-Load 33-83240 T. Rowe Price Annuity
Variable Annuity Variable Account
of Security Benefit
- --------------------------------------------------------------------------------
Effective as of May 1, 1998, the following classes of Contracts are hereby added
to this Schedule 1 and made subject to the Agreement:
- --------------------------------------------------------------------------------
Policy SEC 1933 Act Name of Annuity
Marketing Registration Supporting or Life
Name Number Account
- --------------------------------------------------------------------------------
T. Rowe Price
No-Load Immediate 33-83240 T. Rowe Price Annuity
Variable Annuity Variable Account
of Security Benefit
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Investment Services, Price Associates, and Security
Benefit hereby amend this Schedule 1 in accordance with Article II of the
Agreement.
ROGER K. VIOLA DARRELL N. BRAMAN
- ---------------------- -------------------------
Security Benefit Investment Services
JOSEPH P. HEALY
- ----------------------
Price Associates
<PAGE>
SCHEDULE 2
FUNDS AVAILABLE UNDER
EACH CLASS OF CONTRACTS
Effective as of the Effective Date and January 2, 1997, the following Funds are
available under the Contracts:
- --------------------------------------------------------------------------------
Contracts Marketing Name Fund Fund Series
- --------------------------------------------------------------------------------
T. Rowe Price No-Load T. Rowe Price Equity Income Portfolio
Variable Annuity Equity Series, Inc. New America Growth Portfolio
T. Rowe Price Personal
Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth
Portfolio
- --------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio
International
Series, Inc.
- --------------------------------------------------------------------------------
T. Rowe Price Limited-Term Bond Portfolio
Fixed Income T. Rowe Price Prime
Series,Inc. Reserve Portfolio
- --------------------------------------------------------------------------------
Effective as of May 1, 1998, this Schedule 2 is hereby amended to reflect the
following changes in Fund or Fund Series available under the Contracts:
- --------------------------------------------------------------------------------
Contracts Marketing Name Fund Fund Series
- --------------------------------------------------------------------------------
T. Rowe Price No-Load T. Rowe Price Equity Income Portfolio
Immediate Variable Equity Series, Inc. New America Growth Portfolio
Annuity T. Rowe Price Personal
Strategy Balanced Portfolio
T. Rowe Price Mid-Cap Growth
Portfolio
- --------------------------------------------------------------------------------
T. Rowe Price International Stock Portfolio
International
Series, Inc.
- --------------------------------------------------------------------------------
T. Rowe Price Limited-Term Bond Portfolio
Fixed Income T. Rowe Price Prime
Series,Inc. Reserve Portfolio
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Investment Services, Price Associates and Security Benefit
hereby amend this Schedule 2 in accordance with Article II of the Agreement.
ROGER K. VIOLA DARRELL N. BRAMAN
- ---------------------- -------------------------
Security Benefit Investment Services
JOSEPH P. HEALY
- ----------------------
Price Associates
<PAGE>
SCHEDULE 3
SEPARATE ACCOUNTS OF THE SECURITY BENEFIT
COMPANIES SUPPORTING THE CONTRACTS
Effective as of the Effective Date, the following separate account and
subaccounts are subject to the Agreement:
- --------------------------------------------------------------------------------
Name of Separate Date Established SEC 1940 Act Type of Product
Account and by Board of Directors Registration Supported by
Subaccounts of the Company Number Account
- --------------------------------------------------------------------------------
T. Rowe Price November 11, 1994 811-8726 Variable Annuity
Variable Annuity
Account of
Security Benefit
* Equity Income
Subaccount
* International
Stock
Subaccount
* Limited-Term
Bond
Subaccount
* New America
Growth
Subaccount
* Personal
Strategy
Balanced
Subaccount
- --------------------------------------------------------------------------------
Effective as of January 2, 1997, the following separate accounts and/or
subaccounts are hereby added to this Schedule 3 and made subject to the
Agreement:
- --------------------------------------------------------------------------------
Name of Separate Date Established SEC 1940 Act Type of Product
Account and by Board of Directors Registration Supported by
Subaccounts of the Company Number Account
- --------------------------------------------------------------------------------
Prime Reserve Not applicable 811-8726 Variable Annuity
Subaccount
Mid-Cap Growth
Subaccount
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, Security Benefit, Investment Services, and Price Associates
hereby amend this Schedule 3 in accordance with Article II of the Agreement.
ROGER K. VIOLA DARRELL N. BRAMAN
- ---------------------- -------------------------
Security Benefit Investment Services
JOSEPH P. HEALY
- ----------------------
Price Associates
<PAGE>
SCHEDULE 4
BROKERAGE FIRMS AND MUTUAL FUNDS SPONSORS
American Century
Dreyfus
Fidelity
First Trust
Harbor Capital
Heine Security
Invesco
Jack White
Janus
Neuberger & Berman
Schwab
Scudder
Steinroe
Strong
Vanguard
<PAGE>
SCHEDULE 5
CONTRACT SPECIFICATIONS
IN WITNESS WHEREOF, Investment Services, Price Associates and Security
Benefit hereby approve the attached Contract Specifications in accordance with
Article 2 of the Agreement.
ROGER K. VIOLA DARRELL N. BRAMAN
- ---------------------- -------------------------
Security Benefit Investment Services
JOSEPH P. HEALY
- ----------------------
Price Associates
<PAGE>
SCHEDULE 6
INTEREST RATE CREDITING PROCEDURES
Security Benefit's and Investment Services' assumptions are based
fundamentally on the premise that the fixed account would not likely be viewed
as a long term investment vehicle, but rather as a temporary holding portfolio
during market swings or to take advantage of dollar cost averaging investment
techniques. Accordingly, Security Benefit assumed only 10% of all contributions
made to the Annuity would be allocated to the fixed account. Other assumptions
were made as to how long the assets would stay in the fixed account and the rate
of new sales. The overall conclusion from the tests suggests that investments
made for the fixed account should be in bonds with durations of two to three
years to match the estimated net asset flows.
Another significant issue discussed was the anticipated asset size of the
fixed account. With current sales projections for 1995, 1996, and 1997, and only
10% assumed to be invested in the fixed account, it is not deemed to be
practical for Security Benefit to segregate a portfolio of this size.
However, if a segregated portfolio is not maintained by Security Benefit,
the methodology of establishing the monthly crediting rate becomes an issue. In
discussing this matter with Investment Services, Security Benefit concluded that
an acceptable approach in setting the periodic rate would be to start with the
yield on 2 1/2 year duration Treasury notes [(2 yr. T-Note + 3 yr. T-Note)/2],
add 60 basis points for anticipated credit spread and then deduct an agreed upon
pricing spread of 145 basis points. The resulting rate will be compared to
direct market competitor rates and one year CD's and may be adjusted. Security
Benefit believes that once the fixed account reaches approximately $200 million,
it will then consider actually segregating a portfolio if it is deemed
beneficial to the contract.
After a period of one year, Security Benefit and Investment Services will
revisit the scenario testing based upon actual experience. Security Benefit and
Investment Services will revisit the scenario testing sooner if market
conditions warrant. Such experience will then be used to adjust asset movement
assumptions if necessary.
<PAGE>
SCHEDULE 7
OTHER EXPENSES
(1) Security Benefit shall pay the costs of printing and mailing the
Separate Account Financial Statement; provided, however, that Security
Benefit may make reasonable inquiry regarding the feasibility of
including such Financial Statement in any mailing to all Contract
owners made by Investment Services, and Investment Services may
determine in its sole judgment to include such Separate Account
Financial Statement in such mailing with no charge to Security Benefit
for mailing expenses unless the parties otherwise agree; and
(2) Security Benefit shall pay to Investment Services by each February 28,
the estimated cost of printing and mailing the Annual Statement of
Account to Contract owners based upon the number of Contract owners and
the cost of preparing Security Benefit's normal statement; provided,
however, that Investment Services shall be responsible for printing and
mailing such Annual Statement of Account to Contract owners.
<PAGE>
EXHIBIT A
AGENT AND ADMINISTRATION MANUAL
1 T. Rowe Price and Security Benefit Relationship
* Who is SBG?
* Who is T. Rowe Price?
* SBG and TRP Relationship
2 What is an Annuity?
* Annuity Basics
* Fixed and Variable Annuities
* Immediate vs. Deferred Annuities
* Accumulation and Annuitization Period
* Single and Periodic Premiums
3 General Provisions of the Contracts
* Free Look Period/Exchanges
* Dollar Cost Averaging/Asset Rebalancing
* Purchase Payments
* Ownership, Annuitant, and Beneficiary
4 Investment Options
* New America Growth
* International Stock and Equity Income
* Personal Strategy Balanced
* Limited Term Bond
* Fixed Interest Account
5 Benefits
* Death Benefit Amount and Distribution
* Periodic Withdrawal
* Systematic Withdrawal
6 Annuity Payout Options
* Dates
* Life Option (1)
* Life Annuity with Periodic Certain (2)
* Unity Refund Annuity (3)/Joint and Survivor Annuity (4)
* Payments for Fixed Period (5)/Payments for Fixed Amount (6)
* Age Recalculation
7 Screens
* User Identification/Client/Alpha Screen
* Values Information/Fixed Interest Account/ACT
* Services/Contract Names and Addresses/Transaction History
* Purchases/Exchanges/Notes
* Forms/DMS/Escheatment
8 Miscellaneous
* Confirmations/Statements of Accounts
* Application Check List
* Letters
* Checks
* Addresses and Writing Instructions
* Processing Questions
9 Administrative Procedures
* Document Handling Procedures
* New Application Procedure-CC Batch Entry Procedures
* New Application Procedure-AA
* Application Approval List
* 1035 Exchanges and Procedures
* DMS Indexing-Records Management
10 Administrative Screen Procedures
* Inquiry
* New Business
* Financial
* Service
* Communications
* Screen Navigation
<PAGE>
EXHIBIT B
SERVICE AND QUALITY STANDARDS
Investment Services and Security Benefit both recognize the importance of
providing accurate and timely service to Variable Annuity Contract owners. The
parties, therefore, agree to measure and monitor performance to service
standards and processing quality, and to report results to each on a quarterly
basis. Investment Services and Security Benefit will meet on an annual basis to
review service levels and if necessary, establish an action plan for improving
performance levels.
1. SALES/NEW CONTRACTS
Security Benefit will:
1. Incoming calls from Investment Services representatives -- Security
Benefit will have a group of representatives adequate in number to
answer incoming calls from Investment Services representatives between
the hours of 9 a.m. - 6 p.m. EST each day the New York Stock Exchange
is open. If Security Benefit representatives are unavailable, the
Investment Services representative will leave a message. The Investment
Services representative should be called back within four hours,
provided that calls received by Security Benefit after 2 p.m. EST may
be returned within the first hour of the next business day. As needed,
Security Benefit representatives will be available for conference calls
with Investment Services representatives and potential Contract owners
for complex issues.
2. Contract Establishment -- New contracts will be established on the day
of application receipt, unless the application is not in good order.
Security Benefit will notify Investment Services weekly with the number
of applications being held (number of days and reason) for further
information from the applicant. The contract and welcome letter will be
issued within 2 days of contract establishment.
3. Confirmation Statements -- Security Benefit will send the Contract
owners a confirmation statement the business day after the contract is
established. For one-time transaction events (does not include
automatic transactions), Security Benefit will send the confirmation
the next business day.
4. Security Benefit will provide a weekly status report (see attached
example #1) for Investment Services.
<PAGE>
Investment Services will:
1. Sales Calls -- Investment Services will answer all telephone sales
inquiries within the following timeframes:
* 80% of the calls will be answered within 10-20 seconds
* The abandonment rate will not exceed 5%
* If assistance from an Investment Services Representative is
necessary, and a message is taken, the call will be returned the
same day, or if the message was received late in the day, the
following business morning.
2. Fulfillment Kit -- Investment Services will mail the fulfillment kit
the business day after receiving the fulfillment request.
2. ADMINISTRATION AND OPERATION SERVICE STANDARDS
Security Benefit will:
1. Written Transaction Requests -- Security Benefit will process written
requests for transactions on the day of receipt (if a business day).
Investment Services is to be notified of the quantity of requests held
for further information from the contractholder.
2. Contract Maintenance Requests -- Security Benefit will process
contractholder maintenance (i.e., services options) requests and
Investment Services generated requests within two(2) business days of
receipt.
3. Correspondence -- If Security Benefit rejects a Contract owner
transaction request, Security Benefit will send a letter to the
Contract owner by the next business day. If a maintenance request is
rejected, Security Benefit will send a letter to the Contract owner by
the next business day. If Security Benefit rejects an Investment
Services generated transaction or maintenance request, Security Benefit
will notify the Investment Services representative on the day of
receipt of the request for Investment Services action. All non-system
generated correspondence will be noted on the Security Benefit Software
in the Notes screen of the Contract owner's records.
4. Adjustment Requests -- If a contract's records require adjustment,
Investment Services will notify Security Benefit in writing. Adjustment
requests will be processed by Security Benefit on the day of receipt if
received by 1:00 pm EST (after 1:00 p.m. EST will be completed by end
of next business day). Security Benefit will notify Investment Services
of any outstanding adjustment requests weekly . Security Benefit to
provide monthly summary of adjustments processed.
5. Regulatory Changes -- Security Benefit will take timely action to
comply with legislation and/or regulations which result in changes to
the administration of the Variable Annuity Plan.
Investment Services will:
1. Service Calls - Investment Services will answer all telephone service
calls within the following timeframes:
* 80% of the calls will be answered within 20 seconds
* The abandonment rate will not exceed 5%
* If assistance from an Investment Services Representative is
necessary, and a message is taken, the call will be returned the
same day, or if the message was received late in the day, the
following business morning.
2. All financial transactions received via telephone in good order by 4:00
p.m. EST will be processed the same day.
3. All maintenance will be processed within two (2) business days
following receipt. Research requests will be completed within 3
business days. If not completed by the third day, the request will be
forwarded to an Investment Services Supervisor for follow-up with
Security Benefit.
4. Correspondence -- Any correspondence requests handled by Investment
Services will be answered within 3 business days of the requests.
Investment Services will note the correspondence on the Security
Benefit Software in the Notes screen of the contractholder's records.
3. QUALITY TARGET GOALS
Both Security Benefit and Investment Services will maintain the following
quality target goals:
FUNCTION GOAL (%)
Contract Set-up 98
Correspondence Rating Accuracy 98
Contract Maintenance Accuracy 98
Financial Transactions 99
<PAGE>
EXHIBIT C
BIGHORN SHEEP LOGO
<PAGE>
- --------------------------------------------------------------------------------
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK
70 WEST RED OAK LANE, FOURTH FLOOR
WHITE PLAINS, NEW YORK 10604
March 1, 1999
First Security Benefit Life Insurance
and Annuity Company of New York
70 West Red Oak Lane, 4th Floor
White Plains, NY 10604
Dear Sir/Madam:
This letter is with reference to the Registration Statement of T. Rowe Price
Variable Annuity Account of which First Security Benefit Life Insurance and
Annuity Company of New York (hereinafter "FSBL") is the Depositor. Said
Registration Statement is being filed with the Securities and Exchange
Commission for the purpose of registering the variable annuity contracts issued
by FSBL and the interests of T. Rowe Price Variable Annuity Account of First
Security Benefit Life Insurance and Annuity Company of New York under such
variable annuity contracts which will be sold pursuant to an indefinite
registration.
I have examined the Declaration and Certificate of Incorporation and bylaws of
FSBL, minutes of the meeting of its Board of Directors and other records, and
pertinent provisions of the New York insurance laws, together with applicable
certificates of public officials and other documents which I have deemed
relevant. Based on the foregoing, it is my opinion that:
1. FSBL is duly organized and validly existing as a stock life insurance
company under the laws of New York.
2. T. Rowe Price Variable Annuity Account of FSBL has been validly created as
a Separate Account in accordance with the pertinent provisions of the
insurance laws of New York.
3. FSBL has the power, and has validly and legally exercised it, to create and
issue the variable annuity contracts which are administered within and by
means of T. Rowe Price Variable Annuity Account of FSBL.
4. The amount of variable annuity contracts to be sold pursuant to the
indefinite registration, when issued, will represent binding obligations of
FSBL in accordance with their terms providing said contracts were issued
for the considerations set forth therein and evidenced by appropriate
policies and certificates.
I hereby consent to the inclusion in the Registration Statement of my foregoing
opinion.
Respectfully submitted,
ROGER K. VIOLA
Roger K. Viola, Esq.
Vice President
First Security Benefit Life Insurance and
Annuity Company of New York
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and to the
use of our reports dated February 5, 1999, with respect to the financial
statements of First Security Benefit Life Insurance and Annuity Company of New
York and the financial statements of T. Rowe Price Variable Annuity Account of
First Security Benefit Life Insurance and Annuity Company of New York, included
in Post-Effective Amendment No. 6 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-83240 ) and Amendment No. 9 to the
Registration Statement under the Investment Company Act of 1940 (Registration
No. 811-8726) on Form N-4 and the related Statement of Additional Information
accompanying the Prospectus of T. Rowe Price No-Load Variable Annuity.
Ernst & Young LLP
Kansas City, Missouri
March 1, 1999
<PAGE>
EQUITY INCOME
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,083.86
((1+T)^1)^1 = (1.08386)^1
1+T = 1.08386
T = .0839
4.75 Years (From Date of Inception 3/31/94)
1000 (1+T)^4.75 = 2,304.74
((1+T)^4.75)^4.75 = (2.30474)^4.75
1+T = 1.19218
T = .192
INTERNATIONAL STOCK
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,152.02
((1+T)^1)^1 = (1.15202)^1
1+T = 1.15202
T = .1520
4.75 Years (From Date of Inception 3/31/94)
1000 (1+T)^4.75 = 1,511.02
((1+T)^4.75)^4.75 = (1.51102)^4.75
1+T = 1.09079
T = .0908
LIMITED-TERM BOND
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,064.66
((1+T)^1)^1 = (1.06466)^1
1+T = 1.06466
T = .0647
4.64 Years (From Date of Inception 5/13/94)
1000 (1+T)^4.64 = 1,297.27
((1+T)^4.64)^4.64 = (1.29727)^4.64
1+T = 1.05769
T = .0577
NEW AMERICA GROWTH
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,178.42
((1+T)^1^1 = (1.17842)^1
1+T = 1.17842
T = .1784
4.75 Years (From Date of Inception 3/31/94)
1000 (1+T)^4.75 = 2,561.44
((1+T)^4.75)^4.75 = (2.56144)^4.75
1+T = 1.21898
T = .2190
PERSONAL STRATEGY BALANCED
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,137.45
((1+T)^1)^1 = (1.13745)^1
1+T = 1.13745
T = .1375
4 Years (From Date of Inception 12/30/94)
1000 (1+T)^4 = 1,939.78
((1+T)^4)^4 = (1.93978)^4
1+T = 1.18015
T = .1802
MID-CAP GROWTH
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,214.23
((1+T)^1)1 = (1.21423)^1
1+T = 1.21423
T = .2142
2 Years (From Date of Inception 12/31/96)
1000 (1+T)^2 = 1,434.00
((1+T)^2)^2 = (1.43400)^2
1+T = 1.19750
T = .1975
PRIME RESERVE
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 Year
1000 (1+T)^1 = 1,046.76
((1+T)^1)^1 = (1.04676)^1
1+T = 1.04676
T = .04676
2 Years (From Date of Inception 12/31/96)
1000 (1+T)^2 = 1,097.00
((1+T)^2)^2 = (1.09700)^2
1+T = 1.04738
T = .0474
<PAGE>
PRIME RESERVE
Money Market Yield as of December 31, 1998
CALCULATION OF CHANGE IN UNIT VALUE:
(Unrounded Unrounded)
( Price Price )
(12-31-98 - 12-24-98 ) = 10.968553225532 - 10.959418422030 = .000833512
----------------------- ---------------------------------
( Unrounded Price ) 10.959418422030
( 12-24-98 )
ANNUALIZED YIELD:
365/7 (.000833512) = 4.35%
EFFECTIVE YIELD:
(1 + .000833512)^365/7 - 1 = 4.44%
<PAGE>
LIMITED - TERM BOND
30 DAY YIELD CALCULATION AS OF DECEMBER 31, 1998
[ [ (2,290.49) ]6]
2 [ [ --------------------- + 1 ] ]-1
[ [ (41,067.2199 x 12.35) ] ]
[ ( (2,290.49) )6]
2 [ ( --------------------- + 1 ) ]-1
[ ( (507,180.17) ) ]
2 [((.00451613 + 1)^6)-1]
2 [((1.00451613)^6)-1]
2 [(1.02740) - 1]
2 (.0274)
= .0548 or 5.48% December 31, 1998
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint James R. Schmank, and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK and any
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in the
capacity aforesaid. Each of the aforesaid attorneys acting alone shall have all
the powers of all of said attorneys. I hereby ratify and confirm all that the
said attorneys, or any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January, 1999.
HOWARD R. FRICKE
-------------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 20th day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Kris A. Robbins, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January, 1999.
KRIS A. ROBBINS
-------------------------------------
Kris A. Robbins
SUBSCRIBED AND SWORN to before me this 21st day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Roger K. Viola, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke and James R. Schmank, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK and any
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in the
capacity aforesaid. Each of the aforesaid attorneys acting alone shall have all
the powers of all of said attorneys. I hereby ratify and confirm all that the
said attorneys, or any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January, 1999.
ROGER K. VIOLA
-------------------------------------
Roger K. Viola
SUBSCRIBED AND SWORN to before me this 21st day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, James R. Schmank, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Annuity Contracts offered, issued or sold
by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK and any
T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in the
capacity aforesaid. Each of the aforesaid attorneys acting alone shall have all
the powers of all of said attorneys. I hereby ratify and confirm all that the
said attorneys, or any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January, 1999.
JAMES R. SCHMANK
-------------------------------------
James R. Schmank
SUBSCRIBED AND SWORN to before me this 21st day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Donald J. Schepker, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January, 1999.
DONALD J. SCHEPKER
-------------------------------------
Donald J. Schepker
SUBSCRIBED AND SWORN to before me this 21st day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Jane Boisseau, being a Director of FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute and
appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of January, 1999.
JANE BOISSEAU
-------------------------------------
Jane Boisseau
SUBSCRIBED AND SWORN to before me this 26th day of January, 1999.
SUZANNE CHALPIN ALENICK
-------------------------------------
Notary Public
My Commission Expires:
1/25/2000
- ----------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF CONNECTICUT)
) ss.
COUNTY OF FAIRFIELD )
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Stephen R. Herbert, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January, 1999.
STEPHEN R. HERBERT
-------------------------------------
Stephen R. Herbert
SUBSCRIBED AND SWORN to before me this 20th day of January, 1999.
JOAN M. KNUBBEN
-------------------------------------
Notary Public
My Commission Expires:
11/30/1999
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<PAGE>
POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Katherine White, being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 18th day of January, 1999.
KATHERINE WHITE
-------------------------------------
Katherine White
SUBSCRIBED AND SWORN to before me this 18th day of January, 1999.
RITA M. WARNOCK
-------------------------------------
Notary Public
My Commission Expires:
3/18/2000
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF FLORIDA )
) ss.
COUNTY OF PINELLAS)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of FIRST SECURITY BENEFIT LIFE
INSURANCE AND ANNUITY COMPANY OF NEW YORK, by these presents do make, constitute
and appoint Howard R. Fricke, James R. Schmank, and Roger K. Viola, and each of
them, my true and lawful attorneys, each with full power and authority for me
and in my name and behalf to sign Registration Statements, any amendments
thereto and any applications for exemptive relief filed pursuant to the
Investment Company Act of 1940 or the Securities Act of 1933, as amended, and
any instrument or document filed as part thereof, or in connection therewith or
in any way related thereto, in connection with Variable Annuity Contracts
offered, issued or sold by FIRST SECURITY BENEFIT LIFE INSURANCE AND ANNUITY
COMPANY OF NEW YORK and any T. ROWE PRICE VARIABLE ANNUITY ACCOUNT OF FIRST
SECURITY BENEFIT LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK with like effect
as though said Registration Statements and other documents had been signed and
filed personally by me in the capacity aforesaid. Each of the aforesaid
attorneys acting alone shall have all the powers of all of said attorneys. I
hereby ratify and confirm all that the said attorneys, or any of them, may do or
cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of January, 1999.
JOHN E. HAYES, JR.
-------------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 27th day of January, 1999.
PAMELA MURRAY
-------------------------------------
Notary Public
My Commission Expires:
3/2/2000
- -----------------------
