<PAGE>
As filed with the Securities and Exchange Commission on November 22, 1995
File No. 33-62203
811-7351
- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1 [x]
- - -------------------------------------------------------------------------------
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
(Exact Name of Registrant)
GLENBROOK LIFE AND ANNUITY COMPANY
3100 Sanders Road
Northbrook, Illinois 60062
(Name of Depositor)
Michael J. Velotta
Vice President, Secretary and General Counsel
Glenbrook Life and Annuity Company
3100 Sanders Road
Northbrook, Illinois 60062
708/402-2400
(Name and Complete Address of Agent for Service)
Copies to:
Gregor B. McCurdy, Esquire John R. Hedrick, Esquire
Routier and Johnson, P.C. Allstate Life Financial Services, Inc.
1700 K. Street N. W., Suite 1003 3100 Sanders Road
Washington, D.C. 20006 Northbrook, IL 60062
Approximate date of proposed public offering:
As soon as practicable after the effective date of the Registration Statement
---------------------------
The Registrant has elected pursuant to Rule 24f-2 to register an indefinite
number of securities. The requisite $500 Rule 24f-2 filing fee was paid at the
time of initial registration.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
CROSS REFERENCE SHEET
Showing Location in Part A (Prospectus) and Part B of Registration Statement of
Additional Information Required by Form N-4
Item of Form N-4 Prospectus Caption
- - ---------------- ------------------
Part A: INFORMATION REQUIRED IN A PROSPECTUS
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Definitions. . . . . . . . . . . . . . . . . . . . . Glossary
3. Synopsis . . . . . . . . . . . . . . . . . Highlights; Summary of Variable
Account Expenses
4. Condensed Financial. . . . . . . . . . . . . . ---
(a) Chart............................. . . . . . . . . . .Not Applicable
(b) MM Yield . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(c) Location of Others . . . . . . . . . . . . . . .Financial Statements
5. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) Depositor. . . . . . . . . . . . Glenbrook Life and Annuity Company
(b) Registrant . . . . . . . . . . . . . . . . . . .The Variable Account
(c) Portfolio Company. . . . . . The Fund; AIM Variable Insurance Funds,
Inc.; Investment Advisors for the Fund
(d) Fund Prospectus. . . . . . . . . . . . AIM Variable Insurance Funds;
(e) Voting Rights. . . . . . . . . . . . . . . . . . . . . Voting Rights
(f) Administrators . . . . . . . . . . . . . .Charges & Other Deductions
Contract Maintenance Charge
6. Deductions & Expenses. . . . . . . . . . . . . .Charges & Other Deductions
(a) General. . . . . . . . . . . . . . . . . .Charges & Other Deductions
(b) Sales Load Percent . . . . . . . . . . . . . . . . Withdrawal Charge
(c) Special Purchase Plans . . . . . . . . . . . . . . . .Not Applicable
(d) Commissions. . . . . . . . . . . . . . Distribution of the Contracts
(e) Expenses -- Registrant . . . . . . . . . .Charges & Other Deductions
(f) Fund Expenses. . . . . . . . . Summary of Variable Account Expenses;
Expenses of the Funds
(g) Organizational Expenses. . . . . . . . . . . . . . . .Not Applicable
7. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) Persons with Rights. .Benefits under the Contract; Payout Start Date
for Income Payments; Voting Rights;
Assignments; Beneficiary
(b)(i) Allocation of Purchase Payments . . Allocation of Purchase Payments
(ii) Transfers . . . . . . . . . . . . . . . .Transfers among portfolios
(iii) Exchanges . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(c) Changes . . . . . . . . . . . . . . . . . . . . . . . .Modification
(d) Inquiries . . . . . . . . . . . . . . . . . . . .Customer Inquiries
8. Annuity Period . . . . . . . . . . . Payout Start Date for Income Payments
(a) Material Factors . . . . . . . . . Amount of Variable Annuity Income
Payments
<PAGE>
(b) Dates. . . . . . . . . . . . . Payout Start Date for Income Payments
(c) Frequency, duration & level. . . . Amount of Variable Annuity Income
Payments
(d) AIR. . . . . . . . . . . . . . . . Amount of Variable Annuity Income
Payments
(e) Minimum. . . . . . . . . . . . . . Amount of Variable Annuity Income
Payments
(f) -- Change Options. . . . . . . . . . . . .Transfers among Portfolios
-- Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . ---
9. Death Benefit. . . . . . . . .Death Benefit Payable; Death Benefit Amount;
Death Benefit Payment Provisions
10. Purchases & Contract Value. . . . . . . . . . . . . . . . . . . . . . ---
(a) Purchases. . . . . . . . . . . . . . . . .Purchase of the Contracts:
Crediting of Initial Purchase Payments
(b) Valuation. . . . . . . . Accumulation Units; Accumulation Unit Value
(c) Daily Calculation. . . .Accumulation Units; Accumulation Unit Value;
Allocation of Purchase Payments
(d) Underwriter. . . . . . . . . . . . . . Distribution of the Contracts
11. Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) -- By Owners . . . . . . . . . . . . . . . . . . . . . . Withdrawals
(b) -- By Annuitant. . . . . . . . . . . . . . . . . . . . .Income Plans
(c) Texas ORP. . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(d) Lapse. . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
(e) Free Look. . . . . . . . . . . . . . . . . . . . . . . . .Highlights
12. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . Federal Tax Matters
13. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .Not Applicable
14. SAI Table of Contents. . . . . . . . . . . . . . . . SAI Table of Contents
Part B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
15. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
16. Table of Contents. . . . . . . . . . . . . . . . . . . . Table of Contents
17. General Information & History. . . . . . . . . . . . . . . . . . . . . ---
(a) Depositor's Name . . . . . . . . .Glenbrook Life and Annuity Company
(b) Assets of Sub-account. . . . . . . . . . . . . .The Variable Account
(c) Control of Depositor . . . . . . .Glenbrook Life and Annuity Company
18. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) Fees & Expenses of Registrant. . . . . . Contract Maintenance Charge
(b) Management Contracts . . . . . . . . . .Contract Maintenance Charge;
Distribution of the Contracts
(c) Custodian. . . . . . . . . . . . . SAI: Safekeeping of the Variable
Account's Assets
Independent Public Accountant. . . . . . . . . . . . . . . . Experts
(d) Assets of Registrant . . . . . . . SAI: Safekeeping of the Variable
Account Assets
(e) Affiliated Persons . . . . . . . . . . . . . . . . . .Not Applicable
(f) Principal Underwriter. . . . . . . . . Distribution of the Contracts
<PAGE>
19. Purchase of Securities Being Offered . . . . . . . . . . . . . . . . . ---
(a) Offering . . . . . . . . . . . . . . . . SAI: Purchase of Contracts
(b) Sales load . . . . . . . . . . . . . . Distribution of the Contracts
20. Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) Principal Underwriter. . . . . . . . . Distribution of the Contracts
(b) Continuous offering. . . . . . . . . . . SAI: Purchase of Contracts
(c) Commissions. . . . . . . . . . . . . . Distribution of the Contracts
(d) Unaffiliated Underwriters. . . . . . . . . . . . . . . . . . . . N/A
21. Calculation of Performance Data. . . . . . . . . . .SAI: Performance Data
22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . Income Payments
23. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . ---
(a) Financial Statements of Registrant . . . . . . . .SAI: Not Applicable
(b) Financial Statements of Depositor. . . . . .Glenbrook Life and Annuity
Company Financial Statements
Part C: OTHER INFORMATION
24a. Financial Statements . . . . . . . . . . .Part C. Financial Statements
24b. Exhibits . . . . . . . . . . . . . . . . . . . . . . .Part C. Exhibits
25. Directors and Officers . . . . . . . . Part C. Directors & Officers of
Depositor
26. Persons Controlled By or Under Common
Control with Depositor or Registrant . . Part C. Persons Controlled by
or Under Common Control
with Depositor or
Registrant
27. Number of Contract Owners. . . . . . Part C. Number of Contract Owners
28. Indemnification. . . . . . . . . . . . . . . . Part C. Indemnification
29a. Relationship of Principal Underwriter to
Other Investment Companies . . . . . Part C. Relationship of Principal
Underwriter to Other
Investment Companies
29b. Principal Underwriters . . . . . . . . .Part C. Principal Underwriters
29c. Compensation of Underwriter. . . Part C. Compensation of Allstate Life
Financial Services, Inc.
30. Location of Accounts and Records . . .Part C. Location of Accounts and
Records
31. Management Services. . . . . . . . . . . . Part C. Management Services
32. Undertakings . . . . . . . . . . . . . . . . . . .Part C. Undertakings
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
1-800/776-6978
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE
ANNUITY CONTRACTS
-----------------------
This prospectus describes the AIM Lifetime Plus Variable Annuity, a
Flexible Premium Deferred Variable Annuity Contract ("Contract") designed to aid
you in long-term financial planning and which can be used for retirement
planning. The Contracts are issued by Glenbrook Life and Annuity Company
("Company"), a wholly owned subsidiary of Allstate Life Insurance Company. In
certain states the Contract is only available as a group Contract. In these
states a Certificate (hereinafter referred to as "Contract") is issued which
summarizes the provisions of the Master Group Policy. Purchase payments for the
Contracts will be allocated to a series of Variable Sub-accounts of the
Glenbrook Life and Annuity Company Separate Account A ("Variable Account")
and/or to a Fixed Account option(s) funded through the Company's general
account.
The Variable Sub-accounts invest in shares of AIM Variable Insurance Funds,
Inc. (the "Fund Series"). Nine Funds are currently available for investment
within the Variable Account: (1) AIM V.I. Capital Appreciation Fund; (2) AIM
V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I.
Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and
Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market
Fund; and (9) AIM V.I. Value Fund.
This prospectus presents information you should know before making a
decision to invest in the Contract and the available Investment Alternatives.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE
RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH
BANKS; HOWEVER, THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS,
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES
ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL. THESE CONTRACTS ARE NOT FDIC INSURED
<PAGE>
The Company has prepared and filed a Statement of Additional Information
dated November , 1995 with the U.S. Securities and Exchange Commission. If
you wish to receive the Statement of Additional Information, you may obtain a
free copy by calling or writing the Company at the address above. For your
convenience, an order form for the Statement of Additional Information may be
found on page __ of this prospectus. Before ordering, you may wish to review
the Table of Contents of the Statement of Additional Information on page __ of
this prospectus. The Statement of Additional Information has been incorporated
by reference into this prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR AIM VARIABLE INSURANCE FUNDS, INC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1995.
2
<PAGE>
The Contract is not available in all states.
At least once each Contract year, the Company will send the Owner an annual
statement that contains certain information pertinent to the individual Owner's
Contract. The annual statement details values and specific Contract data that
applies to each particular Contract. The annual statement does not contain
financial statements of the Company. The Company, however, is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports and other information with the Securities and
Exchange Commission. Reports and other information filed by the Company can be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
TABLE OF CONTENTS
Page
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUMMARY OF VARIABLE ACCOUNT EXPENSES . . . . . . . . . . . . . . . . . . . . . .
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .
YIELD AND TOTAL RETURN DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GLENBROOK LIFE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT. . . . . . . . . . .
Glenbrook Life and Annuity Company. . . . . . . . . . . . . . . . . . . . .
The Variable Account. . . . . . . . . . . . . . . . . . . . . . . . . . . .
THE FUND SERIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AIM Variable Insurance Funds, Inc.. . . . . . . . . . . . . . . . . . . . .
Investment Advisors for the Funds . . . . . . . . . . . . . . . . . . . . .
FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Example of Interest Crediting During the Guarantee Period . . . . . . . . .
Withdrawals or Transfers. . . . . . . . . . . . . . . . . . . . . . . . . .
Market Value Adjustment. . . . . . . . . . . . . . . . . . . . . . . . .. .
PURCHASE OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase Payment Limits . . . . . . . . . . . . . . . . . . . . . . . . . .
Free-Look Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
<PAGE>
Crediting of Initial Purchase Payment . . . . . . . . . . . . . . . . . . .
Allocation of Purchase Payments . . . . . . . . . . . . . . . . . . . . . .
Accumulation Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulation Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers Among Investment Alternatives . . . . . . . . . . . . . . . . . .
Dollar Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automatic Fund Rebalancing. . . . . . . . . . . . . . . . . . . . . . . . .
BENEFITS UNDER THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . . .
Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payout Start Date for Income Payments . . . . . . . . . . . . . . . . . .
Variable Account Income Payments. . . . . . . . . . . . . . . . . . . . .
Fixed Amount Income Payments. . . . . . . . . . . . . . . . . . . . . . .
Income Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Death Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution Upon Death Payment Provisions. . . . . . . . . . . . . . . .
Death Benefit Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .
CHARGES AND OTHER DEDUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions from Purchase Payments . . . . . . . . . . . . . . . . . . . . .
Withdrawal Charge (Contingent Deferred Sales Charge). . . . . . . . . . . .
Contract Maintenance Charge . . . . . . . . . . . . . . . . . . . . . . . .
Administrative Expense Charge . . . . . . . . . . . . . . . . . . . . . . .
Mortality and Expense Risk Charge . . . . . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delay of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer Inquiries. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FEDERAL TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Annuities in General. . . . . . . . . . . . . . . . . . . . . .
Tax Deferral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-natural Owners. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diversification Requirements. . . . . . . . . . . . . . . . . . . . . . .
Ownership Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Delayed Maturity Dates. . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Partial and Full Withdrawals. . . . . . . . . . . . . . . . .
Taxation of Annuity Payments. . . . . . . . . . . . . . . . . . . . . . .
4
<PAGE>
Taxation of Annuity Death Benefits. . . . . . . . . . . . . . . . . . . .
Penalty Tax on Premature Distributions. . . . . . . . . . . . . . . . . .
Aggregation of Annuity Contracts. . . . . . . . . . . . . . . . . . . . .
Tax Qualified Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Restrictions Under Section 403(b) Plans . . . . . . . . . . . . . . . . .
Income Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . .
VOTING RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE PERIODS ENDED DECEMBER 31, 1994. . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . .
Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pending Accounting Standards. . . . . . . . . . . . . . . . . . . . . . . .
THREE AND SIX-MONTH PERIODS ENDED SEPTEMBER 30, 1995 . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations and Financial Condition. . . . . . . . . . . . . . .
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . . . .
Pending Accounting Standards . . . . . . . . . . . . . . . . . . . . . . .
COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STATE AND FEDERAL REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . .
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY. . . . . . . . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS . . . . . . . . . . . . .
ORDER FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPENDIX A - Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . .
5
<PAGE>
GLOSSARY
ACCUMULATION UNIT--A measure of your ownership interest in a Sub-account of the
Variable Account prior to the Payout Start Date. Analogous, though not
identical, to a share owned in a mutual fund.
ACCUMULATION UNIT VALUE--The value of each Accumulation Unit which is calculated
each Valuation Date. Each Sub-account of the Variable Account has its own
distinct Accumulation Unit Value. Analogous, though not identical, to the share
price (net asset value) of a mutual fund.
ANNUITANT(S)--The person or persons whose life determines the latest Payout
Start Date and the amount and duration of any income payments for Income Plan
options other than Guaranteed Payments for a Specified Period. Joint annuitants
are only permitted in the payout phase.
BENEFICIARY(IES)--The person(s) to whom any benefits are due when a death
benefit is payable and there is no surviving Owner.
COMPANY("We," "Us")--Glenbrook Life and Annuity Company.
CONTRACT--The Glenbrook Life and Annuity Company Flexible Premium Deferred
Variable Annuity Contract, known as the "AIM Lifetime Plus Variable Annuity-
Registered Trademark- ," that is described in this prospectus.
CONTRACT ANNIVERSARY--An anniversary of the date that the Contract was issued.
CONTRACT VALUE--The value of all amounts accumulated under the Contract prior to
the Payout Start Date, equivalent to the Accumulation Units in each Sub-account
of the Variable Account multiplied by the respective Accumulation Unit Value,
plus the value in the Fixed Account.
CONTRACT YEAR--A period of 12 months starting with the issue date or any
Contract Anniversary.
DEATH BENEFIT ANNIVERSARY--Every seventh Contract Anniversary beginning on the
date that the Contract was issued. For example, the issue date, 7th and 14th
Contract Anniversaries are the first three Death Benefit Anniversaries.
FIXED ACCOUNT-- All of the assets of the Company that are not in separate
accounts.
6
<PAGE>
FIXED SUB-ACCOUNTS--These Sub-accounts are distinguished by Guarantee Period(s)
and the dates the period(s) begin. The Fixed Sub-accounts are established when
purchase payments are allocated to the Fixed Account; when previous Sub-accounts
expire and a new Guarantee Period is selected; and when You transfer an amount
to the Fixed Account.
GUARANTEE PERIOD--A period of years for which a specified effective annual
interest rate is guaranteed by the Company.
INCOME PLAN--One of several ways in which a series of payments are made after
the Payout Start Date. Income payments are based on the Contract Value adjusted
by any applicable Market Value Adjustment and applicable taxes on the Payout
Start Date. Income payment amounts may vary based on any Sub-account of the
Variable Account and/or may be fixed for the duration of the Income Plan.
INVESTMENT ALTERNATIVES--The Sub-accounts of the Variable Account and the Fixed
Account.
MARKET VALUE ADJUSTMENT--The Market Value Adjustment is the adjustment made to
the money distributed from a Sub-account of the Fixed Account, prior to the end
of the Guarantee Period, to reflect the impact of changes in interest rates
between the time the Sub-account of the Fixed Account was established and the
time of distribution.
NON-QUALIFIED CONTRACTS-- Contracts other than Qualified Contracts.
OWNER(S)("You")--The person or persons designated as the Owner in the Contract.
PAYOUT START DATE--The date on which income payments begin.
QUALIFIED CONTRACTS--Contracts issued under plans that qualify for special
federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of
the Internal Revenue Code.
VALUATION DATE--Each day that the New York Stock Exchange is open for business.
The Valuation Date does not include such Federal and non-Federal holidays as are
observed by the New York Stock Exchange.
VALUATION PERIOD--The period between successive Valuation Dates, commencing at
the close of regular trading on the New York Stock Exchange (which is normally
4:00pm Eastern Time) and ending as of the close of regular trading on the New
York Stock Exchange on the next succeeding Valuation Date.
7
<PAGE>
VARIABLE ACCOUNT--Glenbrook Life and Annuity Company Separate Account A, a
separate investment account established by the Company to receive and invest
purchase payments paid under the Contracts.
VARIABLE SUB-ACCOUNT--A portion of the Variable Account invested in shares of a
corresponding Fund. The investment performance of each Variable Sub-account is
linked directly to the investment performance of its corresponding Fund.
8
<PAGE>
HIGHLIGHTS
THE CONTRACT
This Contract is designed for long-term financial planning and retirement
planning. Money can be allocated to any combination of Funds or the Fixed
Account. You have access to your funds either through withdrawals of Contract
Value or through periodic income payments.
You bear the entire investment risk for Contract Values and income payments
based upon the Variable Account, because values will vary depending on the
investment performance of the Fund(s) you select. See "Accumulation Unit
Value," page ___ and "Income Plans," page ___.
You will also bear the investment risk of adverse changes in interest rates
in the event amounts are prematurely withdrawn or transferred from Sub-accounts
of the Fixed Account. See "Fixed Account," page __.
FREE-LOOK
You may cancel the Contract any time within 20 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation, unless a refund of purchase
payments is required by state or federal law. See "Free-Look Period," page __.
HOW TO INVEST
Your first purchase payment must be at least $5,000 (for qualified
contracts, $2,000). Subsequent purchase payments must be at least $500.
Purchase payments may also be made pursuant to an Automatic Addition program.
See "Purchase Payment Limits," page ___.
At the time of your application, you will allocate your purchase payment
among the Investment Alternatives. The allocation you specify on the
application will be effective immediately. All allocations must be in whole
percents from 0% to 100% (total allocation equals 100%) or in whole dollars.
Allocations may be changed by notifying the Company in writing. See "Allocation
of Purchase Payments," page ___.
9
<PAGE>
INVESTMENT ALTERNATIVES
The Variable Account invests in shares of the AIM Variable Insurance Funds,
Inc. (the "Fund Series"). The Fund Series has a total of nine Funds available
under the Contract. The Funds include: (1) AIM V.I. Capital Appreciation Fund;
(2) AIM V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4)
AIM V.I. Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I.
Growth and Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I.
Money Market Fund; and (9) AIM V.I. Value Fund. The assets of each Fund are
held separately from the other Funds and each has distinct investment objectives
and policies which are described in the accompanying prospectus for the Fund
Series. In addition to the Variable Account, Owners can also allocate all or
part of their purchase payments to the Fixed Account. See "Fixed Account," on
page ___.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, you may transfer amounts among the
Investment Alternatives. The Company reserves the right to assess a $10 charge
on each transfer in excess of twelve per Contract Year. The Company is
presently waiving this charge. Transfers to the Fixed Account must be at least
$500. Certain Fixed Account transfers may be restricted. See "Transfers Among
Investment Alternatives," page ___.
You may want to enroll in a Dollar Cost Averaging program or an Automatic
Fund Rebalancing Program. See "Dollar Cost Averaging," page ___, and "Automatic
Fund Rebalancing," page __.
CHARGES AND DEDUCTIONS
The costs of the Contract include: a contract maintenance charge ($35
annually), a mortality and expense risk charge (deducted daily, equal on an
annual basis to 1.35% of the Contract's daily net assets of the Variable
Account), and an administrative expense charge (deducted daily, equal on an
annual basis to .10% of the Contract's daily net assets of the Variable
Account). The Company reserves the right to assess a transfer charge ($10 on
each transfer in excess of twelve per Contract Year). Additional deductions may
be made for certain taxes. See "Contract Maintenance Charge," page ___,
"Mortality and Expense Risk Charge," page ___, "Administrative Expense Charge,"
page ___, "Transfer Charges," page ___, and "Taxes," page ___.
10
<PAGE>
WITHDRAWALS
You may withdraw all or part of the Contract Value before the earliest of
the Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant. No withdrawal charges or Market Value
Adjustments will be applied to amounts withdrawn up to 10% of the amount of
purchase payments. Amounts withdrawn in excess of the 10% may be subject to a
withdrawal charge of 0% to 6% depending on how long purchase payments have been
invested in the Contract. Amounts withdrawn from a Sub-account of the Fixed
Account, in excess of the 10%, except during the 30 day period after the
Guarantee Period expires, will be subject to a Market Value Adjustment. See
"Withdrawals," page __, "Withdrawals or Transfers," page ___, and "Taxation of
Annuities in General," page ___.
DEATH BENEFIT
The Company will pay a death benefit prior to the Payout Start Date on the
death of any Owner or, if the Owner is not a natural person, the death of the
Annuitant. See "Death Benefit Amount," page ___.
INCOME PAYMENTS
You will receive periodic income payments beginning on the Payout Start
Date. You may choose among several Income Plans to fit your needs. Income
payments may be received for a specified period or for life (either single or
joint life), with or without a guaranteed number of payments. You can select
income payments that are fixed, variable or a combination of fixed and variable.
See "Income Payments," page ___.
11
<PAGE>
SUMMARY OF VARIABLE ACCOUNT EXPENSES
The following table illustrates all expenses and fees that you will incur.
The expenses and fees set forth in the table are based on charges under the
Contracts and on the expenses of the Variable Account and the underlying Fund
Series.
OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS)
- - ---------------------------------------------
Sales Load Imposed on Purchases (as a percentage of purchase payments) . . None
Contingent Deferred Sales Charge (as a percentage of purchase payments). . *
Applicable Sales Charge
Number of Complete Years Since Purchase as a
Payment Being Withdrawn Was Made Percentage
0 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6%
1 year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6%
2 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5%
3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5%
4 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4%
5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4%
6 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3%
7 Years or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0%
Transfer Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . **
Annual Contract Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . $35***
Variable Account Annual Expenses (as a percentage of the Contract's average net
assets in the Variable Account)
- - -------------------------------------------------------------------------------
Mortality and Expense Risk Charge. . . . . . . . . . . . . . . . . . . . . 1.35%
Administrative Expense Charge. . . . . . . . . . . . . . . . . . . . . .10%
Total Variable Account Annual Expenses . . . . . . . . . . . . . . . . . ..1.45%
_________________________________________________________________
* Each Contract Year up to 10% of the amount of purchase payments may be
withdrawn without a contingent deferred sales charge or a Market Value
Adjustment.
12
<PAGE>
** No charges will be imposed on the first twelve transfers in any Contract
Year. The Company reserves the right to assess a $10 charge for each transfer
in excess of twelve in any Contract Year, excluding transfers due to dollar cost
averaging and Automatic Fund Rebalancing.
*** The annual Contract Fee will be waived if total purchase payments as of a
Contract Anniversary, or upon a full withdrawal, are $50,000 or if all monies
are allocated to the Fixed Account.
<TABLE>
<CAPTION>
FUND EXPENSES
(AS A PERCENTAGE OF FUND ASSETS)
Total Fund
Annual
Fund Management Fees Other Expenses Expenses
- - ---- --------------- ----------------- -----------------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 0.65% 0.19% 0.84%
AIM V.I. Growth and Income Fund(3) 0.65% 0.41% 1.06%
AIM V.I. Global Utilities Fund(3) 0.00%(2) 1.50%(1) 1.50%
AIM V.I. Diversified Income Fund 0.60% 0.43% 1.03%
AIM V.I. Government Securities Fund 0.50% 0.60% 1.10%
AIM V.I. Growth Fund 0.65% 0.30% 0.95%
AIM V.I. International Equity Fund 0.75% 0.53% 1.28%
AIM V.I. Value Fund 0.65% 0.17% 0.82%
AIM V.I. Money Market Fund 0.40% 0.30% 0.70%
--------------------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" listed for the AIM. V.I. Global Utilities Fund
include expense reimburesments. Had there been no expense reimbursements,
other expenses would have been 1.65%.
(2) The management fees listed are reduced because the Investment Advisor for
the Funds, A.I.M. Advisors, Inc. is temporarily waiving the imposition of
certain management fees. If this waiver were not in effect, the management fees
for the AIM V.I. Global Utilities Fund, as a percentage of each Fund's average
net assets would be 0.65%.
(3) The fees and expenses set forth are based on estimated amounts for the
current fiscal year.
13
<PAGE>
EXAMPLE
You (the Owner) would pay the following cumulative expenses on a $1,000
investment, assuming a 5% annual return under the following circumstances:
If you terminate your Contract or annuitize for a specified period of less than
120 months at the end of the applicable time period:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years
- - ---- ------ -------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund $80 $126
AIM V.I. Growth and Income Fund $81 $129
AIM V.I. Global Utilities Fund $81 $129
AIM V.I. Diversified Income Fund $82 $134
AIM V.I. Government Securities Fund $83 $137
AIM V.I. Growth Fund $80 $127
AIM V.I. International Equity Fund $88 $151
AIM V.I. Value Fund $80 $126
AIM V.I. Money Market Fund $80 $126
</TABLE>
If you do not terminate your Contract or if you annuitize for a specified period
of 120 months or more at the end of the applicable time period:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years
- - ---- ------ -------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund $26 $81
AIM V.I. Growth and Income Fund $27 $84
AIM V.I. Global Utilities Fund $27 $84
AIM V.I. Diversified Income Fund $28 $89
AIM V.I. Government Securities Fund $29 $92
AIM V.I. Growth Fund $26 $82
AIM V.I. International Equity Fund $34 $106
AIM V.I. Value Fund $26 $81
AIM V.I. Money Market Fund $26 $81
</TABLE>
__________________________________________________________________
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose
of the example is to assist you in understanding the
14
<PAGE>
various costs and expenses that you will bear directly or indirectly. Premium
taxes, which vary from 0 - 3.5% depending on the state where the Contract is
sold, are not reflected in the
example.
CONDENSED FINANCIAL INFORMATION
Condensed financial information for the Glenbrook Life and Annuity Company
Separate Account A is not included because, as of the date of this prospectus,
the Variable Account had not yet commenced operations and had no assets,
liabilities, or income.
YIELD AND TOTAL RETURN DISCLOSURE
From time to time the Variable Account may advertise the yield and total
return investment performance of one or more Sub-accounts. Standardized yield
and total return advertisements include charges and expenses attributable to the
Contracts. Including these fees has the effect of decreasing the advertised
performance of a Sub-account, so that a Sub-account's investment performance
will not be directly comparable to that of an ordinary mutual fund.
When a Sub-account advertises its standardized total return it will usually
be calculated for one year, five years, and ten years or since inception if the
Sub-account has not been in existence for such periods. Total return is
measured by comparing the value of an investment in the Sub-account at the end
of the relevant period to the value of the investment at the beginning of the
period.
In addition to the standardized total return, the Sub-account may advertise
a non-standardized total return. This figure will usually be calculated for one
year, five years, and ten years or other periods. Non-standardized total return
is measured in the same manner as the standardized total return described above,
except that the withdrawal charges under the Contract are not deducted.
Therefore, a non-standardized total return for a Sub-account can be higher than
a standardized total return for a Sub-account.
Certain Sub-accounts may advertise yield in addition to total return.
Except in the case of the AIM V.I. Money Market Sub-account, the yield will be
computed in the following manner: the net investment income per unit earned
during a recent one month period is divided by the unit value on the last day of
the period, and then annualized. This figure reflects the recurring charges at
the separate account level.
The AIM V.I. Money Market Sub-account may advertise, in addition to the
total return, either yield or the effective yield. The yield in this case
refers to the income generated by an investment in that Sub-account over a
seven-day period net of recurring charges at the separate
15
<PAGE>
account level. The income is then annualized (i.e., the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment). The
effective yield is calculated similarly but when annualized, the income earned
by an investment in the AIM V.I. Money Market Sub-account is assumed to be
reinvested at the end of each seven-day period. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment during a 52-week period.
The Variable Account may also disclose yield, standard total return, and
non-standard total return for periods prior to the date that the Variable
Account commenced operations. For periods prior to the date the Variable
Account commenced operations, performance information for the Sub-accounts will
be calculated based on the performance of the underlying Funds and the
assumption that the Sub-accounts were in existence for the same periods as those
of the underlying Funds, with a level of charges equal to those currently
assessed against the Sub-accounts.
Please refer to the Statement of Additional Information for a further
description of the method used to calculate a Sub-account's yield and total
return.
FINANCIAL STATEMENTS
The financial statements of Glenbrook Life and Annuity Company are on page
__ of the prospectus. The financial statements of Glenbrook Life and Annuity
Company Separate Account A are not included because, as of the date of this
Prospectus, the Variable Account had not yet commenced operations and had no
assets, liabilities, or income.
GLENBROOK LIFE AND ANNUITY COMPANY AND THE VARIABLE ACCOUNT
GLENBROOK LIFE AND ANNUITY COMPANY
The Company is the issuer of the Contract. The Company is a stock life
insurance company which was organized under the insurance laws of the State of
Illinois in 1992. The Company was originally organized under the laws of the
State of Indiana in 1965. From 1965 to 1983 the Company was known as "United
Standard Life Assurance Company" and from 1983 to 1992 the Company was known as
"William Penn Life Assurance Company of America." As of the date of this
prospectus, the Company is licensed to operate in the District of Columbia and
all states except New Jersey and New York. The Company is currently pursuing a
license in New Jersey. The Company intends to market the Contract in those
jurisdictions in which it is licensed to operate. The Company's home office is
located at 3100 Sanders Road, Northbrook, Illinois 60062.
16
<PAGE>
The Company is a wholly-owned subsidiary of Allstate Life Insurance Company
("Allstate Life"), a stock life insurance company incorporated under the
insurance laws of the State of Illinois. Allstate Life is a wholly-owned
subsidiary of Allstate Insurance Company ("Allstate"), a stock
property-liability insurance company incorporated under the insurance laws of
Illinois. All of the outstanding capital stock of Allstate is owned by The
Allstate Corporation ("Corporation").
The Company and Allstate Life entered into a reinsurance agreement,
effective June 5, 1992, under which the Company reinsures all of its business
with Allstate Life. Under the reinsurance agreement, Fixed Account purchase
payments are automatically transferred to Allstate Life and become invested with
the assets of Allstate Life, and Allstate Life accepts 100% of the liability
under such contracts.
THE VARIABLE ACCOUNT
Established on September 6, 1995, the Glenbrook Life and Annuity Company
Separate Account A is a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. However, such
registration does not signify that the Commission supervises the management or
investment practices or policies of the Variable Account. The investment
performance of the Variable Account is entirely independent of both the
investment performance of the Company's general account and the performance of
any other separate account.
The Variable Account has been divided into nine Sub-accounts, each of which
invests solely in its corresponding Fund of AIM Variable Insurance Funds, Inc.
Additional Variable Sub-accounts may be added at the discretion of the Company.
The assets of the Variable Account are held separately from the other
assets of the Company. They are not chargeable with liabilities incurred in the
Company's other business operations. Accordingly, the income, capital gains and
capital losses, realized or unrealized, incurred on the assets of the Variable
Account are credited to or charged against the assets of the Variable Account,
without regard to the income, capital gains or capital losses arising out of any
other business the Company may conduct. The Company's obligations arising under
the Contracts are general corporate obligations of the Company.
THE FUND SERIES
The Variable Account will invest in shares of the AIM Variable Insurance
Funds, Inc. (the "Fund Series"). The Fund Series is registered with the
Securities and Exchange Commission as an open-end, series, management investment
company. Registration of the Fund Series does not involve supervision of its
management, investment practices or policies by the Securities and Exchange
Commission. The Funds are designed to provide investment vehicles for variable
17
<PAGE>
insurance contracts of various insurance companies, in addition to the Variable
Account.
Shares of the Funds are not deposits, or obligations of, or guaranteed or
endorsed by any bank and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. offers nine Funds for use with this
Contract: (1) AIM V.I Capital Appreciation Fund; (2) AIM V.I Diversified Income
Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities
Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM
V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I.
Value Fund. Each Fund has different investment objectives and policies and
operates as a separate investment fund. The following is a brief description of
the investment objectives and programs of the Funds:
AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a
diversified Fund which seeks to provide capital appreciation through investments
in common stocks, with emphasis on medium-sized and smaller emerging growth
companies.
AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a
diversified Fund which seeks to achieve a high level of current income primarily
by investing in a diversified portfolio of foreign and U.S. government and
corporate debt securities, including lower rated high yield debt securities
(commonly known as "junk bonds").
AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a
non-diversified Fund which seeks to achieve a high level of current income and,
as a secondary objective, to achieve capital appreciation, by investing
primarily in common and preferred stocks of public utility companies (either
domestic or foreign).
AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND") is a diversified
Fund which seeks to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government.
AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified Fund which seeks to
provide growth of capital through investments primarily in common stocks of
leading U.S. companies considered by AIM to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified
Fund which seeks to provide growth of capital, with current income as a
secondary objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
18
<PAGE>
AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified
Fund which seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified Fund
which seeks to provide as high a level of current income as is consistent with
the preservation of capital and liquidity by investing in a diversified
portfolio of money market instruments.
AIM V.I. VALUE FUND ("VALUE FUND") is a diversified Fund which seeks to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings of
the companies issuing the securities, or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
markets generally. Income is a secondary objective.
INVESTMENT ADVISOR FOR THE FUNDS
A.I.M. Advisors, Inc., ("AIM") serves as the investment advisor to each
Fund. AIM was organized in 1976 and, together with its affiliates, manages or
advises 38 investment company portfolios (including the Funds). AIM is a wholly
owned subsidiary of A.I.M. Management Group Inc., a holding company. AIM
manages pursuant to a master investment advisory agreement dated October 18,
1993, as amended April 28, 1994. As of November 15, 1995, total assets advised
or managed by AIM and its affiliates were approximately $40 billion.
There is no assurance that the Funds will attain their respective stated
objectives. Additional information concerning the investment objectives and
policies of the Funds can be found in the current prospectus for the Fund
Company accompanying this prospectus.
You will find more complete information about the Funds, including the
risks associated with each Fund, in the accompanying prospectus. You should
read the prospectus for the Fund Series in conjunction with this prospectus.
THE FUND SERIES PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE
SUB-ACCOUNT.
FIXED ACCOUNT
Purchase payments and transfers allocated to one or more of the
Sub-accounts of the Fixed Account become part of the general account of the
Company. Each Sub-account offers a separate interest rate Guarantee Period.
Guarantee Periods will be offered at the Company's discretion and may range from
one to ten years. Presently, the Company offers Guarantee
19
<PAGE>
Periods of one, three, five, seven and ten years. The Owner must select the
Sub-account(s) in which to allocate each purchase payment and transfer. No less
than $500 may be allocated to any one Sub-account. The Company reserves the
right to limit the number of additional purchase payments. The Fixed Account
Investment Alternative may not be available in all states. Please consult with
your sales representative for current information.
Interest is credited daily to each Sub-account at a rate which compounds to
the effective annual interest rate declared for each Sub-account's Guarantee
Period that has been selected.
The following example illustrates how the Sub-account value for a Sub-
account of the Fixed Account would grow given an assumed purchase payment,
Guarantee Period, and effective annual interest rate:
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
Purchase Payment: . . . . . . . . . . . . . . . . . . $10,000.00
Guarantee Period: . . . . . . . . . . . . . . . . . . 5 years
Effective Annual Rate: . . . . . . . . . . . . . . . . 5.50%
<TABLE>
<CAPTION>
END OF CONTRACT YEAR:
Year 1 Year 2 Year 3 Year 4 Year 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Sub-Account Value $10,000.00
X (1 + Effective Annual Rate) 1.055
----
$10,550.00
Sub-Account Value at end of Contract $10,550.00
year 1 X (1 + Effective Annual Rate) 1.055
----
$11,130.25
Sub-Account Value at end of Contract $11,130.25
year 2 X (1 + Effective Annual Rate) 1.055
----
$11,742.41
Sub-Account Value at end of Contract $11,742.41
year 3 X (1 + Effective Annual Rate) 1.055
----
$12,388.25
Sub-Account Value at end of Contract $12,388.25
year 4 X (1 + Effective Annual Rate) 1.055
-----
Sub-Account Value at end of Guarantee Period: $13,069.60
----------
----------
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $3,069.60 ($13,069.60 -$10,000.00)
</TABLE>
20
<PAGE>
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A withdrawal charge and a Market Value Adjustment may
apply to any amount withdrawn in excess of 10% of the amount of purchase
payments. The hypothetical interest rate is for illustrative purposes only and
is not intended to predict future interest rates to be declared under the
Contract.
The Company has no specific formula for determining the rate of interest
that it will declare initially or in the future. Such interest rates will be
reflective of investment returns available at the time of the determination. In
addition, the management of the Company may also consider various other factors
in determining interest rates, including regulatory and tax requirements, sales
commissions and administrative expenses borne by the Company, general economic
trends, and competitive factors. The Company guarantees that the interest rates
will never be less that the minimum guaranteed rate shown in the Contract. For
current interest rate information, please contact your sales representative or
the Company's customer support unit at 1(800)776-6978
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE
INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE
FUTURE INTEREST RATES TO BE DECLARED.
Prior to the end of a Guarantee Period, a notice will be mailed to the
Owner outlining the options available at the end of a Guarantee Period. During
the 30 day period after a Guarantee Period expires the Owner may:
- take no action and the Company will automatically renew the
Sub-account value to a Guarantee Period of the same duration to be established
on the day the previous Guaranteed Period expired; or
- notify the Company to apply the Sub-account value to a new Guarantee
Period or periods to be established on the day the previous Guarantee Period
expired; or
- notify the Company to apply the Sub-account value to any Sub-account
of the Variable Account on the day we receive the notification.
- receive a portion of the Sub-account value or the entire Sub-account
value through a partial or full withdrawal that is not subject to a Market Value
Adjustment. In this case, the amount withdrawn will be deemed to have been
withdrawn on the day the guarantee period expired.
The Automatic Laddering Program allows the Owner to choose, in advance, one
renewal Guarantee Period for all renewing Sub-accounts. The Owner can select the
Automatic Laddering Program at any time during the accumulation phase, including
on the issue date. The Automatic Laddering Program will continue until the
Owner gives written notice to the Company. The Company reserves the right to
discontinue this Program. For additional information on the
21
<PAGE>
Automatic Laddering Program, please call the Company's Customer Support Unit at
1(800)776-6978.
WITHDRAWALS OR TRANSFERS
With the exception of transfers made automatically through dollar cost
averaging, all withdrawals and transfers, paid from a Sub-account of the Fixed
Account other than during the 30 day period after a Guarantee Period expires are
subject to a Market Value Adjustment.
The amount received by the Owner under a withdrawal request equals the
amount requested, adjusted by any Market Value Adjustment, less any applicable
withdrawal charge (based upon the amount requested prior to any Market Value
Adjustment), less premium taxes and withholding (if applicable).
MARKET VALUE ADJUSTMENT
The Market Value Adjustment reflects the relationship between (1) the
Treasury Rate for the time remaining in the Guarantee Period at the time of the
request for withdrawal or transfer, and (2) the Treasury Rate at the time the
Sub-account was established. As such, the Owner bears some investment risk
under the Contract. Treasury Rate means the U.S. Treasury Note Constant
Maturity yield for the preceding week as reported in Federal Reserve Bulletin
Release H.15.
Generally, if the Treasury Rate for the Guarantee Period is higher than the
applicable current Treasury Rate, then the Market Value Adjustment will result
in a higher amount payable to the Owner or transferred. Similarly, if the
Treasury Rate at the time the Sub-account was established is lower than the
applicable Treasury Rate (interest rate for a period equal to the time remaining
in the Sub-account), then the Market Value Adjustment will result in a lower
amount payable to the Owner or transferred.
For example, assume the Owner purchases a Contract and selects an initial
Guarantee Period of five years and the five year Treasury Rate for that duration
is 5.50%. Assume that at the end of 3 years, the Owner makes a partial
withdrawal. If, at that later time, the current two year Treasury Rate is 4.00%,
then the Market Value Adjustment will be positive, which will result in an
increase in the amount payable to the Owner. Similarly, if the current two year
Treasury Rate is 7.00%, then the Market Value Adjustment will be negative, which
will result in a decrease in the amount payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this prospectus which also contains additional illustrations of
the application of the Market Value Adjustment.
22
<PAGE>
PURCHASE OF THE CONTRACTS
PURCHASE PAYMENT LIMITS
Your first purchase payment must be at least $5,000 unless the Contract is
a qualified contract, in which case the first purchase payment must be at least
$2,000. All subsequent purchase payments must be $500 or more and may be made
at any time prior to the Payout Start Date. Subsequent purchase payments may
also be made from your bank account through Automatic Additions. Under an
Automatic Additions program, the minimum purchase payment for allocation to the
Variable Account is $100 and for allocation to the Fixed Account the minimum
purchase payment is $500. Please consult with your sales representative for
detailed information about Automatic Additions.
We reserve the right to limit the amount of purchase payments we will
accept.
FREE-LOOK PERIOD
You may cancel the Contract any time within 20 days after receipt of the
Contract and receive a full refund of purchase payments allocated to the Fixed
Account. Purchase payments allocated to the Variable Account will be returned
after an adjustment to reflect investment gain or loss that occurred from the
date of allocation through the date of cancellation unless a refund of purchase
payments is required by state or federal law.
CREDITING OF INITIAL PURCHASE PAYMENT
The initial purchase payment accompanied by a duly completed application
will be credited to the Contract within two business days of receipt by us at
our home office. If an application is not duly completed, we will credit the
purchase payments to the Contract within five business days or return it at that
time unless you specifically consent to us holding the purchase payment until
the application is complete. We reserve the right to reject any application.
Subsequent purchase payments will be credited to the Contract at the close of
the Valuation Period in which the purchase payment is received by the Company at
its home office.
23
<PAGE>
ALLOCATION OF PURCHASE PAYMENTS
On the application, you instruct us how to allocate the purchase payment
among the Investment Alternatives. Purchase payments may be allocated in whole
percents, from 0% to 100% (total allocation equals 100%) to any Investment
Alternative. Unless you notify us in writing otherwise, subsequent purchase
payments are allocated according to the allocation for the previous purchase
payment.
ACCUMULATION UNITS
Each purchase payment allocated to the Variable Account will be credited to
the Contract as Accumulation Units. For example, if a $10,000 purchase payment
is credited to the Contract when the Accumulation Unit value equals $10, then
1,000 Accumulation Units would be credited to the Contract. The Variable
Account, in turn, purchases shares of the corresponding Fund.
ACCUMULATION UNIT VALUE
The Accumulation Units in each Sub-account of the Variable Account are
valued separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased by each
Variable Sub-account and the deduction of certain expenses and charges.
The value of an Accumulation Unit in a Variable Sub-account for any
Valuation Period equals the value of the Accumulation Unit as of the immediately
preceding Valuation Period, multiplied by the Net Investment Factor for that
Sub-account for the current Valuation Period. The Net Investment Factor for a
Valuation Period is a number representing the change, since the last Valuation
Date in the value of Sub-account assets per Accumulation Unit due to investment
income, realized or unrealized capital gain or loss, deductions for taxes, if
any, and deductions for the mortality and expense risk charge and administrative
expense charge.
TRANSFERS AMONG INVESTMENT ALTERNATIVES
Prior to the Payout Start Date, you may transfer amounts among Investment
Alternatives. The Company reserves the right to assess a $10 charge on each
transfer in excess of twelve per Contract Year. The Company is presently
waiving this charge. Transfers to or from more than one Investment Alternative
on the same day are treated as one transfer. Transfers among Investment
Alternatives before the Payout Start Date may be made at any time. See
"Transfers and Withdrawals," page ___ for the requirements on transfers from the
Fixed Account.
24
<PAGE>
After the Payout Start Date, transfers among Sub-accounts of the Variable
Account or from a variable amount income payment to a fixed amount income
payment may be made only once every six months and may not be made during the
first six months following the Payout Start Date. After the Payout Start Date,
transfers from a fixed amount income payment are not allowed.
Telephone transfer requests will be accepted by the Company if received at
1(800)776-6978 by 3:00 p.m., Central Time. Telephone transfer requests received
at any other telephone number or after 3:00 p.m., Central Time will not be
accepted by the Company. Telephone transfer requests received before 3:00 p.m.,
Central Time are effected at the next computed value. The Company utilizes
procedures which the Company believes will provide reasonable assurance that
telephone authorized transfers are genuine. Such procedures include taping of
telephone conversations with persons purporting to authorize such transfers and
requesting identifying information from such persons. Accordingly, the Company
disclaims any liability for losses resulting from such transfers by reason of
their allegedly not having been properly authorized. However, if the Company
does not take reasonable steps to help ensure that such authorizations are
valid, the Company may be liable for such losses.
The minimum amount that may be transferred into a Sub-account of the Fixed
Account is $500. Any transfer from a Sub-account of the Fixed Account at a time
other than during the 30 day period after a Guarantee Period expires will be
subject to a Market Value Adjustment. If any transfer reduces the value of a
Sub-account of the Fixed Account to less than $500, the Company will treat the
request as a transfer of the entire Sub-account value.
The Company reserves the right to waive transfer restrictions.
DOLLAR COST AVERAGING
Transfers may be made automatically through Dollar Cost Averaging prior to
the Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a
specified amount every month from the one year Guarantee Period Sub-account of
the Fixed Account, to any Sub-account of the Variable Account. Transfers made
through Dollar Cost Averaging must be $50 or more. Dollar Cost Averaging cannot
be used to transfer amounts to the Fixed Account. Transfers made through Dollar
Cost Averaging are not subject to a Market Value Adjustment. In addition, such
transfers are not assessed a $10 charge and are not included in the twelve free
transfers per Contract Year.
The theory of Dollar Cost Averaging is that, if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in the Dollar Cost Averaging program
25
<PAGE>
does not assure you of a greater profit from your purchases under the program;
nor will it prevent or alleviate losses in a declining market.
AUTOMATIC FUND REBALANCING
Transfers may be made automatically through Automatic Fund Rebalancing
prior to the Payout Start Date. By electing Automatic Fund Rebalancing, all of
the money allocated to Sub-accounts of the Variable Account will be rebalanced
to the desired allocation on a quarterly basis, determined from the first date
that you decide to rebalance. Each quarter, money will be transferred among
Sub-accounts of the Variable Account to achieve the desired allocation.
The desired allocation will be the allocation initially selected, unless
subsequently changed. You may change the allocation at any time by giving us
written notice. The new allocation will be effective with the first rebalancing
that occurs after we receive the written request. We are not responsible for
rebalancing that occurs prior to receipt of the written request.
Transfers made through Automatic Fund Rebalancing are not assessed a $10
charge and are not included in the twelve free transfers per Contract Year.
Any money allocated to the Fixed Account will not be included in the
rebalancing.
BENEFITS UNDER THE CONTRACT
WITHDRAWALS
You may withdraw all or part of the Contract Value at any time prior to the
earlier of the death of the Owner (or the Annuitant if the Owner is not a
natural person) or the Payout Start Date. The amount available for withdrawal
is the Contract Value next computed after the Company receives the request for a
withdrawal at its home office, adjusted by any applicable Market Value
Adjustment, less any withdrawal charges, contract maintenance charges and any
premium taxes. Withdrawals from the Variable Account will be paid within seven
days of receipt of the request, subject to postponement in certain
circumstances. See "Delay of Payments," page ___.
Money can be withdrawn from the Variable Account or the Fixed Account. To
complete the partial withdrawal from the Variable Account, the Company will
redeem Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes. The Owner must name the
Investment Alternative from which the withdrawal is to be made. If none is
26
<PAGE>
named, then the withdrawal request is incomplete and cannot be honored.
The minimum partial withdrawal is $50. If any withdrawal reduces the value
of any Sub-account of the Fixed Account to less than $500, we will treat the
request as a withdrawal of the entire Sub-account value. If the Contract Value
after a partial withdrawal would be less than $1,000, then the Company will
treat the request as one for termination of the Contract and the entire Contract
Value, adjusted by any Market Value Adjustment, less any charges and premium
taxes, will be paid out.
Partial withdrawals may also be taken automatically through Systematic
Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic
Withdrawals of $50 or more may be requested at any time prior to the Payout
Start Date. At the Company's discretion, Systematic Withdrawals may not be
offered in conjunction with Dollar Cost Averaging or Automatic Fund Rebalancing.
Partial and full withdrawals may be subject to income tax and a 10% tax
penalty. This tax and penalty are explained in "Federal Tax Matters," on page
___.
After the Payout Start Date, withdrawals are only permitted when payments
from the Variable Account are being made that do not involve life contingencies.
In that case, you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the commuted balance of the
remaining variable payments due, less any applicable withdrawal charge.
INCOME PAYMENTS
PAYOUT START DATE FOR INCOME PAYMENTS
The Payout Start Date is the day that income payments will start under the
Contract. You may change the Payout Start Date at any time by notifying the
Company in writing of the change at least 30 days before the scheduled Payout
Start Date. The Payout Start Date must be (a) at least one month after the
Issue Date; and (b) no later than the day the Annuitant reaches age 90, or the
10th anniversary of the issue date, if later.
VARIABLE ACCOUNT INCOME PAYMENTS
The amount of Variable Account income payments depends upon the investment
experience of the Sub-accounts selected by the Owner and any premium taxes, the
age and sex of the Annuitant, and the Income Plan chosen. The Company
guarantees that the amount of the income payment will not be affected by (1)
actual mortality experience and (2) the amount of the Company's administration
expenses.
27
<PAGE>
The Contracts offered by this prospectus contain income payment tables that
provide for different benefit payments to men and women of the same age (except
in states which require unisex annuity tables). Nevertheless, in accordance
with the U.S. Supreme Court's decision in ARIZONA GOVERNING COMMITTEE V. NORRIS,
in certain employment-related situations, annuity tables that do not vary on the
basis of sex will be used.
The total income payments received may be more or less than the total
purchase payments made because (a) Variable Account income payments vary with
the investment results of the underlying Funds, and (b) Annuitants may not live
as long as, or may live longer than, expected.
The Income Plan option selected will affect the dollar amount of each
income payment. For example, if an Income Plan for a Life Income is chosen, the
income payments will be greater than income payments under an Income Plan for a
Life Income with Guaranteed Payments.
If the actual net investment experience of the Variable Account is less
than the assumed investment rate, then the dollar amount of the income payments
will decrease. The dollar amount of the income payments will stay level if the
net investment experience equals the assumed investment rate and the dollar
amount of the income payments will increase if the net investment experience
exceeds the assumed investment rate. For purposes of the Variable Account
income payments, the assumed investment rate is 3 percent. For more detailed
information as to how Variable Account income payments are determined see the
Statement of Additional Information.
FIXED AMOUNT INCOME PAYMENTS
Income payment amounts derived from any monies allocated to Sub-accounts of
the Fixed Account during the accumulation phase are fixed for the duration of
the Income Plan. The fixed amount income payment amount is calculated by
applying the portion of the Contract Value in the Fixed Account on the Payout
Start Date, adjusted by any Market Value Adjustment and less any applicable
premium tax, to the greater of the appropriate value from the income payment
table selected or such other value as we are offering at that time.
INCOME PLANS
The Income Plans include:
INCOME PLAN 1 -- LIFE INCOME WITH GUARANTEED PAYMENTS
28
<PAGE>
The Company will make payments for as long as the Annuitant lives. If the
Annuitant dies before the selected number of guaranteed payments have been made,
the Company will continue to pay the remainder of the guaranteed payments.
29
<PAGE>
INCOME PLAN 2 -- JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
The Company will make payments for as long as either the Annuitant or Joint
Annuitant, named at the time of Income Plan selection, is living. If both the
Annuitant and the Joint Annuitant die before the selected number of guaranteed
payments have been made, the Company will continue to pay the remainder of the
guaranteed payments.
INCOME PLAN 3 -- GUARANTEED NUMBER OF PAYMENTS
The Company will make payments for a specified number of months beginning
on the Payout Start Date. These payments do not depend on the Annuitant's life.
The number of months guaranteed may be from 60 to 360. The mortality and
expense risk charge will be deducted from Variable Account assets supporting
these payments even though the Company does not bear any mortality risk.
The Owner may change the Income Plan until 30 days before the Payout Start
Date. If an Income Plan is chosen which depends on the Annuitant or Joint
Annuitant's life, proof of age will be required before income payments begin.
Applicable premium taxes will be assessed.
In the event that an Income Plan is not selected, the Company will make
income payments in accordance with Income Plan 1 with Guaranteed Payments for
120 Months. At the Company's discretion, other Income Plans may be available
upon request. The Company currently uses sex-distinct annuity tables. However,
if legislation is passed by Congress or the states, the Company reserves the
right to use income payment tables which do not distinguish on the basis of sex.
Special rules and limitations may apply to certain qualified contracts.
If the Contract Value to be applied to an Income Plan is less than $2,000,
or if the monthly payments determined under the Income Plan are less than $20,
the Company may pay the Contract Value adjusted by any Market Value Adjustment
and less any applicable taxes, in a lump sum or change the payment frequency to
an interval which results in income payments of at least $20.
30
<PAGE>
DEATH BENEFITS
DISTRIBUTION UPON DEATH PAYMENT PROVISIONS
A distribution upon death may be paid to the Owner determined immediately after
the death if, prior to the Payout Start Date:
/ / any Owner dies; or
/ / the Annuitant dies and the Owner is not a natural person.
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions. Otherwise, if the Owner is a natural person, the Owner
may elect to receive a distribution upon death in one or more distributions or
periodic payments through an Income Plan.
A death benefit will be paid: 1) if the Owner elects to receive the death
benefit in a single payment distributed within 180 days of the date of death;
and 2) if the death benefit is paid as of the day the value of the death
benefit is determined. Otherwise, the settlement value will be paid. The
settlement value is the same amount that would be paid in the event of
withdrawal of the Contract Value. The Company will calculate the settlement
value at the end of the Valuation Period coinciding with the requested
distribution date for payment or on the mandatory distribution date of 5 years
after the date of death. In any event, the entire distribution upon death must
be distributed within five years after the date of death unless an Income Plan
is selected or a surviving spouse continues the Contract in accordance with the
following sections:
Payments from the Income Plan must begin within one year of the date of
death and must be payable throughout:
- the life of the Owner; or
- a period not to exceed the life expectancy of the
Owner; or
- the life of the Owner with payments guaranteed for a
period not to exceed the life expectancy of the Owner.
If the surviving spouse of the deceased Owner is the new Owner, then the
spouse may elect one of the options listed above or may continue the Contract in
the accumulation phase as if the death had not occurred. The Company will only
permit the Contract to be continued once. If the Contract is continued in the
accumulation phase, the surviving spouse may make a single withdrawal of any
amount within one year of the date of death without incurring a withdrawal
charge. However, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply.
31
<PAGE>
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest
of:
(a) the Contract Value on the date the Company determines the death
benefit; or
(b) the amount that would have been payable in the event of a full
withdrawal of the Contract Value on the date the Company determines
the death benefit; or
(c) the Contract Value on the Death Benefit Anniversary immediately
preceding the date the Company determines the death benefit adjusted
by any purchase payments, withdrawals and charges made between such
Death Benefit Anniversary and the date the Company determines the
death benefit. A Death Benefit Anniversary is every seventh Contract
Anniversary beginning with the issue date. For example, the issue
date, 7th and 14th Contract Anniversaries are the first three Death
Benefit Anniversaries. The death benefit will never be less than the
sum of all purchase payments less any amounts previously withdrawn
(including income tax withholding).
In addition to the above options, upon purchase of the Contract, the Owner
can select one of the following enhanced death benefit options:
(A) the greatest of the anniversary values as of the date we determine the
death benefit. The anniversary value is equal to the Contract Value
on a Contract Anniversary, increased by purchase payments made since
that anniversary and reduced by the amount of any partial withdrawals
since that anniversary. Anniversary values will be calculated for
each Contract Anniversary prior to the earlier of: (i) the date we
determine the death benefit, or (ii) the deceased's attained age 75 or
5 years after the date the Contract was established, if later; or
(B) total purchase payments minus the sum of all partial withdrawals.
Each purchase payment and each partial withdrawal will accumulate
daily at rate equivalent to 5% per year until the earlier of: (i) the
date we determine the death benefit, or (ii) the first day of the
month following the deceased's 75th birthday or 5 years after the
issue date, if later.
If neither option is selected by the Owner, the Contract will automatically
include option (A).
The value of the death benefit will be determined at the end of the
Valuation Period during which the Company receives a complete request for
payment of the death benefit, which includes due proof of death.
The Company will not settle any death claim until it receives due proof of
death.
32
<PAGE>
CHARGES AND OTHER DEDUCTIONS
DEDUCTIONS FROM PURCHASE PAYMENTS
No deductions are made from purchase payments. Therefore, the full amount
of every purchase payment is invested in the Investment Alternative(s).
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
You may withdraw the Contract Value at any time before the earliest of the
Payout Start Date, the death of any Owner or, if the Owner is not a natural
person, the death of the Annuitant.
There are no withdrawal charges on amounts withdrawn up to 10% of the
amount of purchase payments. Amounts withdrawn in excess of this may be subject
to a withdrawal charge. Amounts not subject to a withdrawal charge and not
withdrawn in a Contract Year are not carried over to later Contract Years.
Withdrawal charges, if applicable, will be deducted from the amount paid.
For purposes of calculating the amount of the withdrawal charge,
withdrawals are assumed to come from purchase payments first, beginning with the
oldest payment. Withdrawals made after all purchase payments have been
withdrawn, will not be subject to a withdrawal charge. For partial withdrawals,
the Contract Value will be adjusted to reflect the amount of payment received by
the Owner, any withdrawal charge, any applicable taxes and any Market Value
Adjustment.
Withdrawals in excess of the Free Withdrawal Amount will be subject to a
withdrawal charge as set forth below:
<TABLE>
<CAPTION>
COMPLETE YEARS SINCE
PURCHASE PAYMENT BEING APPLICABLE WITHDRAWAL
WITHDRAWN WAS MADE CHARGE PERCENTAGE
---------------------------------------------------------------------
<S> <C>
0 YEARS.................................... 6%
1 YEAR..................................... 6%
2 YEARS.................................... 5%
3 YEARS.................................... 5%
4 YEARS.................................... 4%
5 YEARS.................................... 4%
6 YEARS.................................... 3%
7 YEARS OR MORE............................ 0%
</TABLE>
33
<PAGE>
Withdrawal charges will be used to pay sales commissions and other
promotional or distribution expenses associated with the marketing of the
Contracts. The Company does not anticipate that the withdrawal charges will
cover all distribution expenses in connection with the Contract.
In addition, federal and state income tax may be withheld from withdrawal
amounts. Certain terminations may also be subject to a federal tax penalty.
See "Federal Tax Matters," page .
The Company reserves the right to waive the withdrawal charge with respect
to Contracts issued to employees and registered representatives of any
broker-dealer that has entered into a sales agreement with Allstate Life
Financial Services, Inc. ("ALFS") to sell the Contracts and all wholesalers and
their employees that are under agreement with ALFS to wholesale the Contract.
In addition, the Company will waive any withdrawal charge prior to the Payout
Start Date if at least 30 days after the Contract Date any Owner (or Annuitant
if the Owner is not a natural person) is first confined to a long term care
facility or hospital for at least 90 consecutive days, confinement is prescribed
by a physician and is medically necessary, and the request for a withdrawal and
adequate written proof of confinement are received by us no later than 90 days
after discharge. The withdrawal charge will also be waived on withdrawals taken
to satisfy IRS required minimum distribution rules for this Contract.
CONTRACT MAINTENANCE CHARGE
A contract maintenance charge is deducted annually from the Contract Value
to reimburse the Company for its actual costs in maintaining each Contract and
the Variable Account. The Company guarantees that the amount of this charge
will not exceed $35 per Contract Year over the life of the Contract. This
charge will be waived if the total purchase payments are $50,000 or more on a
Contract Anniversary or if all money is allocated to the Fixed Account on the
Contract Anniversary.
Maintenance costs include but are not limited to expenses incurred in
billing and collecting purchase payments; keeping records; processing death
claims, cash withdrawals, and policy changes; proxy statements; calculating
Accumulation Unit and Annuity Unit values; and issuing reports to Owners and
regulatory agencies. The Company does not expect to realize a profit from this
charge.
On each Contract Anniversary prior to the payout start date, the contract
maintenance charge will be deducted from Sub-accounts of the Variable Account in
the same proportion that the Owner's value in each bears to the total value in
all Sub-accounts of the Variable Account. After the Payout Start Date, a pro
rata share of the annual contract maintenance charge will be deducted from each
income payment. For example, 1/12 of the $35, or $2.92, will be deducted if
there are twelve income payments during the Contract Year. A full contract
maintenance charge will be deducted if the Contract is terminated on any date
other than a Contract Anniversary.
34
<PAGE>
ADMINISTRATIVE EXPENSE CHARGE
The Company will deduct an administrative expense charge which is equal, on
an annual basis, to .10% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. This charge is designed to cover actual
administrative expenses which exceed the revenues from the contract maintenance
charge. The Company does not intend to profit from this charge. The Company
believes that the administrative expense charge and contract maintenance charge
have been set at a level that will recover no more than the actual costs
associated with administering the Contracts. There is no necessary relationship
between the amount of administrative charge imposed on a given Contract and the
amount of expenses that may be attributable to that Contract.
MORTALITY AND EXPENSE RISK CHARGE
The Company will deduct a mortality and expense risk charge which is equal,
on an annual basis, to 1.35% of the daily net assets you have allocated to the
Sub-accounts of the Variable Account. The Company estimates that .95% is
attributable to the assumption of mortality risks and .40% is attributable to
the assumption of expense risks. The Company guarantees that the amount of this
charge will not increase over the life of the Contract.
The mortality risk arises from the Company's guarantee to cover all death
benefits and to make income payments in accordance with the Income Plan selected
and the Income Payment Tables.
The expense risk arises from the possibility that the contract maintenance
and administrative expense charge, both of which are guaranteed not to increase,
will be insufficient to cover actual administrative expenses.
If the mortality and expense risk charge is insufficient to cover the
Company's mortality costs and excess expenses, the Company will bear the loss.
If the charge is more than sufficient, the Company will retain the balance as
profit. The Company currently expects a profit from this charge. Any such
profit, as well as any other profit realized by the Company and held in its
general account (which supports insurance and annuity obligations), would be
available for any proper corporate purpose, including, but not limited to,
payment of distribution expenses.
TAXES
The Company will deduct applicable state premium taxes or other similar
policyholder taxes relative to the Contract (collectively referred to as
"premium taxes") either at the Payout Start
35
<PAGE>
Date, or when a total withdrawal occurs. Current premium tax rates range from 0
to 3.5%. The Company reserves the right to deduct premium taxes from the
purchase payments.
At the Payout Start Date, the charge for premium taxes will be deducted
from each Investment Alternative in the proportion that the Owner's value in the
Investment Alternative bears to the total Contract Value.
TRANSFER CHARGES
The Company reserves the right to assess a $10 charge on each transfer in
excess of twelve per Contract Year, excluding transfers through Dollar Cost
Averaging and Automatic Fund Rebalancing. The Company is presently waiving this
charge.
FUND EXPENSES
A complete description of the expenses and deductions from the Funds is
found in the prospectus for the Fund Series. This prospectus is accompanied by
the prospectus for the Fund Series.
GENERAL MATTERS
OWNER
The Owner has the sole right to exercise all rights and privileges under
the Contract, except as otherwise provided in the Contract. The Contract cannot
be jointly owned by both a non-natural person and a natural person.
BENEFICIARY
Subject to the terms of any irrevocable Beneficiary designation, the Owner
may change the Beneficiary at any time by notifying the Company in writing. Any
change will be effective at the time it is signed by the Owner, whether or not
the Annuitant is living when the change is received by the Company. The Company
will not, however, be liable as to any payment or settlement made prior to
receiving the written notice.
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Unless otherwise provided in the Beneficiary designation, if a Beneficiary
predeceases the Owner and there are no other surviving beneficiaries, the new
Beneficiary will be: the Owner's spouse if living; otherwise, the Owner's
children, equally, if living; otherwise, the Owner's estate. Multiple
Beneficiaries may be named. Unless otherwise provided in the Beneficiary
designation, if more than one Beneficiary survives the Owner, the surviving
Beneficiaries will share equally in any amounts due.
ASSIGNMENTS
The Company will not honor an assignment of an interest in a Contract as
collateral or security for a loan. Otherwise, the Owner may assign benefits
under the Contract prior to the Payout Start Date. No Beneficiary may assign
benefits under the Contract until they are due. No assignment will bind the
Company unless it is signed by the Owner and filed with the Company. The
Company is not responsible for the validity of an assignment. Federal law
prohibits or restricts the assignment of benefits under many types of retirement
plans and the terms of such plans may themselves contain restrictions on
assignments.
DELAY OF PAYMENTS
Payment of any amounts due from the Variable Account under the Contract
will occur within seven days, unless:
1. The New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted;
2. An emergency exists as defined by the Securities and Exchange
Commission; or
3. The Securities and Exchange Commission permits delay for the protection
of the Owners.
Payments or transfers from the Fixed Account may be delayed for up to 6
months.
MODIFICATION
The Company may not modify the Contract without the consent of the Owner
except to make the Contract meet the requirements of the Investment Company Act
of 1940, or to make the Contract comply with any changes in the Internal Revenue
Code or to make any changes required by the Code or by any other applicable law.
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CUSTOMER INQUIRIES
The Owner or any persons interested in the Contract may make inquiries
regarding the Contract by calling or writing your representative or the Company
at:
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
1-800/776-6978
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE
COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
TAX DEFERRAL
Generally, an annuity contract owner is not taxed on increases in the
Contract Value until a distribution occurs. This rule applies only where (1)
the owner is a natural person, (2) the investments of the Variable Account
are "adequately diversified" in accordance with Treasury Department
Regulations, and (3) the issuing insurance company, instead of the annuity
owner, is considered the owner for federal income tax purposes of any
separate account assets funding the contract.
NON-NATURAL OWNERS
As a general rule, annuity contracts owned by non-natural persons such as
corporations, trusts, or other entities are not treated as annuity contracts for
federal income tax purposes and the income on such contracts is taxed as
ordinary income received or accrued by the owner during the taxable year. There
are several exceptions to the general rule for contracts owned by non-natural
persons which are discussed in the Statement of Additional Information.
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DIVERSIFICATION REQUIREMENTS
For a Contract to be treated as an annuity for federal income tax purposes,
the investments in the Variable Account must be "adequately diversified" in
accordance with the standards provided in the Treasury regulations. If the
investments in the Variable Account are not adequately diversified, then the
Contract will not be treated as an annuity contract for federal income tax
purposes and the Owner will be taxed on the excess of the Contract Value over
the investment in the Contract. Although the Company does not have control over
the Funds or their investments, the Company expects the Funds to meet the
diversification requirements.
OWNERSHIP TREATMENT
In connection with the issuance of the regulations on the adequate
diversification standards, the Department of the Treasury announced that the
regulations do not provide guidance concerning the extent to which contract
owners may direct their investments among Sub-accounts of a variable account.
The Internal Revenue Service has previously stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the owner possesses incidents of ownership in those assets such as the
ability to exercise investment control over the assets. At the time the
diversification regulations were issued, Treasury announced that guidance would
be issued in the future regarding the extent that owners could direct their
investments among Sub-accounts without being treated as owners of the underlying
assets of the Variable Account. As of the date of this prospectus, no such
guidance has been issued.
The ownership rights under this contract are similar to, but different in
certain respects from, those described by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the owner of this contract has the choice of more investment options to
which to allocate premiums and contract values, and may be able to transfer
among investment options more frequently than in such rulings. These
differences could result in the contract owner being treated as the owner of the
assets of the Variable Account. In those circumstances, income and gains from
the Variable Account assets would be includible in the Contract Owners' gross
income. In addition, the Company does not know what standards will be set forth
in the regulations or rulings which the Treasury Department has stated it
expects to issue. It is possible that Treasury's position, when announced, may
adversely affect the tax treatment of existing contracts. The Company,
therefore, reserves the right to modify the Contract as necessary to attempt to
prevent the Owner from being considered the federal tax owner of the assets of
the Variable Account. However, the Company makes no guarantee that such
modification to the contract will be successful.
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DELAYED MATURITY DATES
If the contract's scheduled maturity date is at a time when the annuitant
has reached an advanced age, e.g., past age 85, it is possible that the contract
would not be treated as an annuity. In that event, the income and gains under
the contract could be currently includible in the owner's income.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value before the withdrawal
exceeds the investment in the contract. The investment in the contract is the
gross premium or other consideration paid for the contract reduced by any
amounts previously received from the contract to the extent such amounts were
properly excluded from the owner's gross income. In the case of a partial
withdrawal under a qualified contract, the portion of the payment that bears the
same ratio to the total payment that the investment in the contract (i.e.,
nondeductible IRA contributions, after tax contributions to qualified plans)
bears to the contract value, can be excluded from income. In the case of a full
withdrawal under a non-qualified contract or a qualified contract, the amount
received will be taxable only to the extent it exceeds the investment in the
contract. If an individual transfers an annuity contract without full and
adequate consideration to a person other than the individual's spouse (or to a
former spouse incident to a divorce), the owner will be taxed on the difference
between the contract value and the investment in the contract at the time of
transfer. Other than in the case of certain qualified contracts, any amount
received as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) of the contract value is treated as a withdrawal of such
amount or portion. The contract provides a death benefit that in certain
circumstances may exceed the greater of the payments and the contract value. As
described elsewhere in the prospectus, the Company imposes certain charges with
respect to the death benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial withdrawal from the
contract.
TAXATION OF ANNUITY PAYMENTS
Generally, the rule for income taxation of payments received from an
annuity contract provides for the return of the owner's investment in the
contract in equal tax-free amounts over the payment period. The balance of each
payment received is taxable. In the case of variable annuity payments, the
amount excluded from taxable income is determined by dividing the investment in
the contract by the total number of expected payments. In the case of fixed
annuity payments, the amount excluded from income is determined by multiplying
the payment by the ratio of the investment in the contract (adjusted for any
refund feature or period certain) to the total expected value of annuity
payments for the term of the contract. Once the total amount of the investment
in the contract is excluded using these ratios, the annuity payments will be
fully taxable. If annuity payments cease because of the death of the annuitant
before the total amount of the investment in the contract is recovered, the
unrecovered amount generally will be allowed as a deduction to the annuitant for
his last taxable year.
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TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of
an owner or annuitant. Generally, such amounts are includible in income as
follows: (1) if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal or (2) if distributed under an annuity option, the
amounts are taxed in the same manner as an annuity payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature
distribution from a non-qualified annuity contract. The penalty tax generally
applies to any distribution made prior to the owner attaining age 59 1/2.
However, there should be no penalty tax on distributions to owners (1) made on
or after the owner attains age 59 1/2; (2) made as a result of the owner's
death or disability; (3) made in substantially equal periodic payments over life
or life expectancy; or (4) made under an immediate annuity. Similar rules apply
for distributions under certain qualified contracts; or (5) attributable to an
investment in the contract before August 14, 1982. A competent tax advisor
should be consulted to determine if any other exceptions to the penalty apply to
your specific circumstances.
AGGREGATION OF ANNUITY CONTRACTS
All non-qualified deferred annuity contracts issued by the Company (or its
affiliates) to the same owner during any calendar year will be aggregated and
treated as one annuity contract for purposes of determining the taxable amount
of a distribution.
TAX QUALIFIED CONTRACTS
Annuity contracts may be used as investments with certain tax qualified
plans such as: (1) Individual Retirement Annuities under Section 408(b) of the
Code; (2) Simplified Employee Pension Plans under Section 408(k) of the Code;
(3) Tax Sheltered Annuities under Section 403(b) of the Code; (4) Corporate and
Self Employed Pension and Profit Sharing Plans; and (5) State and Local
Government and Tax-Exempt Organization Deferred Compensation Plans. In the case
of certain tax qualified plans, the terms of the plans may govern the right to
benefits, regardless of the terms of the contract.
RESTRICTIONS UNDER SECTION 403(b) PLANS
Section 403(b) of the Code provides for tax-deferred retirement savings
plans for employees of certain non-profit and educational organizations. In
accordance with the requirements of Section 403(b), any annuity contract used
for a 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
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reduction contributions, may be made only after the employee attains age 59
1/2, separates from service, dies, becomes disabled or on account of hardship
(earnings on salary reduction contributions may not be distributed on the
account of hardship). These limitations do not apply to withdrawals where the
Company is directed to transfer some or all of the contract value to another
Section 403(b) plans.
INCOME TAX WITHHOLDING
The Company is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless an individual elects to make a
"direct rollover" of such amounts to another qualified plan or Individual
Retirement Account or Annuity (IRA). Eligible rollover distributions generally
include all distributions from qualified contracts, excluding IRAs, with the
exception of (1) required minimum distributions, or (2) a series of
substantially equal periodic payments made over a period of at least 10 years,
or the life (joint lives) of the participant (and beneficiary). For any
distributions from non-qualified annuity contracts, or distributions from
qualified contracts which are not considered eligible rollover distributions,
the Company may be required to withhold federal and state income taxes unless
the recipient elects not to have taxes withheld and properly notifies the
Company of such election.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook Illinois, a wholly owned subsidiary of Allstate Life, acts as the
principal underwriter of the Contracts. ALFS is registered as a broker-dealer
under the Securities Exchange Act of 1934 and became a member of the National
Association of Securities Dealers, Inc. on June 30, 1993. Contracts are sold by
registered representatives of broker-dealers or bank employees who are licensed
insurance agents appointed by the Company, either individually or through an
incorporated insurance agency. In some states, Contracts may be sold by
representatives or employees of banks which may be acting as broker-dealers
without separate registration under the Securities Exchange Act of 1934,
pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed
6.75% of any purchase payment. In addition, under certain circumstances,
certain sellers of the Contracts may be paid persistency bonuses which will take
into account, among other things, the length of time purchase payments have been
held under a Contract, and Contract Values. A persistency bonus is not expected
to exceed 1.20%, on an annual basis, of the Contract Values considered in
connection with the bonus. These commissions are intended to cover distribution
expenses.
The underwriting agreement with ALFS provides for indemnification of ALFS
by the Company for liability to Owners arising out of services rendered or
Contracts issued.
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VOTING RIGHTS
The Owner or anyone with a voting interest in the Sub-account of the
Variable Account may instruct the Company on how to vote at shareholder meetings
of the Fund Series. The Company will solicit and cast each vote according to the
procedures set up by the Fund Series and to the extent required by law. The
Company reserves the right to vote the eligible shares in its own right, if
subsequently permitted by the Investment Company Act of 1940, its regulations or
interpretations thereof.
Fund shares as to which no timely instructions are received will be voted
in proportion to the voting instructions which are received with respect to all
Contracts participating in that Sub-account. Voting instructions to abstain on
any item to be voted upon will be applied on a pro-rata basis to reduce the
votes eligible to be cast.
Before the Payout Start Date, the Owner holds the voting interest in the
Sub-account of the Variable Account (The number of votes for the Owner will be
determined by dividing the Contract Value attributable to a Sub-account by the
net asset value per share of the applicable eligible Fund.)
After the Payout Start Date, the person receiving income payments has the
voting interest. After the Payout Start Date, the votes decrease as income
payments are made and as the reserves for the Contract decrease. That person's
number of votes will be determined by dividing the reserve for such Contract
allocated to the applicable Sub-account by the net asset value per share of the
corresponding eligible Fund.
SELECTED FINANCIAL DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
Prospectus beginning on page .
GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
Year-End Financial Data 1994 1993 1992*
- - ----------------------- -------- -------- -------
<S> <C> <C> <C>
For The Years Ended December 31:
Income Before Taxes. . . . . . . . . . $ 2,017 $ 836 $ 337
Net Income . . . . . . . . . . . . . 1,294 529 212
As of December 31:
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Total Assets(1). . . . . . . . . . . . 751,680 169,361 12,183
</TABLE>
(1)The Company adopted SFAS No. 115, "Accounting for Certain Instruments in
Debt and Equity Securities" on December 31, 1993. See Note 3 to the Financial
Statements.
* For the period from April 1, 1992 (date of acquisition) to December 31,
1992.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
AND FOR THE PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
GENERAL
Glenbrook Life and Annuity Company (the "Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"), which is wholly owned by
Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation (the "Corporation"). In November 1994, Sears, Roebuck and Co.
("Sears") announced it intended to distribute in a tax-free dividend to its
stockholders its 80.3% ownership interest of the Corporation.
The Company issues single and flexible premium fixed annuity contracts. In
addition the Company issues flexible premium deferred variable annuity
contracts.
Effective December 31, 1993, the Company entered into an assumption
reinsurance treaty with an affiliate, Glenbrook Life Insurance Company, to
reinsure certain annuity contracts. Per the terms of the agreement, the Company
assumed all of Glenbrook Life Insurance Company's liability under such
contracts.
The Company reinsures all of its insurance in force, including the business
assumed from Glenbrook Life Insurance Company, with Allstate Life. Accordingly,
the results of operations with respect to applications received and contracts
issued by the Company are not reflected in the Company's financial statements.
The amounts reflected in the Company's financial statements relate only to the
investment of those assets of the Company that are not transferred to Allstate
Life under the reinsurance agreement.
RESULTS OF OPERATIONS
Net investment income was $2.0 million in 1994 compared with $836 thousand
and $405 thousand in 1993 and 1992, respectively. Invested assets grew $38.5
million in 1994 due entirely to a capital contribution from Allstate Life during
the third quarter of 1994.
Net income was $1.3 million compared to $529 thousand in 1993 and $212
thousand in 1992. The increase in 1994 is due to the increase in investment
income.
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LIQUIDITY AND CAPITAL RESOURCES
Under the terms of intercompany reinsurance agreements, assets of the
Company that relate to insurance in-force are transferred to Allstate Life.
Therefore, the funds necessary to support the operations of the Company are
generally provided by Allstate Life and the invested assets supporting contract
liabilities are held by Allstate Life.
During the third quarter of 1994, the Company received a capital
contribution of $39 million from Allstate Life.
SEGMENT INFORMATION
The Company's operations consist of one business segment which is the
issuance of insurance and annuity products.
RESERVES
Under the Company's reinsurance agreement with Allstate Life, the Company
reinsures all reserve liabilities with Allstate Life except for the variable
portion of variable contracts. The Company's variable contract assets and
liabilities are held in legally segregated unitized separate accounts and are
retained by the Company. The transactions related to guaranteed benefits under
the variable contracts are transferred to Allstate Life.
INVESTMENTS
The Company generally holds its fixed income securities for the long term,
but has classified them as "available for sale" and carries them in the
statement of financial position at fair value, to allow maximum flexibility in
portfolio management.
PENDING ACCOUNTING STANDARDS
In May, 1993, the Financial Accounting Standards Board ("FASB") issued FASB
No. 114, "Accounting by Creditors for Impairment of a Loan." The statement,
which must be adopted by 1995, requires that impairment loans be measured based
on the present value of expected future cash flows discounted at the loan's
effective interest rate. The impact on net income and financial condition of
adopting this statement is not expected to be significant.
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GLENBROOK LIFE AND ANNUITY COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995
GENERAL
Glenbrook Life and Annuity Company ("the Company") is wholly owned by
Allstate Life Insurance Company ("Allstate Life"). Allstate Life is wholly-
owned by Allstate Insurance Company, a wholly-owned subsidiary of The Allstate
Corporation ("the Corporation"). Sears, Roebuck and Co. distributed its 80.3%
ownership in the Corporation on June 30, 1995 to Sears common shareholders
through a tax-free dividend. As a result of the distribution, Sears no longer
has an ownership interest in the Corporation.
The Company issues single and flexible premium annuity contracts and
flexible premium deferred variable annuity contracts.
The Company reinsures all of its insurance in force with Allstate Life.
Accordingly, the results of operations with respect to applications received and
contracts issued by the Company are not reflected in the Company's Statements of
Income.
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Pre-tax net investment income in the third quarter of 1995 increased 72.1%
to $1.0 million compared to $581 thousand for the same period in 1994. For the
first nine months of 1995, pre-tax net investment income increased to $3.0
million compared to $1.0 million in the prior year. The increases were related
to an increased level of invested assets which resulted from a $39 million
capital contribution from Allstate Life during the third quarter of 1994. Net
income reflects the changes in pre-tax investment income.
The Statement of Financial Position at September 30, 1995 reflects an
increase of 68.6% from December 31, 1994 in both contractholder funds and
amounts recoverable from Allstate Life Insurance Company under reinsurance
treaties. These increases are due to sales of the Company's single and flexible
premium annuity contracts. Unrealized net capital gains (losses) increased $3.3
million to an unrealized net capital gain of $2.2 million, as compared to an
unrealized net capital loss of $1.1 million at December 31, 1994. Fluctuations
in unrealized gains (losses) are largely a function of overall market
conditions. Current year increases are the result of an overall lower interest
rate environment as compared to December 31, 1994.
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LIQUIDITY AND CAPITAL RESOURCES
Under the terms of the reinsurance agreements, assets of the Company that
relate to insurance inforce are transferred to Allstate Life. Therefore, the
funds necessary to support the operations of the Company are provided by
Allstate Life, and the Company is not required to obtain additional capital to
support inforce or future business.
PENDING ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of". The statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The statement requires that
impairment loss be measured for those assets as the amount by which the
carrying amount of the asset exceeds the asset's fair value. This statement
will be adopted in 1996 and is not expected to have a material impact on the
Company's results of operations or financial position.
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" which encourages entities to adopt a fair value based method of
accounting for compensation cost of employee stock compensation plans. The
statement allows an entity to continue the application of accounting prescribed
by APB Opinion No. 25, "Accounting for Stock Issued to Employees", however pro
forma disclosures of net income and earnings per share, as if the fair value
based method of accounting defined by this statement had been applied, are
required. The disclosure requirements of this statement will be adopted in
1996. Results of operations and financial position will not be affected by the
adoption of this statement.
COMPETITION
The Company is engaged in a business that is highly competitive because of
the large number of stock and mutual life insurance companies and other entities
competing in the sale of insurance and annuities. There are approximately 2,000
stock, mutual and other types of insurers in business in the United States.
Several independent rating agencies regularly evaluate life insurer's claims-
paying ability, quality of investments and overall stability. A.M. Best Company
assigns A+ (Superior) to Allstate Life which automatically reinsures all net
business of the Company. A.M. Best Company also assigns the Company the rating
of A+(r) because the Company automatically reinsures all business with Allstate
Life. Standard & Poor's Insurance
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Rating Services assigns AA+ (Excellent) to Glenbrook Life's claims-paying
ability and Moody's assigns an Aa3 (Excellent) financial stability rating to
Glenbrook Life. These ratings do not relate to the investment performance of
the Variable Account.
EMPLOYEES
As of December 31, 1994, Allstate Life has approximately 31 employees at
its home office in Northbrook, Illinois who work primarily on the Company's
matters.
PROPERTIES
The Company occupies office space provided by its parent, Allstate Life, in
Northbrook, Illinois. Expenses associated with these offices are allocated on a
direct and indirect basis to the Company.
STATE AND FEDERAL REGULATION
The insurance business of the Company is subject to comprehensive and
detailed regulation and supervision throughout the United States. The laws of
the various jurisdictions establish supervisory agencies with broad
administrative powers with respect to licensing to transact business, overseeing
trade practices, licensing agents, approving policy forms, establishing reserve
requirements, fixing maximum interest rates on life insurance policy loans and
minimum rates for accumulation of surrender values, prescribing the form and
content of required financial statements and regulating the type and amounts of
investments permitted. Each insurance company is required to file detailed
annual reports with supervisory agencies in each of the jurisdictions in which
it does business and its operations and accounts are subject to examination by
such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses
incurred as a result of company insolvencies. The amount of any future
assessments on the Company under these laws cannot be reasonably estimated. Most
of these laws do provide, however, that an assessment may be excused or deferred
if it would threaten an insurer's own financial strength.
In addition, several states, including Illinois, regulate affiliated groups
of insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies.
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Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit regulation,
controls on medical care costs, removal of barriers preventing banks from
engaging in the securities and insurance business, tax law changes affecting the
taxation of insurance companies, the tax treatment of insurance products and its
impact on the relative desirability of various personal investment vehicles, and
proposed legislation to prohibit the use of gender in determining insurance and
pension rates and benefits.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
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LOUIS G. LOWER, II, 50, Chief Executive Officer (1995)* and Chairman of the
Board (1992)*
He is also President and Chairman of the Board of Directors of Allstate
Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life
Insurance Company, The Northbrook Corporation and Allstate Life Insurance
Company of New York; Chairman of the Board of Directors and Chief Executive
Officer of Surety Life Insurance Company and Lincoln Benefit Life Company;
Chairman of the Board of Directors of Allstate Settlement Corporation; Director
and Senior Vice President of Allstate Insurance Company; Vice President of the
Allstate Foundation; and Director of Allstate Life Financial Services, Inc.,
Allstate Indemnity Company, Allstate Property and Casualty Insurance Company,
Deerbrook Insurance Company, Northbrook Indemnity Company, Northbrook National
Insurance Company, Northbrook Property and Casualty Insurance Company, Allstate
International, Inc. and Saison Life Insurance Company, Ltd. Prior to 1990, he
was Executive Vice President of Allstate Life Insurance Company. From 1992 to
1995, in addition to his position as Chairman of the Board, he was
also President of the Company.
MARLA G. FRIEDMAN, 41, President, Chief Operating Officer (1995)* and Director
(1992)*
She is also Vice President and Director of Allstate Life Insurance Company,
Northbrook Life Insurance Company, Glenbrook Life Insurance Company and The
Northbrook Corporation; and Director of Allstate Settlement Corporation and
Allstate Life Financial Services, Inc. Prior to 1995, she was Vice President
and Director of Glenbrook Life and Annuity Company and prior to 1992, she was
Vice President and Director of Allstate Life Insurance Company and Northbrook
Life Insurance Company. Prior to 1995, she was also Vice President of the
Company.
MICHAEL J. VELOTTA, 50, Vice President, Secretary, General Counsel, and Director
(1993)*
He is also Vice President, Secretary, General Counsel and Director of
Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook
Life Insurance Company and Allstate Life Insurance Company of New York;
Secretary and Director of Allstate Settlement Corporation, Allstate Life
Financial Services, Inc. and The Northbrook Corporation; and Director of Surety
Life Insurance Company and Lincoln Benefit Life Company. Prior to 1993, he was
Vice President and Assistant General Counsel of Allstate Insurance Company.
PETER H. HECKMAN, 49, Vice President and Director (1992)*
He is also Vice President and Director of Allstate Life Insurance Company,
Northbrook Life Insurance Company, Glenbrook Life Insurance Company, Allstate
Settlement Corporation and Allstate Life Insurance Company of New York; Vice
President and Controller of The Northbrook Corporation; and Director of Surety
Life Insurance Company and Lincoln Benefit Life Company. Prior to 1992, he was
Vice President and Director of Allstate Life Insurance
51
<PAGE>
Company, Northbrook Life Insurance Company, Glenbrook Life Insurance Company and
Allstate Life Insurance Company of New York.
G. CRAIG WHITEHEAD, 49, Senior Vice President (1992)* and Director (1995)*
He is also Assistant Vice President and Director of Glenbrook Life
Insurance Company and Assistant Vice President of Allstate Life Insurance
Company. Prior to 1992, he was an Assistant Vice President of Glenbrook Life
Insurance Company and Allstate Life Insurance Company and prior to 1991, he was
a director in the strategic planning area of Allstate Insurance Company.
BARRY S. PAUL, 40, Assistant Vice President and Controller (1992)*
He is also Assistant Vice President and Controller of Allstate Life
Insurance Company, Northbrook Life Insurance Company, Allstate Life Insurance
Company of New York and Glenbrook Life Insurance Company. Prior to 1991, he was
Assistant Vice President of Allstate Life Insurance Company, Northbrook Life
Insurance Company and Allstate Life Insurance Company of New York.
* Date elected/appointed to current office.
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life
and receive no compensation directly from the Company. Some of the officers also
serve as officers of other companies affiliated with the Company. Allocations
have been made as to each individual's time devoted to his or her duties as an
executive officer of the Company. However, no officer's compensation allocated
to the Company exceeded $100,000 in 1994. The allocated cash compensation of all
officers of the Company as a group for services rendered in all capacities to
the Company during 1994 totaled $9,216.31. Directors of the Company receive no
compensation in addition to their compensation as employees of the Company.
52
<PAGE>
SUMMARY COMPENSATION TABLE
(Allstate Life Insurance Co.)
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------ -----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual Restricted Underlying LTIP All Other
Compensation Stock Options/ Payouts Compensation
Name and Principal Position Year Salary($) Bonus($) $ Award(s) SARs(#) ($) ($)
- - ------------------------------ ---- -------- -------- -------- -------- ------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II . . . . . . 1994 $389,050 $ 26,950 $ 25,889 $170,660 N/A 0 $ 1,890(1)
President and Chairman 1993 $374,200 $294,683 $ 52,443 $318,625 N/A $ 13,451 $ 6,296(1)
of the Board of Directors 1992 $356,625 0 $ 11,981 $206,388 N/A $ 173,561 $ 2,095(1)
</TABLE>
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing Fund of
Sears employees.
Shares of the Company and Allstate Life are not directly owned by any
director or officer of the Company. The percentage of shares of The Allstate
Corporation beneficially owned by any director, and by all directors and
officers of the Company as a group, does not exceed one percent of the class
outstanding.
LEGAL PROCEEDINGS
From time to time the Company is involved in pending and threatened
litigation in the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal counsel, does
not anticipate the ultimate liability arising from such pending or threatened
litigation to have a material effect on the financial condition of the Company.
EXPERTS
The financial statements and financial statement schedule of the Company
included in this prospectus have been audited by Deloitte & Touche LLP, Two
Prudential Plaza, 180 North Stetson Avenue, Chicago, Illinois, 60601-6779
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
53
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the federal securities laws applicable to
the issue and sale of the Contracts have been passed upon by Routier and
Johnson, P.C., of Washington, D.C. All matters of Illinois law pertaining to the
Contracts, including the validity of the Contracts and the Company's right to
issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of the Company.
54
<PAGE>
34
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER
OF GLENBROOK LIFE AND ANNUITY COMPANY:
We have audited the accompanying Statements of Financial Position of Glenbrook
Life and Annuity Company (an affiliate of Sears, Roebuck and Co.) as of December
31, 1994 and 1993, and the related Statements of Income, Shareholder's Equity
and Cash Flows for the years ended December 31, 1994 and 1993 and for the period
from April 1, 1992 (date of acquisition) to December 31, 1992. Our audits also
included Schedule IV -- Reinsurance for the years ended December 31, 1994 and
1993 and for the period from April 1, 1992 to December 31, 1992. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule 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, such financial statements present fairly, in all material
respects, the financial position of Glenbrook Life and Annuity Company as of
December 31, 1994 and 1993 and the results of its operations and its cash flows
for the years ended December 31, 1994, 1993, and for the period from April 1,
1992 (date of acquisition) to December 31, 1992 in conformity with generally
accepted accounting principles. Also in our opinion, Schedule IV -- Reinsurance,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in Note 3 to the financial statements, in 1993 the Company changed
its method of accounting for investments in debt securities.
/s/ Deloitte & Touche LLP
April 1, 1995
<PAGE>
35
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
Assets
Investments
Fixed income securities:
Available for sale, at fair value (amortized cost $51,527 and $9,543)............... $ 49,807 $ 10,609
Short-term............................................................................ 924 1,591
---------- ----------
Total investments................................................................. 50,731 12,200
Reinsurance recoverable from Allstate Life Insurance Company............................ 696,854 154,799
Cash.................................................................................... 299
Net receivable from affiliates.......................................................... 88 41
Other................................................................................... 4,007 2,022
---------- ----------
Total assets...................................................................... $ 751,680 $ 169,361
---------- ----------
---------- ----------
Liabilities
Contractholder funds.................................................................... $ 696,854 $ 154,799
Income taxes payable.................................................................... 63 574
Other liabilities and accrued expenses.................................................. 2,105 813
---------- ----------
Total liabilities................................................................. 699,022 156,186
---------- ----------
Commitments and contingencies
Shareholder's equity
Common stock ($500 par, 42,000 shares authorized, issued, and outstanding).............. 2,100 2,100
Additional capital paid-in.............................................................. 49,641 9,641
Unrealized net capital (losses) gains................................................... (1,118) 693
Retained income......................................................................... 2,035 741
---------- ----------
Total shareholder's equity........................................................ 52,658 13,175
---------- ----------
Total liabilities and shareholder's equity........................................ $ 751,680 $ 169,361
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
36
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1 TO
-------------------- DECEMBER 31,
1994 1993 1992
--------- --------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Investment income, less investment expense.................. $ 2,017 $ 753 $ 405
Realized capital gains and losses........................... 83
--------- --------- -----
2,017 836 405
Expenses
Operating expenses.......................................... 68
--------- --------- -----
Income before income taxes.................................... 2,017 836 337
Income tax expense............................................ 723 307 125
--------- --------- -----
Net income.................................................... $ 1,294 $ 529 $ 212
--------- --------- -----
--------- --------- -----
</TABLE>
See notes to financial statements.
<PAGE>
37
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL NET CAPITAL
COMMON CAPITAL GAINS RETAINED
STOCK PAID-IN (LOSSES) INCOME TOTAL
----------- ----------- ----------- ----------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance, at April 1, 1992 (date of acquisition).......... $ 2,100 $ 3,641 $ -- $ -- $ 5,741
Net income............................................. 212 212
Capital contribution................................... 6,000 6,000
Change in unrealized net capital gains and losses...... (10) (10)
----------- ----------- ----------- ----------- ---------
Balance, December 31, 1992............................... 2,100 9,641 (10) 212 11,943
Net income............................................. 529 529
Change in unrealized net capital gains and losses...... 703 703
----------- ----------- ----------- ----------- ---------
Balance, December 31, 1993............................... 2,100 9,641 693 741 13,175
Net income............................................. 1,294 1,294
Capital contribution................................... 40,000 40,000
Change in unrealized net capital gains and losses...... (1,811) (1,811)
----------- ----------- ----------- ----------- ---------
Balance, December 31, 1994............................... $ 2,100 $ 49,641 $ (1,118) $ 2,035 $ 52,658
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
</TABLE>
See notes to financial statements.
<PAGE>
38
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1 TO
--------------------- DECEMBER 31,
1994 1993 1992
---------- --------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................................. $ 1,294 $ 529 $ 212
Adjustments to reconcile net income to net cash from operating activities:
Amortization............................................................. 97 58 45
Realized capital gains................................................... (83)
Changes in other operating assets and liabilities........................ (277) 598 (90)
---------- --------- ------------
Net cash from operating activities..................................... 1,114 1,102 167
---------- --------- ------------
Cash flows from investing activities:
Fixed income securities available for sale:
Proceeds from sales...................................................... 3,015
Investment collections................................................... 649 969 403
Investment purchases..................................................... (42,729) (3,737) (6,996)
Net change in short-term investments....................................... 667 (1,102) (489)
---------- --------- ------------
Net cash from investing activities..................................... (41,413) (855) (7,082)
---------- --------- ------------
Cash flows from financing activities:
Capital contribution....................................................... 40,000 -- 6,000
---------- --------- ------------
Net cash from financing activities..................................... 40,000 -- 6,000
---------- --------- ------------
Net (decrease) increase in cash.............................................. (299) 247 (915)
Cash at date of acquisition.................................................. 967
Cash at beginning of period.................................................. 299 52
---------- --------- ------------
Cash at end of period........................................................ $ 0 $ 299 $ 52
---------- --------- ------------
---------- --------- ------------
</TABLE>
See notes to financial statements.
<PAGE>
39
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
1. BASIS OF PRESENTATION
Glenbrook Life and Annuity Company (the "Company") is wholly owned by Allstate
Life Insurance Company ("Allstate Life"), which is wholly owned by Allstate
Insurance Company ("Allstate"), a wholly-owned subsidiary of The Allstate
Corporation (the "Corporation"). In November 1994, Sears, Roebuck and Co.
("Sears") announced it intends to distribute in a tax-free dividend to its
stockholders its 80.2% ownership interest of the Corporation (the
"Distribution"). The Distribution is expected to occur in mid-1995, but is
subject to market conditions, final approval by the Sears Board of Directors,
any required regulatory approvals and a favorable tax ruling or legal opinion on
the tax-free nature of the Distribution.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. Fixed
income securities which may be sold prior to their contractual maturity
("available for sale") are carried at fair value. The difference between
amortized cost and fair value, net of deferred income taxes, is reflected as a
separate component of shareholder's equity. Provisions are made to write down
the carrying value of fixed income securities for declines in value that are
other than temporary.
Short-term investments are carried at cost which approximates fair value.
Investment income consists primarily of interest, which is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method based on the anticipated repayment of principal.
Realized capital gains and losses are determined on a specific identification
basis.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities and the enacted tax
rates. Deferred income taxes also arise from unrealized capital gains or losses
on fixed income securities carried at fair value.
LIFE INSURANCE ACCOUNTING
The Company sells long-duration contracts that do not involve significant risk
of policyholder mortality or morbidity (principally single and flexible premium
annuities) which are considered investment contracts.
INVESTMENT CONTRACTS
Payments received under investment contracts are recorded as interest bearing
liabilities.
CONTRACTHOLDER FUNDS
Contractholder funds are reserves for investment contracts, which are equal to
the account balance that accrues to the benefit of the contractholder. Credited
interest rates on contractholder funds ranged from 3.0% to 7.45% for those
contracts with fixed interest rates and from 4.25% to 8.1% for those with
flexible rates during 1994.
3. ACCOUNTING CHANGES
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." SFAS No. 115 requires that investments classified
as available for sale be carried at fair value. Previously, fixed income
securities classified as available for sale were carried at the lower of
amortized cost or fair value, determined in the aggregate. Unrealized holding
gains and losses are reflected as a separate component of shareholder's equity,
net of deferred income taxes. The net effect of adoption of this statement
increased shareholder's equity at December 31, 1993 by $693, with no impact on
net income.
<PAGE>
40
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS
BUSINESS OPERATIONS AND REINSURANCE
The Company utilizes services and business facilities owned or leased, and
operated by Allstate in conducting its business activities. The Company
reimburses Allstate for the operating expenses incurred by Allstate. The cost to
the Company is determined by various allocation methods and is primarily related
to the level of services provided. Investment-related expenses are retained by
the Company. All other costs, including costs of retirement and other benefit
programs, are assumed by Allstate Life under a reinsurance agreement.
The Company reinsures all of its insurance in force with Allstate Life,
including business assumed on December 31, 1993 from Glenbrook Life Insurance
Company, an affiliate. Contract charges, credited interest and the provision for
policy benefits and other insurance reserves are 100% ceded to Allstate Life and
reflected net of such cessions in the statements of income. Reinsurance
recoverable from Allstate Life under reinsurance treaty and contractholder funds
are reported separately in the statements of financial position.
Revenues ceded to Allstate Life consist of contract charges of $409 and $70 in
1994 and 1993, respectively. Benefits and expenses ceded to Allstate Life
consist of paid benefits, credited interest and operating expenses. These
benefits and expenses amounted to $26,177 and $2,162 in 1994 and 1993,
respectively.
5. INCOME TAXES
The Corporation and its domestic subsidiaries (the "Allstate Group") join with
Sears and its domestic business units (the "Sears Group") in the filing of a
consolidated federal income tax return (the "Sears Tax Group") and are parties
to a federal income tax allocation agreement (the "Tax Sharing Agreement"). As a
member of the Sears Tax Group, the Company is jointly and severally liable for
the consolidated income tax liability of the Sears Tax Group.
Under the Tax Sharing Agreement, the Company will pay to or receive from the
Allstate Group the amount, if any, by which the Sears Group's federal income tax
liability is affected by virtue of inclusion of the Company in the consolidated
federal income tax return. Effectively, this results in the Company's annual
income tax provision being computed as if the Company filed a separate return,
except that items such as net operating losses, capital losses, foreign tax
credits, investment tax credits or similar items which might not be immediately
recognizable in a separate return, are allocated according to the Tax Sharing
Agreement and reflected in the Company's provision to the extent that such items
reduce the Sears Tax Group's federal tax liability.
Payments under the Tax Sharing Agreement generally are to be paid on each date
on which a quarterly payment of estimated federal income tax is due, with any
final settlement made after the consolidated return is filed. When a refund is
received from the Internal Revenue Service as the result of any carryback,
payment will be made to the members of the Sears Tax Group within 15 days after
receipt of the refund.
In anticipation of the Distribution (see Note 1), the Allstate Group and Sears
Group have entered into an agreement which governs their respective rights and
obligations with respect to federal income taxes for all periods prior to the
Distribution ("Consolidated Tax Years"). The agreement provides that all
Consolidated Tax Years will continue to be governed by the Tax Sharing Agreement
with respect to the Allstate Group's federal income tax liability and taxes
payable to or recoverable from the Sears Group.
After the Distribution, the Allstate Group will no longer be included in the
Sears Tax Group. The Company does not expect the impact of separation from the
Sears Tax Group to be significant.
<PAGE>
41
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
5. INCOME TAXES (CONTINUED)
The components of the deferred income tax assets and liabilities at December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Unrealized losses on fixed income securities available for sale......................... $ 602 $ --
Other................................................................................... 4
--------- ---------
Total deferred assets................................................................. 606 --
--------- ---------
Unrealized gains on fixed income securities available for sale.......................... (373)
Amortization............................................................................ (64) (14)
Other................................................................................... (3)
--------- ---------
Total deferred liabilities............................................................ (64) (390)
--------- ---------
Net deferred asset (liability)........................................................ $ 542 $ (390)
--------- ---------
--------- ---------
</TABLE>
The Company paid income taxes of $57 in 1994 to Allstate under the Tax Sharing
Agreement. The Company had an income tax payable to Allstate of $605 and $184 at
December 31, 1994 and 1993, respectively.
The Company has not established a valuation reserve as it is more likely than
not that the Company will produce sufficient taxable income in the future to
realize the deferred tax asset.
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1, TO
-------------------- DECEMBER 31,
1994 1993 1992
--------- --------- ---------------
<S> <C> <C> <C>
Current......................................................... $ 652 $ 290 $ 67
Deferred........................................................ 71 17 58
--------- --------- -----
Income tax expense.............................................. $ 723 $ 307 $ 125
--------- --------- -----
--------- --------- -----
</TABLE>
6. INVESTMENTS
FAIR VALUES
The amortized cost, fair value and gross unrealized gains and losses for fixed
income securities, which are designated as available for sale and carried at
fair value, are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED -------------------- FAIR
AT DECEMBER 31, 1994 COST GAINS LOSSES VALUE
- - ---------------------------------------------------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C>
U.S. Government and agencies........................ $ 31,005 $ 30 $ 1,126 $ 29,909
Mortgage-backed securities.......................... 20,522 624 19,898
----------- --------- --------- ---------
Totals............................................ $ 51,527 $ 30 $ 1,750 $ 49,807
----------- --------- --------- ---------
----------- --------- --------- ---------
<CAPTION>
AT DECEMBER 31, 1993
- - ----------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government and agencies........................ $ 9,543 $ 1,066 $ -- $ 10,609
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
<PAGE>
42
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
6. INVESTMENTS (CONTINUED)
SCHEDULED MATURITIES
The scheduled maturities of fixed income securities available for sale at
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- -----------
<S> <C> <C>
Due in one year or less........................................... $ -- $ --
Due after one year through five years............................. 393 399
Due after five years through ten years............................ 21,951 21,174
Due after ten years............................................... 8,661 8,336
------- -----------
31,005 29,909
Mortgage-backed securities........................................ 20,522 19,898
------- -----------
Total........................................................... $ 51,527 $ 49,807
------- -----------
------- -----------
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities available for
sale included in shareholder's equity at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR UNREALIZED NET
COST VALUE GAINS/(LOSSES)
----------- --------- --------------
<S> <C> <C> <C>
Fixed income securities available for sale............. $ 51,527 $ 49,807 $ (1,720)
Deferred income taxes.................................. 602
-------
Total................................................ $ (1,118)
-------
-------
</TABLE>
The change in unrealized net capital gains and losses for fixed income
securities is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1, TO
-------------------- DECEMBER 31,
1994 1993 1992
--------- --------- ---------------
<S> <C> <C> <C>
Fixed income securities available for sale................. $ (2,786) $ 1,076 $ (13)
Deferred income taxes...................................... 975 (373) 3
--------- --------- ---
Change in unrealized net capital gains and losses.......... $ (1,811) $ 703 $ (10)
--------- --------- ---
--------- --------- ---
</TABLE>
<PAGE>
43
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
6. INVESTMENTS (CONTINUED)
INVESTMENT INCOME
Investment income by investment type is as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1, TO
-------------------- DECEMBER 31,
1994 1993 1992
--------- --------- ---------------
<S> <C> <C> <C>
Investment income:
Fixed income securities..................................... $ 1,984 $ 729 $ 395
Short-term.................................................. 48 35 13
--------- --------- -----
Investment income, before expense............................. 2,032 764 408
Investment expense............................................ 15 11 3
--------- --------- -----
Investment income, less investment expense.................... $ 2,017 $ 753 $ 405
--------- --------- -----
--------- --------- -----
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
Gross gains of $83 were realized on sales of fixed income securities, during
1993. No gross gains or losses were realized on such sales during 1994 and 1992.
SECURITIES ON DEPOSIT
At December 31, 1994, fixed income securities with a carrying value of $7,986
were on deposit with regulatory authorities as required by law.
7. STATUTORY FINANCIAL INFORMATION
The accompanying financial statements have been prepared on the basis of
generally accepted accounting principles which vary from statutory accounting
principles prescribed or permitted by regulatory authorities. The following
tables reconcile net income and shareholder's equity as reported herein in
conformity with generally accepted accounting principles with statutory net
income and statutory capital and surplus, determined in accordance with
principles prescribed or permitted by insurance regulatory authorities:
<PAGE>
44
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INCOME
-------------------------------------
FOR THE FOR THE
YEAR ENDED PERIOD FROM
DECEMBER 31, APRIL 1, TO
-------------------- DECEMBER 31,
1994 1993 1992
--------- --------- ---------------
<S> <C> <C> <C>
Balance per generally accepted accounting principles.............................. $ 1,294 $ 529 $ 212
Deferred income taxes........................................................... 29 8 (9)
Fixed income securities......................................................... (53) 27 26
Statutory income from January 1, 1992 to March 31, 1992......................... 123
Non-admitted assets and statutory reserves...................................... 15 (47) 31
--------- --------- -----
Balance per statutory accounting practices........................................ $ 1,285 $ 517 $ 383
--------- --------- -----
--------- --------- -----
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
DECEMBER 31,
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Balance per generally accepted accounting principles........................................ $ 52,658 $ 13,175
Deferred income taxes..................................................................... (575) 530
Fixed income securities................................................................... 1,719 (1,179)
Non-admitted assets and statutory reserves................................................ (1,635) (1,831)
--------- ---------
Balance per statutory accounting practices.................................................. $ 52,167 $ 10,695
--------- ---------
--------- ---------
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
Allstate and its life insurance subsidiaries prepare their statutory financial
statements in accordance with accounting principles and practices prescribed or
permitted by the insurance department of the applicable state of domicile.
Prescribed statutory accounting practices include a variety of publications of
the National Association of Insurance Commissioners, as well as state laws,
regulations, and general administrative rules. Permitted statutory accounting
practices encompass all accounting practices not so prescribed.
Allstate and its life insurance subsidiaries do not follow any permitted
statutory accounting practices that have a material effect on statutory surplus
or risk-based capital of any company individually or in the aggregate.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
principles, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1995 without prior approval of both the Illinois and California
Departments of Insurance is $5,217.
<PAGE>
45
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1994 AND 1993
AND PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
($ IN THOUSANDS)
8. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value of all financial
assets other than fixed income securities and all liabilities other than
contractholder funds approximates their carrying value as they are short-term in
nature.
Fair values for fixed income securities are based on quoted market prices. The
December 31, 1994 and 1993 fair values and carrying values of fixed income
securities are discussed in Note 6.
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the fund balance less surrender charge. The fair value of immediate
annuities and annuities without life contingencies with fixed terms are
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and duration. Contractholder
funds on investment contracts had a carrying value of $696,854 at December 31,
1994 and a fair value of $670,930. The carrying value and fair value at December
31, 1993 were $154,799 and $151,595, respectively.
9. COMMITMENTS AND CONTINGENCIES
The Company has no significant commitments or contingencies at December 31,
1994.
<PAGE>
46
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV -- REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
- - -----------------------------------------------------------------------------------------------------------
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
Life insurance in force.............................................................. $ 1,250 $ 1,250 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Contract charges................................................................... $ 409 $ 409 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
- - -----------------------------------------------------------------------------------------------------------
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
Life insurance in force.............................................................. $ 1,250 $ 1,250 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life............................................................................... $ 6 $ 6 $ --
Contract charges................................................................... 70 70 --
--------- --------- ---------
$ 76 $ 76 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
PERIOD FROM APRIL 1, 1992
(DATE OF ACQUISITION) TO DECEMBER 31, 1992
- - -----------------------------------------------------------------------------------------------------------
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
Life insurance in force.............................................................. $ 1,250 $ 1,250 $ --
--------- --------- ---------
--------- --------- ---------
Premiums:
Life............................................................................... $ 3 $ 3 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
47
GLENBROOK LIFE AND ANNUITY COMPANY
QUARTERLY FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIODS ENDED SEPTEMBER 30, 1995
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30, December 31,
($ in thousands) 1995 1994
(Unaudited)
<S> <C> <C>
Assets
Investments
Fixed income securities:
Available for sale, at fair value
(amortized cost $51,991 and $51,527) $ 55,397 $ 49,807
Short-term 2,282 924
Total investments 57,679 50,731
Amounts recoverable from Allstate Life
Insurance Company under reinsurance
treaties 1,175,035 696,854
Net receivable from affiliates 250 88
Other assets 2,684 4,007
Total assets $1,235,648 $ 751,680
Liabilities
Contractholder funds $1,175,035 $ 696,854
Income taxes payable 2,198 63
Other liabilities and accrued expenses 458 2,105
Total liabilities 1,177,691 699,022
Shareholder's equity
Common stock, ($500 par, 42,000 shares
authorized, issued and outstanding) 2,100 2,100
Additional capital paid-in 49,641 49,641
Unrealized net capital gains (losses) 2,214 (1,118)
Retained income 4,002 2,035
Total shareholder equity 57,957 52,658
Total liabilities and shareholder equity $1,235,648 $ 751,680
</TABLE>
See notes to financial statements.
55
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
($ in thousands) 1995 1994 1995 1994
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Investment income, less
investment expense $ 1,027 $ 581 $ 3,045 $ 1,036
Income before income taxes 1,027 581 3,045 1,036
Income tax expense 361 208 1,078 375
Net income $ 666 $ 373 $ 1,967 $ 661
</TABLE>
See notes to financial statements.
56
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
($ in thousands) 1995 1994
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,967 $ 661
Adjustments to reconcile net income to net
cash from operating activities:
Amortization (30) 106
Change in deferred income taxes (632) 146
Changes in other operating assets and
liabilities 488 (1,244)
----------- -----------
Net cash from operating activities 1,793 (331)
----------- -----------
Cash flows from investing activities:
Fixed income securities
Investment collections 1,056 499
Investment purchases (1,491) (40,489)
Net change in short-term investments (1,358) 1,022
----------- -----------
Net cash from investing activities (1,793) (38,968)
----------- -----------
Cash flows from financing activities:
Capital contribution 0 39,000
----------- -----------
Net cash from financing activities 0 39,000
----------- -----------
Net (decrease) in cash 0 (299)
Cash at beginning of period 0 299
----------- -----------
Cash at end of period $ 0 $ 0
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
57
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
1. Financial Statements
The Statement of Financial Position as of September 30, 1995, the
Statements of Income for the three-month and nine-month periods ended
September 30, 1995 and 1994, and the Statements of Cash Flow for the nine-
month periods then ended are unaudited. The interim financial statements
reflect all adjustments (consisting only of normal recurring accruals)
which are, in the opinion of management, necessary for a fair statement of
the results for the interim periods presented. The financial statements
should be read in conjunction with the financial statements and notes
thereto included in the Glenbrook Life and Annuity Company 1994 Financial
Statements. The results of operations for the interim periods should not
be considered indicative of results to be expected for the full year.
2. Transactions with Affiliates
Revenues ceded to Allstate Life Insurance Company consist of contract
charges of $1,121,942 and $266,256 for the nine-month periods ended
September 30, 1995 and 1994, respectively. Investment income earned on
the assets which support contractholder fund liabilities was excluded from
the Company's financial statements as those assets were transferred to
Allstate Life Insurance Company under the terms of reinsurance treaties.
Benefits and expenses ceded to Allstate Life consist of paid benefits,
credited interest on reinsured contracts and operating expenses. These
benefits and expenses amounted to $48,200,122 and $16,037,252 for the nine-
month periods ended September 30, 1995 and 1994, respectively.
58
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
Page
----
Additions, Deletions or Substitutions of Investments . . . . . . . . . . . . . .
Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) . . . . . . . .
Premium Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Variable Annuity Unit Values. . . . . . . . . . . . . . . . .
General Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safekeeping of the Variable Account's Assets . . . . . . . . . . . . . . . .
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Glenbrook Life and Annuity Company . . . . . . . . . . . . . . .
Exceptions to the Non-Natural Owner Rule . . . . . . . . . . . . . . . . . .
IRS Required Distribution at Death Rules . . . . . . . . . . . . . . . . . .
Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Types of Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Account Financial Statements. . . . . . . . . . . . . . . . . . . . . .
59
<PAGE>
ORDER FORM
Please send me a copy of the most recent Statement of Additional Information for
the Glenbrook Life and Annuity Company Separate Account A.
- - ----------- -----------------------------------
(Date) (Name)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Send to:
Glenbrook Life and Annuity Company
Post Office Box 94042
Palatine, Illinois 60094
Attention: VA Customer Service Unit
60
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee
Period for the week preceding the establishment of the Sub-account.
N = the number of whole and partial years from the date we receive the
withdrawal, or death benefit request, or from the Payout Start Date to the end
of the Sub-account's Guarantee Period.
J = the Treasury Rate for a maturity of length N for the week preceding the
receipt of the withdrawal request, death benefit request, or income payment
request. If a Note with a maturity of length N is not available, a weighted
average will be used. If N is one year or less, J will be the 1-year Treasury
Rate.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 * (I - J) * N
Any transfer, withdrawal in excess of the free withdrawal amount, or death
benefit paid from a Sub-account of the Fixed Account will be multiplied by the
Market Value Adjustment factor to determine the Market Value Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000
Guarantee Period: 5 years
Interest Rate: 5.50%
Full Withdrawal: End of Contract Year 3
</TABLE>
NOTE: This illustration assumes that premium taxes were not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
(3)
= 10,000.00 * (1.055) = $11,742.41
Step 2: Calculate the Withdrawal Charge:
61
<PAGE>
= .05 * (10,000.00) = $500.00
Step 3: Calculate the Market Value Adjustment:
I= 5.50%
J= 5.00%
N = 730 DAYS = 2
--------
365 days
Market Value Adjustment Factor: .9 * (I - J) * N
= .9 * (.055 - .05) * 2 = .009
Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment:
= .009 * (11,742.41 - 10% (10,000.00) = $96.68
Step 4: Calculate The Amount Received by Customers as a Result of Full
Withdrawal at the end of Contract Year 3:
= 11,742.41 - 500.00 + 96.68 = $11,339.09
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Account Value at End of Contract Year 3:
(3)
= 10,000.00 * (1.055) = $11,742.41
Step 2: Calculate the Withdrawal Charge:
= .05 * (10,000.00) = $500.00
Step 3: Calculate the Market Value Adjustment:
I= 5.50%
J= 6.00%
N = 730 DAYS =2
--------
365 days
Market Value Adjustment Factor: .9 * (I - J) * N
= .9 * (.055 - .06) * (2) = -.009
Market Value Adjustment = Factor * Amount Subject to Market Value Adjustment
= -.009 * ($11,742.41 - 10% (10,000.00)) = -96.68
Step 4: Calculate The Net Withdrawal Value at End of Contract Year 3:
= 11,742.41 - 500.00 - 96.68 = $11,145.73
62
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
OFFERED BY
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, IL 60062
1-800/776-6978
INDIVIDUAL AND GROUP FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS
This Statement of Additional Information supplements the information in the
prospectus for the Individual and Group Flexible Premium Deferred Variable
Annuity Contract offered by Glenbrook Life and Annuity Company ("Company"), a
wholly owned subsidiary of Allstate Life Insurance Company. The Contract is
primarily designed to aid individuals in long-term financial planning and it can
be used for retirement planning regardless of whether the plan qualifies for
special federal income tax treatment. The prospectus may be obtained from
Glenbrook Life and Annuity Company by writing or calling the address or
telephone number listed above.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE
CONTRACT
The prospectus, dated November , 1995, has been filed with the United
States Securities and Exchange Commission
DATED NOVEMBER , 1995.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Additions, Deletions or Substitutions of Investments . . . . . . . . . . . . .
Reinvestment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of Contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers). . . . . . .
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Reserves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calculation of Variable Annuity Unit Values . . . . . . . . . . . . . . .
General Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safekeeping of the Variable Account's Assets. . . . . . . . . . . . . . .
Federal Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxation of Glenbrook Life and Annuity Company. . . . . . . . . . . . . .
Exceptions to the Non-Natural Owner Rule. . . . . . . . . . . . . . . . .
IRS Required Distribution at Death Rules. . . . . . . . . . . . . . . . .
Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Types of Qualified Plans. . . . . . . . . . . . . . . . . . . . . . . . .
Variable Account Financial Statements. . . . . . . . . . . . . . . . . . . . .
2
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
The Company retains the right, subject to any applicable law, to make
additions to, deletions from or substitutions for the Fund shares held by any
Sub-account of the Variable Account. The Company reserves the right to
eliminate the shares of any of the Funds and to substitute shares of another
Fund of the Fund Series, or of another open-end, registered investment company,
if the shares of the Fund are no longer available for investment, or if, in the
Company's judgment, investment in any Fund would become inappropriate in view of
the purposes of the Variable Account. Substitutions of shares attributable to
an Owner's interest in a Sub-account will not be made until the Owner has been
notified of the change, and until the Securities and Exchange Commission has
approved the change, to the extent such notification and approval is required by
the Investment Company Act of 1940. Nothing contained in this Statement of
Additional Information shall prevent the Variable Account from purchasing other
securities for other series or classes of contracts, or from effecting a
conversion between series or classes of contracts on the basis of requests made
by Owners.
The Company may also establish additional Sub-accounts or series of
Sub-accounts of the Variable Account. Each additional Sub-account would
purchase shares in a new Fund of the Fund Series or in another mutual fund. New
Sub-accounts may be established when, in the sole discretion of the Company,
marketing needs or investment conditions warrant. Any new Sub-accounts offered
in conjunction with the Contract will be made available to existing Owners on a
basis to be determined by the Company. The Company may also eliminate one or
more Sub-accounts if, in its sole discretion, marketing, tax or investment
conditions so warrant.
In the event of any such substitution or change, the Company may, by
appropriate endorsement, make such changes in the Contract as may be necessary
or appropriate to reflect such substitution or change. If deemed to be in the
best interests of persons having voting rights under the policies, the Variable
Account may be operated as a management company under the Investment Company Act
of 1940 or it may be deregistered under such Act in the event such registration
is no longer required.
REINVESTMENT
All dividends and capital gains distributions from the Funds are
automatically reinvested in shares of the distributing Fund at their net asset
value.
3
<PAGE>
THE CONTRACT
PURCHASE OF CONTRACTS
The Contracts are offered to the public through brokers as well as banks
licensed under the federal securities laws and state insurance laws. The
Contracts are distributed through the principal underwriter for the Variable
Account, Allstate Life Financial Services, Inc., an affiliate of Glenbrook Life
and Annuity Company. The offering of the Contracts is continuous and the
Company does not anticipate discontinuing the offering of the Contracts.
However, the Company reserves the right to discontinue the offering of the
Contracts.
PERFORMANCE DATA
From time to time the Variable Account may publish advertisements
containing performance data relating to its Sub-accounts. The performance data
for the Sub-accounts (other than for the AIM V.I. Money Market Sub-account) will
always be accompanied by total return quotations. Performance figures used by
the Variable Account are based on actual historical performance of its
Sub-accounts for specified periods, and the figures are not intended to indicate
future performance. The Variable Account may also disclose yield, standard
total return, and non-standard total return for periods prior to the date that
the Variable Account commenced operations. For periods prior to the date the
Variable Account commenced operations, performance information for the
Sub-accounts will be calculated based on the performance of the underlying Funds
and the assumption that the Sub-accounts were in existence for the same periods
as those of the underlying Funds, with a level of charges equal to those
currently assessed against the Sub-accounts.
A Sub-account's "average annual total return" represents an
annualization of the Sub-account's total return over a particular period and is
computed by finding the annual percentage rate which, when compounded annually,
will accumulate a hypothetical $1,000 Purchase Payment to the redeemable value
at the end of the one, five or ten year period, or for a period from the date of
commencement of the Sub-account's operations, if shorter than any of the
foregoing. The average annual total return is obtained by dividing the ending
redeemable value, after deductions for any Withdrawal Charges or Contract
Maintenance Charges imposed on the Contracts by the Variable Account, by the
initial hypothetical $1,000 Purchase Payment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting 1 from
the result.
The Withdrawal Charges assessed upon redemption are computed as
follows: no Withdrawal Charge is assessed on 10% of the Contract Value, as
calculated based on the date of the first withdrawal during the Contract Year.
Withdrawal Charges are charged on the amount of redemption equal to the Purchase
Payment, reduced by the amount entitled to the 10% exception,
4
<PAGE>
if any. The remaining amount of the redemption, if any, is not assessed a
Withdrawal Charge. The Withdrawal Charge Schedule specifies rates based on the
number of complete years since each Purchase Payment was made. The Contract
Maintenance Charge ($35 per contract) used in the total return calculation is
normally prorated using the following method: The total amount of annual
Contract fees collected during the year is divided by the total average net
assets of all the Sub-accounts. The resulting percentage is then multiplied by
the ending Contract Value.
In addition, the Variable Account may advertise the total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. Such calculations would not reflect deductions
for Withdrawal Charges which may be imposed on the Contracts by the Variable
Account which, if reflected, would reduce the performance quoted. The formula
for computing such total return quotations involves a per unit change
calculation. This calculation is based on the Accumulation Unit value at the
end of the defined period divided by the Accumulation Unit value at the
beginning of such period, minus 1. The periods included in such advertisements
are "year-to-date" (prior calendar year end to the day of the advertisement);
"year to most recent quarter" (prior calendar year end to the end of the most
recent quarter); "the prior calendar year"; "'n' most recent Calendar Years";
and "Inception (commencement of the Sub-account's operation) to date" (day of
the advertisement).
The Variable Account may also advertise the performance of the
Sub-accounts relative to certain performance rankings and indexes compiled by
independent organizations, such as: (a) Lipper Analytical Services, Inc.; (b)
the Standard & Poor's 500 Composite Stock Price Index ("S & P 500"); (c) A.M.
Best Company; (d) Bank Rate Monitor; and (e) Morningstar.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
The Company accepts Purchase Payments which are the proceeds of a
Contract in a transaction qualifying for a tax-free exchange under Section 1035
of the Internal Revenue Code. Except as required by federal law in calculating
the basis of the Contract, the Company does not differentiate between Section
1035 Purchase Payments and non-Section 1035 Purchase Payments.
The Company also accepts "rollovers" and transfers from Contracts
qualifying as tax-sheltered annuities ("TSAs"), individual retirement annuities
or accounts ("IRAs"), or any other Qualified Contract which is eligible to
"rollover" into an IRA. The Company differentiates among Non-Qualified
Contracts, TSAs, IRAs and other Qualified Contracts to the extent necessary to
comply with federal tax laws. For example, the Company restricts the
assignment, transfer or pledge of TSAs and IRAs so the Contracts will continue
to qualify for special tax treatment. An Owner contemplating any such exchange,
rollover or transfer of a Contract should contact a competent tax adviser with
respect to the potential effects of such a transaction.
5
<PAGE>
PREMIUM TAXES
Applicable premium tax rates depend on the Owner's state of residency
and the insurance laws and status of the Company in those states where premium
taxes are incurred. Premium tax rates may be changed by legislation,
administrative interpretations or judicial acts.
TAX RESERVES
The Company does not establish capital gains tax reserves for the
Sub-account nor deduct charges for tax reserves because the Company believes
that capital gains attributable to the Variable Account will not be taxable.
However, the Company reserves the right to deduct charges to establish tax
reserves for potential taxes on realized or unrealized capital gains.
INCOME PAYMENTS
CALCULATION OF VARIABLE ANNUITY UNIT VALUES
The amount of the first Income Payment is calculated by applying the
Contract Value allocated to each Variable Sub-account less any applicable
premium tax charge deducted at this time, to the income payment tables in the
Contract. The first Variable Annuity Income Payment is divided by the
Sub-account's then current annuity unit value to determine the number of annuity
units upon which later Income Payments will be based. Variable Annuity Income
Payments after the first will be equal to the sum of the number of annuity units
determined in this manner for each Sub-account times the then current annuity
unit value for each respective Sub-account.
Annuity units in each variable Sub-account are valued separately and
annuity unit values will depend upon the investment experience of the particular
Portfolios in which the Sub-account invests. The value of the annuity unit for
each variable Sub-account at the end of any Valuation Period is calculated by:
(a) multiplying the annuity unit Value at the end of the immediately preceding
Valuation Period by the Sub-accounts's Net Investment Factor during the period;
and then (b) dividing the product by the sum of 1.0 plus the assumed investment
rate for the period. The assumed investment rate adjusts for the interest rate
assumed in the Income Payment tables used to determine the dollar amount of the
first Variable Annuity Income Payment, and is at an effective annual rate which
is disclosed in the Contract.
The amount of the first Income Payment paid under an income plan is
determined using the interest rate and mortality table disclosed in the
Contract. Due to judicial or legislative developments regarding the use of
tables which do not differentiate on the basis of sex, different annuity tables
may be used.
6
<PAGE>
GENERAL MATTERS
INCONTESTABILITY
The Contract will not be contested after it is issued.
SETTLEMENTS
Due proof of the Owner(s) death (or Annuitant's death if there is a
non-natural Owner) must be received prior to settlement of a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds title to the assets of the Variable Account. The
assets are kept physically segregated and held separate and apart from the
Company's general corporate assets. Records are maintained of all purchases and
redemptions of the Fund shares held by each of the variable Sub-accounts.
The Fund does not issue certificates and, therefore, the Company holds
the Account's assets in open account in lieu of stock certificates. See the
Fund's prospectus for a more complete description of the custodian of the Fund.
FEDERAL TAX MATTERS
INTRODUCTION
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE.
THE COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax
consequences of ownership or receipt of distributions under an annuity contract
depend on the individual circumstances of each person. If you are concerned
about any tax consequences with regard to your individual circumstances, you
should consult a competent tax adviser.
TAXATION OF GLENBROOK LIFE AND ANNUITY COMPANY
7
<PAGE>
The Company is taxed as a life insurance company under Part I of
Subchapter L of the Internal Revenue Code. Since the Variable Account is not an
entity separate from the Company, and its operations form a part of the Company,
it will not be taxed separately as a "Regulated Investment Company" under
Subchapter M of the Code. Investment income and realized capital gains are
automatically applied to increase reserves under the contract. Under existing
federal income tax law, the Company believes that the Variable Account
investment income and realized net capital gains will not be taxed to the extent
that such income and gains are applied to increase the reserves under the
contract.
Accordingly, the Company does not anticipate that it will incur any
federal income tax liability attributable to the Variable Account, and therefore
the Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretations thereof result in the Company
being taxed on income or gains attributable to the Variable Account, then the
Company may impose a charge against the Variable Account (with respect to some
or all contracts) in order to set aside provisions to pay such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that contracts held
by a non-natural owner are not treated as annuity contracts for federal income
tax purposes. Contracts will generally be treated as held by a natural person
if the nominal owner is a trust or other entity which holds the contract as
agent for a natural person. However, this special exception will not apply in
the case of an employer who is the nominal owner of an annuity contract under a
non-qualified deferred compensation arrangement for its employees. Other
exceptions to the non-natural owner rule are: (1) contracts acquired by an
estate of a decedent by reason of the death of the decedent; (2) certain
qualified contracts; (3) contracts purchased by employers upon the termination
of certain qualified plans; (4) certain contracts used in connection with
structured settlement agreements, and (5) contracts purchased with a single
premium when the annuity starting date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax
purposes, an annuity contract must provide: (1) if any owner dies on or after
the annuity start date but before the entire interest in the contract has been
distributed, the remaining portion of such interest must be distributed at least
as rapidly as under the method of distribution being used as of the date of the
owner's death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
8
<PAGE>
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
owner for purposes of applying the distribution at death rules. In addition, a
change in the annuitant on a contract owned by a non-natural person will be
treated as the death of the owner.
QUALIFIED PLANS
This annuity contract may be used with several types of qualified
plans. The tax rules applicable to participants in such qualified plans vary
according to the type of plan and the terms and conditions of the plan itself.
Adverse tax consequences may result from excess contributions, premature
distributions, distributions that do not conform to specified commencement and
minimum distribution rules, excess distributions and in other circumstances.
Owners and participants under the plan and annuitants and beneficiaries under
the contract may be subject to the terms and conditions of the plan regardless
of the terms of the contract.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to
an individual retirement program known as an Individual Retirement Annuity.
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. IRAs generally may
not provide life insurance, but they may provide a death benefit that equals the
greater of the premiums paid and the contract's cash value. The contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the contract value. It is possible that the Death Benefit
could be viewed as violating the prohibition on investment in life insurance
contracts with the result that the Contract would not be viewed as satisfying
the requirements of an IRA.
9
<PAGE>
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified
employee pension plans for their employees using the employees' individual
retirement annuities if certain criteria are met. Under these plans the
employer may, within specified limits, make deductible contributions on behalf
of the employees to their individual retirement annuities. Employers intending
to use the contract in connection with such plans should seek competent advice.
In particular, employers should consider that IRAs generally may not provide
life insurance, but they may provide a death benefit that equals the greater of
the premiums paid and the contract's cash value. The contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the contract value.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and
employees of certain types of tax-exempt organizations (specified in Section
501(c)(3) of the Code) to have their employers purchase annuity contracts for
them, and subject to certain limitations, to exclude the purchase payments from
the employees' gross income. An annuity contract used for a Section 403(b) plan
must provide that distributions attributable to salary reduction contributions
made after 12/31/88, and all earnings on salary reduction contributions, may be
made only after the employee attains age 59 1/2, separates from service, dies,
becomes disabled or on the account of hardship (earnings on salary reduction
contributions may not be distributed for hardship). These limitations do not
apply to withdrawals where the Company is directed to transfer some or all of
the contract value to another Section 403(b) plan. Purchasers of the contracts
for such purposes should seek competent advice as to eligibility, limitations on
permissible amounts of purchase payments and other tax consequences associated
with the contracts. In particular, purchasers should consider that the contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the contract value. It is possible that such death benefit
could be characterized as an incidental death benefit. If the death benefit
were so characterized, this could result in currently taxable income to
purchasers. In addition, there are limitations on the amount of incidental
death benefits that may be provided under a tax-sheltered annuity. Even if the
death benefit under the contract were characterized as an incidental death
benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance contract as part of his or her tax-sheltered annuity
plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to
establish various types of tax favored retirement plans for employees. The
Self-Employed Individuals Retirement Act of 1962, as amended, (commonly referred
to as "H.R. 10" or "Keogh") permits self-employed individuals to establish tax
favored retirement plans for themselves and their
10
<PAGE>
employees. Such retirement plans may permit the purchase of annuity contracts
in order to provide benefits under the plans. The contract provides a death
benefit that in certain circumstances may exceed the greater of the payments and
the contract value. It is possible that such death benefit could be
characterized as an incidental death benefit. There are limitations on the
amount of incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may result in
currently taxable income to participants. Employers intending to use the
contract in connection with such plans should seek competent advice.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local
governments and tax-exempt organizations to defer a portion of their
compensation without paying current taxes. The employees must be participants
in an eligible deferred compensation plan. Under these plans, contributions
made for the benefit of the employees will not be includible in the employees'
gross income until distribution from the plan. However, under a Section 457
plan all the compensation deferred under the plan must remain solely the
property of the employer, subject only to the claims of the employer's general
creditors, until such time as made available to the employee or a beneficiary.
VARIABLE ACCOUNT FINANCIAL STATEMENTS
The financial statements of Glenbrook Life and Annuity Company
Separate Account A are not included herein because, as of the date hereof, the
Variable Account had not yet commenced operations, had no assets or liabilities
and received no income. The financial statements of the Variable Account will
be audited on an annual basis once the Variable Account commences operations.
11
<PAGE>
PART C
OTHER INFORMATION
24a. FINANCIAL STATEMENTS
PART A: Glenbrook Life and Annuity Company Financial Statements and
Financial Statement Schedules are contained in Part A of this Registration
Statement.
The financial statements of Glenbrook Life and Annuity Company Separate
Account A are not included herein because, as of the date hereof, the Variable
Account had not yet commenced operations, had no assets or liabilities and
received no income. The financial statements of the Variable Account will be
audited on an annual basis once the Variable Account commences operations.
24b. EXHIBITS
The following exhibits:
The following exhibits correspond to those required by paragraph (b) of
item 24 as to exhibits in Form N-4:
(1) Form of Resolution of the Board of Directors of Glenbrook Life and
Annuity Company authorizing establishment of the Glenbrook Life and
Annuity Company Separate Account A.
(2) Not Applicable.
(3) Form of Underwriting Agreement
(4) Specimen Contract*
(5) Form of application for a Contract*
(6) (a) Articles of Incorporation of Glenbrook Life and Annuity
Company.**
(b) By-laws of Glenbrook Life and Annuity Company.
(7) Reinsurance Agreement
(8) Form of Participation Agreement
(9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary
and General Counsel of Glenbrook Life and Annuity Company.*
(10) (a) Consent of Accountants
(b) Consent of Attorneys
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) Financial Data Schedule
(99) Powers of Attorney*.
_____________
* previously filed in initial registration statement
** Previously filed and incorporated by reference with Depositor's Form N-4
Registration Statement No. 33-60882 dated April 9, 1993
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal Position and Office With Depositor
Business Address of the Trust
- - ---------------- ------------
Louis G. Lower, II Chairman of the Board and Chief Executive Officer
Michael J. Velotta Vice President, Secretary, General Counsel and Director
Marla G. Friedman President, Chief Operating Officer and Director
Peter H. Heckman Vice President and Director
James P. Zils Treasurer
Casey J. Sylla Chief Investment Officer
G. Craig Whitehead Senior Vice President and Director
Sarah R. Donahue Assistant Vice President
Margarita E. Kellen Assistant Vice President
Paul N. Kierig Assistant Secretary
Emma M. Kalaidjian Assistant Secretary
Mary J. McGinn Assistant Secretary
Barry S. Paul Assistant Vice President and Controller
Robert N. Roeters Assistant Vice President
Theodore A. Schnell Assistant Treasurer
C. Nelson Strom Assistant Vice President and Corporate Actuary
Kevin R. Slawin Assistant Treasurer
The principal business address of the foregoing officers and directors is 3100
Sanders Road, Northbrook, IL 60062
26. Persons Controlled by or Under Common Control with Depositor or Registrant
See 10-K Commission File #1-11840, The Allstate Corporation.
27. NUMBER OF CONTRACT OWNERS
Not Applicable
28. INDEMNIFICATION
The by-laws of both Glenbrook Life and Annuity Company (Depositor) and
Allstate Life Financial Services, Inc. (Distributor), provide for the
indemnification of its Directors, Officers and Controlling Persons, against
expenses, judgments, fines and amounts paid in settlement as incurred by such
person, if such person acted properly. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of a duty
to the Company, unless a court determines such person is entitled to such
indemnity.
Insofar as indemnification for liability arising out of the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such 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 payment by the registrant of expenses incurred by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question 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.
<PAGE>
29a. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
Not applicable
29b. PRINCIPAL UNDERWRITER
Name and Principal Business Allstate Life Financial
Address Of Each Such Person Services, Inc. ("ALFS")
___________________________________________________________________________
Louis G. Lower, II Director
Marla G, Friedman Director
Michael J. Velotta Director and Secretary
Robert J. Kelly President and Chief Executive Officer
Diane Bellas Vice President and Controller
Richard A. Scholl Vice President
John R. Hedrick General Counsel and Assistant Secretary
James P. Zils Treasurer
Robert N. Roeters Assistant Vice President
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Kevin R. Slawin Assistant Treasurer
The principal address of ALFS is 3100 Sanders Road, Northbrook, Illinois
29c. COMPENSATION OF ALLSTATE LIFE FINANCIAL SERVICES, INC.
None
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Glenbrook Life and Annuity Company, is located at 3100
Sanders Road, Northbrook, Illinois 60062.
The Underwriter, Allstate Life Financial Services, Inc., is located at 3100
Sanders Road, Northbrook, Illinois 60062.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
31. MANAGEMENT SERVICES
None
<PAGE>
32. UNDERTAKINGS
The Registrant promises to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the variable annuity contracts may be
accepted. Registrant furthermore agrees to include either as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a statement of Additional Information or a post
card or similar written communication affixed to or included in the Prospectus
that the applicant can remove to send for a Statement of Additional Information.
Finally the Registrant agrees to deliver any Statement of Additional Information
and any Financial Statements required to be made available under this Form N-4
promptly upon written or oral request.
33. REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL REVENUE CODE
The Company represents that it is relying upon a November 28, 1988
Securities and Exchange Commission no-action letter issued to the American
Council of Life Insurance ("ACLI") and that the provisions of paragraphs 1-4 of
the no-action letter have been complied with.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "Act") and
the Investment Company Act of 1940, the registrant, Glenbrook Life and Annuity
Company Separate Account A, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the Township of Northfield, State of
Illinois, on the 16th day of November, 1995.
GLENBROOK LIFE AND ANNUITY COMPANY SEPARATE ACCOUNT A
(REGISTRANT)
BY: GLENBROOK LIFE AND ANNUITY COMPANY
(DEPOSITOR)
(SEAL)
Attest: /s/ Paul N. Kierig By: /s/ Michael J. Velotta
-------------------- -------------------------
Paul N. Kierig Michael J. Velotta
Assistant Secretary Vice President, Secretary and
General Counsel
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registration Statement has been duly signed
below by the following Directors and Officers of Glenbrook Life and Annuity
Company on the 16th day of November, 1995.
*/ LOUIS G. LOWER, II Chairman of the Board of Directors and
- - ---------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/ Michael J. Velotta Vice President, Secretary, General
- - ---------------------- Counsel and Director
Michael J. Velotta
*/MARLA G. FRIEDMAN President, Chief Operating Officer
- - ---------------------- and Director
Marla G. Friedman
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- - ----------------------
G. Craig Whitehead
*/PETER H. HECKMAN Vice President and Director
- - ----------------------
Peter H. Heckman
*/ BARRY S. PAUL Assistant Vice President and Controller
- - ---------------------- (Principal Accounting Officer)
Barry S. Paul
*/ By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
<PAGE>
Exhibit No. (1)
Form of Resolution of Board of Directors
<PAGE>
AIM VARIABLE ANNUITY CONTRACTS WITH MARKET ADJUSTED FIXED ACCOUNT
Upon motion duly made, seconded and unanimously carried, the following
resolutions were adopted:
RESOLVED, That, pursuant to the Corporation's plan to issue the AIM
Variable Annuity Contracts with a market value adjusted fixed account
("Contracts"), the appropriate officers, with such assistance from the
Corporation's auditors, legal counsel and independent consultants or others as
they may require, be, and hereby are, authorized and directed to take all action
necessary to: (a) register the Contracts on a continuous basis and in such
amounts as the officers of the Corporation shall from time to time deem
appropriate under the Securities Act of 1933; and (b) take all other actions
which are necessary in connection with the offering of said Contracts for sale
in order to comply with the Securities Exchange Act of 1934, the Securities Act
of 1933, and other applicable federal laws, including the filing of any
amendments to registration statements, any undertakings or other requirements of
applicable federal laws, as the officers of the Corporation shall deem necessary
or appropriate.
FURTHER RESOLVED, That the Vice President, Secretary and General Counsel,
and the Vice President of the Corporation, and either of them with full power to
act without the other, hereby are severally authorized and empowered to prepare,
execute and cause to be filed with the Securities and Exchange Commission on
behalf of the Corporation as issuer of the Contracts, a Registration Statement
under the Securities Act of 1933 registering the Contracts, and any and all
amendments to the foregoing on behalf of the Corporation and on behalf of and as
attorneys for the principal executive officer and/or the principal financial
officer and/or the principal accounting officer and/or any other officer of the
Corporation.
FURTHER RESOLVED, That the Vice President, Secretary, and General Counsel
is hereby appointed as agent for service of process under any such registration
statement and any and all amendments thereof, and is duly authorized to receive
communications and notices from the Securities and Exchange Commission under the
Securities Act of 1933.
FURTHER RESOLVED, That the appropriate officers of the Corporation be and
they hereby are, authorized on behalf of the Corporation to take any and all
action that they may deem necessary or advisable in order to sell the Contracts,
including any registrations, filings and qualifications of the Corporation, its
officers, agents and employees, and the Contracts under the insurance and
securities laws of any states of the United States of America or other
jurisdictions, and in connection therewith, to prepare execute, deliver and file
all such applications, reports, covenants, resolutions, applications for
exemptions, consents to service of
<PAGE>
process and other papers and instruments as may be required under such laws, and
to take any and all further action which said officers deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as said officers or counsel deem them to be in the best interest of the
Corporation.
FURTHER RESOLVED, That the appropriate officers of the Corporation, and
each of them, are hereby authorized to execute and deliver all such documents
and papers and 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
purposes thereof.
GLAC SBOD 09/06/95
<PAGE>
UNDERWRITING AGREEMENT
THIS AGREEMENT, is entered into on this 29th day of September, 1995, by and
among GLENBROOK LIFE AND ANNUITY COMPANY, ("Glenbrook Life" or "Company") a life
insurance company organized under the laws of the State of Illinois, on its own
and on behalf of the GLENBROOK LIFE AND ANNUITY COMPANY VARIABLE ANNUITY
ACCOUNT, ("Separate Account") a separate account established pursuant to the
insurance laws of the State of Illinois, and ALLSTATE LIFE FINANCIAL SERVICES,
INC., ("Principal Underwriter"), a corporation organized under the laws of the
state of Delaware.
RECITALS
WHEREAS, Company proposes to issue to the public certain variable annuity
contracts identified in the Attachment A ("Contracts"); and
WHEREAS, Company, by resolution adopted on December 15, 1992, established
the Separate Account for the purpose of issuing the Contracts; and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-7632); and
WHEREAS, the Contracts to be issued by Company are registered with the
Commission under the Securities Act of 1933 and the Investment Company Act of
1940. (File No. 33-91914, 33-91916 ) for offer and sale to the public and
otherwise are in compliance with all applicable laws; and
<PAGE>
WHEREAS, Principal Underwriter, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD"), proposes to act as principal underwriter on
an agency (best efforts) basis in the marketing and distribution of said
Contracts; and
WHEREAS, Company desires to obtain the services of Principal Underwriter as
an underwriter and distributor of said Contracts issued by Company through the
Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, the Company, the Separate Account, and the Principal Underwriter
hereby agree as follows:
1. AUTHORITY AND DUTIES
(a) Principal Underwriter will serve as an underwriter and distributor on
an agency basis for the Contracts which will be issued by the Company
through the Separate Account.
(b) Principal Underwriter will use its best efforts to provide information
and marketing assistance to licensed insurance agents and broker-
dealers on a continuing basis. However, Principal Underwriter shall
be responsible for compliance with the requirements of state broker-
dealer regulations and the Securities Exchange Act of 1934 as each
applies to Principal Underwriter in connection with its duties as
distributor of said Contracts. Moreover, Principal
2
<PAGE>
Underwriter shall conduct its affairs in accordance with the rules of
Fair Practice of the NASD.
(c) Subject to agreement with the Company, Principal Underwriter may enter
into selling agreements with broker-dealers which are registered under
the Securities Exchange Act of 1934 and/or authorized by applicable
law or exemptions to sell variable annuity contracts issued by Company
through the Separate Account. Any such contractual arrangement is
expressly made subject to this Agreement, and Principal Underwriter
will at all times be responsible to Company for supervision of
compliance with the federal securities laws regarding distribution of
Contracts.
2. WARRANTIES
(a) The Company represents and warrants to Principal Underwriter that:
(i) Registration Statements (on Form N-4) for each of the Contracts
identified in Attachment A have been filed with the Commission in
the form previously delivered to Principal Underwriter and that
copies of any and all amendments thereto will be forwarded to
Principal Underwriter at the time that they are filed with
Commission;
(ii) The Registration Statements and any further amendments or
supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act
of 1933 and the Investment
3
<PAGE>
Company Act of 1940, and the rules and regulations of the
Commission under such Acts, and will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement or
omission made in reliance upon and in conformity with information
furnished in writing to Company by Principal Underwriter
expressly for use therein;
(iii) The Company is validly existing as a stock life insurance company
in good standing under the laws of the State of Illinois, with
power to own its properties and conduct its business as described
in the Prospectus, and has been duly qualified for the
transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties, or
conducts any business;
(iv) The Contracts to be issued by the Company and through the
Separate Account and offered for sale by Principal Underwriter on
behalf of the Company hereunder have been duly and validly
authorized and, when issued and delivered with payment therefore
as provided herein, will be duly and validly issued and will
conform to the description of such Contracts contained in the
Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are to be
appropriately licensed or appointed to comply with the state
insurance laws;
4
<PAGE>
(vi) The performance of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in a
violation of any of the provisions of or default under any
statute, indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which Company is a party or by
which Company is bound (including Company's Charter or By-laws as
a stock life insurance company, or any order, rule or regulation
of any court or governmental agency or body having jurisdiction
over Company or any of its properties);
(vii) There is no consent, approval, authorization or order of any
court or governmental agency or body required for the
consummation by Company of the transactions contemplated by this
Agreement, except such as may be required under the Securities
Exchange Act of 1934 or state insurance or securities laws in
connection with the distribution of the Contracts; and
(viii) There are no material legal or governmental proceedings pending
to which Company or the Separate Account is a party or of which
any property of Company or the Separate Account is the subject
(other than as set forth in the Prospectus relating to the
Contracts, or litigation incidental to the kind of business
conducted by the Company) which, if determined adversely to
Company, would individually or in the aggregate have a material
adverse effect on the financial position, surplus or operations
of Company.
(b) Principal Underwriter represents and warrants to Company that:
5
<PAGE>
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934, is a member in
good standing of the NASD, and is in compliance with the
securities laws in those states in which it conducts business as
a broker-dealer;
(ii) As a principal underwriter, it shall permit the offer and sale of
Contracts to the public only by and through persons who are
appropriately licensed under the securities laws and who are
appointed in writing by the Company to be authorized insurance
agents unless such persons are exempt from licensing and
appointment requirements;
(iii) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of or constitute a
default under any statute, indenture, mortgage, deed of trust,
note agreement or other agreement or instrument to which
Principal Underwriter is a party or by which Principal
Underwriter is bound (including the Certificate of Incorporation
or By-laws of Principal Underwriter or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over either Principal Underwriter or its property);
and
(iv) To the extent that any statements made in the Registration
Statements, or any amendments or supplements thereto, are made in
reliance upon and in conformity with written information
furnished to Company by Principal Underwriter expressly for use
therein, such statements will, when they
6
<PAGE>
become effective or are filed with the Commission, as the case
may be, conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations of the
Commission thereunder, and will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
3. BOOKS AND RECORDS
(a) Principal Underwriter shall keep, in a manner and form approved by
Company and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934, correct records and books of account
as required to be maintained by a registered broker-dealer, acting as
principal underwriter, of all transactions entered into on behalf of
Company with respect to its activities under this Agreement.
Principal Underwriter shall make such records and books of account
available for inspection by the Commission, and Company shall have the
right to inspect, make copies of or take possession of such records
and books of account at any time upon demand.
(b) Subject to applicable Commission or NASD restrictions, Company will
send confirmations of Contract transactions to Contract Owners.
Company will make such confirmations and records of transactions
available to Principal Underwriter upon request. Company will also
maintain Contract Owner records on behalf of Principal Underwriter to
the extent permitted by applicable securities laws.
7
<PAGE>
8
<PAGE>
4. SALES MATERIALS
(a) After authorization to commence the activities contemplated herein,
Principal Underwriter will utilize the currently effective prospectus
relating to the subject Contracts in connection with its underwriting,
marketing and distribution efforts. As to other types of sales
material, Principal Underwriter hereby agrees and will require any
participating or selling broker-dealers to agree that they will use
only sales materials which have been authorized for use by Company,
which conform to the requirements of federal and state laws and
regulations, and which have been filed where necessary with the
appropriate regulatory authorities, including the NASD.
(b) Principal Underwriter will not distribute any prospectus, sales
literature or any other printed matter or material in the underwriting
and distribution of any Contract if, to the knowledge of Principal
Underwriter, any of the foregoing misstates the duties, obligation or
liabilities of Company or Principal Underwriter.
5. COMPENSATION
(a) Company agrees to pay Principal Underwriter for direct expenses
incurred on behalf of Company. Such direct expenses shall include,
but not be limited to, the costs of goods and services purchased from
outside vendors, travel expenses and state and federal regulatory fees
incurred on behalf of Company.
9
<PAGE>
(b) Principal Underwriter shall present a statement after the end of the
quarter showing the apportionment of services rendered and the direct
expenses incurred. Settlements are due and payable within thirty
days.
6. PURCHASE PAYMENTS
Principal Underwriter shall arrange that all purchase payments collected on the
sale of the Contracts are promptly and properly transmitted to Company for
immediate allocation to the Separate Account in accordance with the procedures
of Company and the directions furnished by the purchasers of such Contracts at
the time of purchase.
7. UNDERWRITING TERMS
(a) Principal Underwriter makes no representations or warranties regarding
the number of Contracts to be sold by licensed broker-dealers and
registered representatives of broker-dealers or the amount to be paid
thereunder. Principal Underwriter does, however, represent that it
will actively engage in its duties under this Agreement on a
continuous basis while there are effective registration statements
with the Commission.
(b) Principal Underwriter will use its best efforts to ensure that the
Contracts shall be offered for sale by registered broker-dealers and
registered representatives (who are duly licensed as insurance agents)
on the terms described in the currently effective prospectus
describing such Contracts.
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(c) It is understood and agreed that Principal Underwriter may render
similar services to other companies in the distribution of other
variable contracts.
(d) The Company will use its best efforts to assure that the Contracts are
continuously registered under the Securities Act of 1933 (and under
any applicable state "blue sky" laws) and to file for approval under
state insurance laws when necessary.
(e) The Company reserves the right at any time to suspend or limit the
public offering of the subject Contracts upon one day's written notice
to Principal Underwriter.
8. LEGAL AND REGULATORY ACTIONS
(a) The Company agrees to advise Principal Underwriter immediately of:
(i) any request by the Commission for amendment of the Registration
Statement or for additional information relating to the
Contracts;
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that purpose;
and
(iii) the happening of any known material event which makes untrue any
statement made in the Registration Statement relating to the
Contracts or
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which requires the making of a change therein in order to make
any statement made therein not misleading.
(b) Each of the undersigned parties agrees to notify the other in writing
upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
(c) During any legal action or inquiry, Company will furnish to Principal
Underwriter such information with respect to the Separate Account and
Contracts in such form and signed by such of its officers as Principal
Underwriter may reasonably request and will warrant that the
statements therein contained when so signed are true and correct.
9. TERMINATION
(a) This Agreement will terminate automatically upon its assignment.
(b) This Agreement shall terminate without the payment of any penalty by
either party upon sixty (60) days' advance written notice.
(c) This Agreement shall terminate at the option of the Company upon
institution of formal proceedings against Principal Underwriter by the
NASD or by the Commission, or if Principal Underwriter or any
representative thereof at any time:
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(i) employs any device, scheme, artifice, statement or omission to
defraud any person;
(ii) fails to account and pay over promptly to the Company money due
it according to the Company's records; or
(iii) violates the conditions of this Agreement.
10. INDEMNIFICATION
The Company agrees to indemnify Principal Underwriter for any liability that it
may incur to a Contract owner or party-in-interest under a Contract:
(a) arising out of any act or omission in the course of or in connection
with rendering services under this Agreement; or
(b) arising out of the purchase, retention or surrender of a contract;
provided, however, that the Company will not indemnify Principal
Underwriter for any such liability that results from the willful
misfeasance, bad faith or gross negligence of Principal Underwriter or
from the reckless disregard by such Principal Underwriter of its
duties and obligations arising under this Agreement.
11. GENERAL PROVISIONS
(a) This Agreement shall be subject to the laws of the State of Illinois.
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(b) This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time by
the mutual agreement and consent of the undersigned parties.
(c) In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in way be affected or impaired thereby.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed, to be effective as of October 1, 1995.
GLENBROOK LIFE AND ANNUITY COMPANY
(and GLENBROOK LIFE AND ANNUITY COMPANY VARIABLE ANNUITY ACCOUNT)
BY: ____________________________ ______________________________
President and Chief Executive Officer Date
ALLSTATE LIFE FINANCIAL SERVICES, INC.
BY: ____________________________ ________________________________
President and Chief Operating Officer Date
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UNDERWRITING AGREEMENT
15
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GLENBROOK LIFE AND ANNUITY COMPANY
BY-LAWS
ADOPTED JUNE 11, 1992
<PAGE>
BY-LAWS OF
GLENBROOK LIFE AND ANNUITY COMPANY
As adopted by the Board of Directors of the Corporation on June 11, 1992.
ARTICLE I
DIRECTORS
SECTION 1. The property, business and affairs of the Company shall
be managed and controlled by a Board of Directors composed of five members. The
Directors shall be elected at each annual meeting of the shareholders of the
Company for a term of one year. Each Director shall hold office for the term
for which elected and until the election and qualification of his successor.
SECTION 2. In the event of a vacancy occurring in the Board of
Directors, the shareholders of the Company shall, by a majority vote at a
special meeting called for that purpose or at the next annual meeting of
shareholders, elect a Director to fill such vacancy, such person to hold office
during the unexpired portion of the term of the Director whose place he or she
was elected to fill.
SECTION 3. The Board of Directors may declare dividends payable
out of the surplus funds of the Company when warranted by law.
SECTION 4. The Board of Directors shall elect all the general
officers of the Company hereafter provided, and may prescribe additional
descriptive titles for any such officers. The Board of Directors may from time
to time appoint an Actuary, Assistant Vice Presidents, Assistant Secretaries,
Assistant Treasurers, Assistant Actuaries and other officers of the Company.
The Board of Directors may prescribe the duties and fix the compensation of any
elected or appointed officer and may require from any officer security for
faithful service and for proper accounting for monies and property from time to
time in such officer's possession. All officers of the Company shall hold
office at the will of the Board of Directors.
SECTION 5. The Board of Directors shall designate in what bank or
banks the funds of the Company shall be deposited and the person or persons who
may sign, on behalf of the Company, checks or drafts against such deposits.
Such designations may also be made by such person or persons as shall be
appointed for that purpose by the Board of Directors.
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SECTION 6. The Board of Directors shall have the power to make
rules and regulations not inconsistent with applicable law, the Articles of
Incorporation of the Company, or these By-Laws, for the conduct of its own
meetings and the management of the affairs of the Company.
SECTION 7. The Board of Directors may authorize payment of
compensation to Directors for their services as Directors, and fix the amount
thereof.
SECTION 8. The Board of Directors shall have the power to appoint
committees and to grant them powers not inconsistent with applicable law, the
Articles of Incorporation of the Company, or these By-Laws.
SECTION 9. An annual meeting of the Board of Directors shall be
held each year immediately after the adjournment of the annual meeting of the
shareholders. Other meetings of the Board of Directors may be held at such time
as the Board of Directors may determine, or when called by the Chairman or by a
majority of the Board of Directors.
Notice of meetings of the Directors, other than the stated annual meeting
shall be given by letter or facsimile sent to each Director's business address,
no fewer than three days prior to the meeting. Any Director may, in writing,
waive notice of any meeting, and the presence of a Director at any meeting shall
be considered a waiver of notice of such meeting, except as otherwise provided
by law.
Any action required or permitted to be taken at any meeting of the Board of
Directors, or of any Committee thereof, may be taken without a meeting if all
members of the Board or such Committee, as the case may be, consent thereto in
writing. Such writing or writings shall be filed with the minutes of
proceedings of the Board or such Committee.
SECTION 10. A majority of the whole Board of Directors shall
constitute a quorum for the transaction of business, but if at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn that meeting, from time to time, until a quorum shall
have been obtained.
ARTICLE II
OFFICERS
SECTION 1. The general officers of the Company shall consist of a
Chairman of the Board, President, two or more Vice Presidents, a Secretary, and
a Treasurer, who shall be elected annually by the Board of Directors at the
stated annual
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meeting held upon adjournment of the annual shareholders' meeting, and if not
elected at such meeting, such officers may be elected at any meeting of the
Board of Directors held thereafter. Such officers shall be elected by a
majority of the Directors, and shall hold office for one year and until their
respective successors are elected and qualified, subject to removal at will by
the Board of Directors. In case of a vacancy in any of the general offices of
the Company, such vacancy may be filled by the vote of a majority of the Board
of Directors. Any two of the aforesaid offices may be filled by the same
person, with the exception of the offices of President and Vice President, and
President and Secretary.
SECTION 2. The Chairman of the Board shall preside at all meetings
of the shareholders and of the Board of Directors, but may designate any other
officer of the Company to so serve in his or her absence. The Chairman shall be
the Chief Executive Officer of the Company, shall have general and active
management of the business of the Company subject to the supervision of the
Board of Directors, and shall see that all orders and resolutions of the Board
of Directors are carried into effect. The Chairman shall also perform such
other duties as shall be prescribed from time to time by the Board of Directors.
SECTION 3. The President shall have general administrative control
and supervision over the operations of the Company, subject to the supervision
of the Chairman of the Board. The President shall, in the absence or inability
of the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board, shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Company, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Company, and shall also perform
such other duties as may properly belong to the office or as shall be prescribed
from time to time by the Chairman of the Board or by the Board of Directors.
SECTION 4. Each Vice President shall have such powers and shall
perform such duties as may be assigned by the Chairman of the Board or by the
Board of Directors. In the absence or in the case of the inability of the
Chairman of the Board or the President to act, the Board of Directors may
designate which one of the Vice Presidents shall be the acting Chief Executive
Officer of the Company during such absence or inability, whereupon such acting
Chief Executive Officer shall have all the powers and perform all of the duties
incident to the office of the Chairman during the absence or inability of the
Chairman and President to act.
SECTION 5. The Secretary shall keep the minutes of all meetings of
the Board of Directors, and of all meetings of the shareholders, in books
provided by the Company for such purpose. The Secretary shall attend to the
giving of all notices of meetings of the Board of Directors or shareholders.
The Secretary may sign with the Chairman of the Board, the President or a Vice
President, in the name of the Company,
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when authorized by the Board of Directors so to do, all contracts and other
instruments requiring the seal of the Company and may affix the seal thereto.
The Secretary shall, in general, perform all of the duties which are incident to
the office of Secretary and such other duties as the Board of Directors or
Chairman of the Board may from time to time prescribe.
SECTION 6. The Treasurer shall deposit the monies of the Company
in the Company's name in depositories designated by the Board of Directors, or
by such person or persons as shall be designated for that purpose by the Board
of Directors. The Treasurer shall, in general, perform all of the duties which
are incident to the office of Treasurer and such other duties as the Board of
Directors or Chairman of the Board may from time to time prescribe. The Board
of Directors may, in its discretion, require the Treasurer to give bond for the
faithful discharge of his duties.
ARTICLE III
SHAREHOLDER'S MEETING
SECTION 1. The annual meeting of the shareholders shall be held at
the principal office of the Company in Northfield Township, Cook County,
Illinois, or at such other location within or without the State of Illinois as
may be set forth in the notice of call, on the third Tuesday in February of each
year, except when such day shall be a legal holiday, in which case the meeting
shall be held on the next succeeding business day. The Chairman or the Board of
Directors may at any time call a special meeting of the shareholders, and the
Chairman shall call such special meeting when so requested, in writing, by the
owners of not less than one-fifth of the outstanding share of the Company.
SECTION 2. Notice of every meeting of the shareholders shall be
given by mailing notice thereof at least ten days before such meeting to all the
shareholders at their respective post office addresses last furnished by them,
respectively, to the Company. The shareholders may waive notice of any such
meeting, in writing, and the presence of a shareholder, either in person or by
proxy, shall be considered a waiver of notice, except as otherwise provided by
law.
SECTION 3. The presence at such meeting, in person or by proxy, of
shareholders of the Company representing at least fifty-one percent of the then
outstanding shares of the Company, shall be necessary to constitute a quorum for
the purpose of transacting business, except as otherwise provided by law, but a
smaller number may adjourn the meeting from time to time until a quorum shall be
obtained. Each shareholder shall be entitled to cast one vote in person or by
proxy for each share of stock of the Company held and of record in such
shareholder's name on the books of the Company.
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ARTICLE IV
SHARES
SECTION 1. Share certificates shall be signed by the Chairman or a
Vice President and countersigned by the Secretary, shall be sealed with the
corporate seal of the Company, and shall be registered upon the Share Register
of the Company. Each certificate shall express on its face the name of the
Company, the number of the certificate, the number of shares for which it is
issued, the name of the person to whom it is issued, the par value of each of
the said shares, and the amount actually received by the Company for each share
represented by said certificate.
SECTION 2. Transfer of shares of the Company shall be made only on
the books of the Company by the holder thereof in person or by an attorney duly
authorized, in writing, and upon the surrender of the certificates or
certificate for the share transfer, upon which surrender and transfer new
certificates will be issued. The Board of Directors may, by resolution, close
the share transfer books of the Company for a period not exceeding ten days
before the holding of any annual or special meeting of the shareholders. The
Board of Directors may, by resolution, also close the transfer books of the
Company for a period not exceeding ten days before the payment of any dividends
which may be declared upon the shares of the Company.
ARTICLE V
INSURANCE POLICES
SECTION 1. All policies of insurance issued by this Company shall
comply with the laws of the respective states or territories in which the
policies are issued. All policies of insurance issued by this Company shall be
signed, either manually or by facsimile, by the President and the Secretary or
by such other officer or officers as the Chairman may designate, and shall be
countersigned by a duly licensed resident agent where so required by law or
regulation.
ARTICLE VI
MISCELLANEOUS
SECTION 1.
(a) As used in this Article:
(i) "acted properly" as to any person shall mean that such person
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(A) acted in good faith;
(B) acted in a manner not clearly opposed to any written policy
of the Company or which such person reasonably believed to
be in the best interests of the Company; and
(C) with respect to any criminal action or proceeding, had no
reasonable cause to believe that such person's conduct was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act properly.
(ii) "agent" shall mean any person who is or was
(A) a Director, officer or employee of the Company and/or any
subsidiary;
(B) a trustee or a fiduciary under any employee pension, profit
sharing, welfare or similar plan or trust of the Company
and/or any subsidiary;
(C) serving at the request of the Company as a Director, officer
and/or employee of or in a similar capacity in another
corporation, partnership, joint venture, trust or other
enterprise, (which shall, for the purpose of this Article be
deemed to include not-for-profit or for-profit entities of
any type), whether acting in such capacity or in any other
capacity including, without limitation, as a trustee or
fiduciary under any employee pension, profit sharing,
welfare or similar plan of trust.
(iii) "expenses" shall include attorneys' fees and any expenses of
establishing a right to indemnification under this Article.
(iv) "proceeding" shall mean any threatened, pending or completed
action or completed action or proceeding, whether civil or
criminal, and whether judicial, legislative or administrative and
shall include investigative action by any person or body.
(v) "subsidiary" shall mean a corporation, 50% or more of the shares
of which at the time outstanding having voting power for the
election of Directors, is owned directly or indirectly by the
Company, or by
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one or more subsidiaries, or by the Company and one or more
subsidiaries.
(b) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action
by or in the right of the Company) by reason of the fact that such
person is or was an agent, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such
person in connection with such proceeding, if such person acted
properly.
(c) The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by or in the right of
the Company to procure a judgment in its favor by reason of the fact
that such person is or was an agent, against amounts paid in
settlement and against expenses actually and reasonably incurred in
connection with the defense or settlement of such proceeding, if such
person acted properly, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of duty to the Company, unless and only to the extent that
the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as such court shall
deem proper.
(d) Expense incurred in defending a proceeding shall be paid by the
Company to or on behalf of an agent in advance of the final
disposition of such proceeding if:
(i) there is a reasonable basis to believe that such agent may be
entitled to indemnification under this Article;
(ii) such advance payments would not result in undue financial
hardship to the Company; and
(iii) the Company shall have received an undertaking by or on behalf of
such agent to repay such amount unless it shall ultimately be
determined that such agent is entitled to be indemnified by the
Company as authorized in this Article.
(e) Any indemnification or advance under paragraphs (b), (c) or (d) of
this Article (unless ordered by a court) shall be made by the Company
only as authorized in the specific proceeding upon a determination
that
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indemnification or advancement to such person is proper in the circumstances.
Such determination shall be made:
(i) by the Chairman and General Counsel, so long as neither was made
a party to such proceeding, or
(ii) if the Chairman or General Counsel was made a party, by the Board
of Directors, by a majority vote of a quorum consisting of
Directors who were not made parties to such proceedings, or
(iii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or
(iv) if a quorum of disinterested Directors is not obtainable, or if a
majority of the disinterested Directors so directs, by the
shareholders.
(f) The Company shall indemnify or advance funds to any person described
in Section (a)(ii)(c), only after such person shall have sought
indemnification or an advance from the Company, partnership, joint
venture, trust or other enterprise in which such person was serving at
the Company's request, shall have failed to receive such
indemnification or advance, and shall have assigned irrevocably to the
Company any right to receive indemnification which such person might
be entitled to assert against such other corporation, partnership,
joint venture, trust or other enterprise.
(g) The indemnification provided to an agent by this Article:
(i) shall not be deemed exclusive of any other rights to which such
agent may be entitled by law or under any articles of
incorporation, by-law, agreement, vote of shareholders or
disinterested Directors or otherwise; and
(ii) shall inure to the benefit of the legal representatives of such
agent or such agent's estate, whether such representatives are
court-appointed or otherwise designated, and to the benefit of
the heirs of such agent.
(h) The indemnification and advances provided to an agent by this Article
shall extend to and include claims for such payments arising out of
any proceeding commenced or based on actions of an agent taken prior
to the
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effective date of this Article, provided that payment of such claims had not
been agreed to or denied by the Company at the effective date.
(i) The Company shall have power to purchase and maintain insurance on
behalf of any agent against any liability asserted against and
incurred by such agent as agent or arising out of status as such,
whether or not the Company would have the power to indemnify against
such liability under the provisions of this Article. The Company
shall also have power to purchase and maintain insurance to indemnify
the Company for any obligation which it may incur as a result of the
indemnification of agents under the provisions of this Article.
(j) The invalidity or unenforceability of any provision in this Article
shall not affect the validity or enforceability of the remaining
provisions of this Article.
SECTION 2. The fiscal year of the Company shall commence in each
year on the first day of January and terminate on the thirty-first day of
December of each year.
SECTION 3. The common seal of the Company shall be circular in
form and shall contain the name of the Company and the words: "CORPORATE SEAL"
and "ILLINOIS".
SECTION 4. These By-Laws may be amended or repealed by the vote of
a majority of the Directors present at any meeting at which a quorum is present.
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REINSURANCE AGREEMENT
BETWEEN
GLENBROOK LIFE AND ANNUITY COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "ALLSTATE")
ARTICLE I
BASIS OF REINSURANCE
1. ALLSTATE will indemnify and GLENBROOK will automatically reinsure with
ALLSTATE, according to the terms and conditions hereof, the net liability
for applications received and contracts issued subsequent to the Effective
Date by GLENBROOK on the contracts listed in Schedule A.
2. The indemnity reinsurance provided hereunder shall be on a modified
coinsurance basis. GLENBROOK shall retain, maintain, and own all assets
held in relation to the Reserve, as defined in Article II of this
Agreement.
3. In no event will reinsurance on an application or a policy under this
Agreement be in force unless the corresponding application is pending with
GLENBROOK or policy issued by GLENBROOK, or the reinsurance accepted by
GLENBROOK, as the case may be, is in force.
ARTICLE II
LIABILITY OF ALLSTATE
1. The liability of ALLSTATE with respect to any contract reinsured hereunder
will begin simultaneously with that of GLENBROOK. ALLSTATE'S liability
with respect to any contract reinsured hereunder will terminate on the date
GLENBROOK'S liability on such contract terminates or the date this
Agreement is terminated, whichever is earlier. However, termination of
this Agreement will not terminate ALLSTATE'S liability for benefit payments
incurred prior to the date of termination.
<PAGE>
2. For the purpose of this Agreement, the term "Reserve" will be the "Total
Liabilitites" of GLENBROOK'S Variable Annuity Separate Accounts
(corresponding to amounts shown on page 3, line 17 of 1992 Separate
Accounts Statutory Statements).
ARTICLE III
MONTHLY SETTLEMENTS
1. While this Agreement is in effect, GLENBROOK shall pay to ALLSTATE on a
daily basis, with respect to eligible policies under this Agreement, a
reinsurance premium equal to the sum of Items (a) and (b) below, less the
sum of Items (c) and (d) below.
(a) Gross premiums (direct and reinsurance assumed) collected by
GLENBROOK.
(b) Reserves transferred from the GLENBROOK General Account to a GLENBROOK
Separate Account.
(c) Gross premiums refunded by GLENBROOK to policyholders.
(d) Reserves transferred from a GLENBROOK Separate Account to the
GLENBROOK General Account.
2. While this Agreement is in effect, ALLSTATE shall pay to GLENBROOK on a
daily basis a benefit and expense allowance equal to the sum of Items (a),
(b), (c) and (d) below.
(a) Net benefits (as defined in Paragraph 3 of this Article III) paid by
GLENBROOK with respect to the contracts reinsured under this
Agreement.
(b) Commissions and other sales compensation incurred by GLENBROOK with
respect to the contracts reinsured under this Agreement.
(c) General insurance expenses incurred by GLENBROOK with respect to the
contracts reinsured under this Agreement.
(d) Insurance taxes, licenses and fees (excluding Federal Income Tax)
incurred by GLENBROOK with respect to the contracts reinsured under
this Agreement.
3. Net Benefits are defined as follows:
(a) For a contract issued directly by GLENBROOK and reinsured under this
Agreement, net benefits are the actual amounts payable by GLENBROOK to
the
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contractholder, less any amounts payable to GLENBROOK by another
reinsurer with respect to the contract. These payments include death
benefits, endowment benefits, annuity benefits, disability benefits,
benefits under A & H policies, withdrawals, surrender benefits and
payments on supplementary contracts with and without life
contingencies.
(b) For contracts reinsured by GLENBROOK and retroceded under this
Agreement, net benefits and commission and expense allowances are the
actual amounts payable by GLENBROOK to the ceding company with respect
to the contract reinsured by GLENBROOK.
4. Allstate shall pay to GLENBROOK, no less frequently than annually, any
taxes incurred by GLENBROOK as a result of Section 848 of the Internal
Revenue Code which concerns capitalization of policy acquisition costs.
ARTICLE IV
DAILY RESERVE ADJUSTMENTS
While this Agreement is in effect, on a daily basis a reserve adjustment equal
to the amount defined below shall be paid.
Let:
RC = The Reserve change in GLENBROOK'S Variable Annuity
Separate Accounts from the end of the prior
accounting period to the end of the current
accounting period for the reinsured contracts
(corresponding to the sum of the amounts on page
4, lines 10, 11, 12 and 13 of 1992 Separate
Account Statutory Statements).
NII = The net investment income in GLENBROOK'S
Variable Annuity Separate Accounts
(corresponding to the sum of the amounts
on page 4, line 2 of 1992 Separate
Account Statutory Statements), minus
interest income on GLENBROOK'S capital
investment in the Separate Accounts.
If RC is greater than NII then a reserve adjustment of RC-NII is payable by
ALLSTATE to GLENBROOK.
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If NII is greater than RC, then a reserve adjustment of NII-RC is payable
by GLENBROOK to ALLSTATE.
ARTICLE V
OVERSIGHTS
ALLSTATE shall be bound as GLENBROOK is bound, and it is expressly understood
and agreed that if failure to reinsure or failure to comply with any terms of
this Agreement is shown to be unintentional and the result of misunderstanding
or oversight on the part of either GLENBROOK or ALLSTATE, both GLENBROOK and
ALLSTATE shall be restored to the positions they would have occupied had such
error or oversight not occurred.
ARTICLE VI
INSPECTION OF RECORDS
GLENBROOK and ALLSTATE shall have the right, at any reasonable time, to examine
at the office of the other, any books, documents, reports or records which
pertain in any way to the contracts reinsured under this Agreement.
ARTICLE VII
INSOLVENCY
1. In the event of the insolvency of GLENBROOK, reinsurance hereunder is
payable by ALLSTATE on the basis of its liability hereunder without
diminution because of the insolvency of GLENBROOK.
2. Further, in the event of the insolvency of GLENBROOK, the liquidator,
receiver or statutory successor of the insolvent GLENBROOK shall give
written notice to ALLSTATE of the pendency of any obligation of the
insolvent GLENBROOK on any policy reinsured, whereupon ALLSTATE may
investigate such claim and interpose at its own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses which it may
deem available to GLENBROOK or its liquidator or statutory successor. The
expense thus incurred by ALLSTATE shall be chargeable, subject to court
approval, against the insolvent GLENBROOK as part of the expenses of
liquidation
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to the extent of a proportionate share of the benefit which may accrue to
GLENBROOK solely as a result of the defense undertaken by ALLSTATE.
3. All moneys due GLENBROOK or ALLSTATE under this agreement shall be offset
against each other, dollar for dollar, regardless of any insolvency of
either party.
ARTICLE VIII
ARBITRATION
Any dispute arising with respect to this Agreement which is not settled by
mutual agreement of the parties shall be referred to arbitration. Within twenty
(20) days from receipt of written notice from one party that an arbitrator has
been appointed, the other party shall also name an arbitrator. The two
arbitrators shall choose a third arbitrator and shall forthwith notify the
contracting parties of such choice. Each arbitrator shall be a present or
former officer of a life insurance company and should have no present or past
affiliation with this Agreement or with either party. The arbitrators shall
consider this Agreement as an honorable engagement rather than merely as a legal
obligation, and shall be relieved of all judicial formalities. The decision of
the arbitrators shall be final and binding upon the parties hereto. Each party
shall bear the expenses of its own arbitrator and shall jointly and equally bear
the expenses of the third arbitrator and of the arbitration. Any such
arbitration shall take place at the Home Office of GLENBROOK, unless some other
location is mutually agreed upon.
ARTICLE IX
PARTIES TO AGREEMENT
This Agreement is solely between GLENBROOK and ALLSTATE. The acceptance of
reinsurance hereunder shall not create any right or legal relation whatever
between ALLSTATE and any party in interest under any contract of GLENBROOK
reinsured hereunder. GLENBROOK shall be and remain solely liable to any
insured, contract owner, or beneficiary under any contract reinsured hereunder.
ARTICLE X
5
<PAGE>
DURATION OF AGREEMENT
This agreement will be effective as of September 1st, 1993, and will be
unlimited as to its duration; provided, however, it may be terminated with
respect to the reinsurance of new business by either party giving the other
party sixty (60) days prior written notice of termination.
ARTICLE XI
ENTIRE AGREEMENT
This Agreement constitutes the entire contract between ALLSTATE and GLENBROOK.
No variation, modification or changes to this Agreement shall be binding unless
in writing and signed by an officer of each party.
IN WITNESS HEREOF, the parties to this Agreement have caused it to be duly
executed in duplicate by their respective officers on the dates shown below.
GLENBROOK LIFE AND ANNUITY COMPANY of Northbrook, Illinois
By __________________________________________
Title _______________________________________
Date ________________________________________
ALLSTATE LIFE INSURANCE COMPANY of Northbrook, Illinois
By __________________________________________
Title _______________________________________
Date ________________________________________
6
<PAGE>
SCHEDULE A
CONTRACTS SUBJECT TO REINSURANCE
Any annuity contract whose reserve is invested, in whole or in part, in any
account designated as a GLENBROOK Separate Account shall be reinsured under this
Agreement; provided, however, that the portion of any such contract which is not
so invested is not covered under this Agreement.
7
<PAGE>
AMENDMENT # 1 TO THE
REINSURANCE AGREEMENT
BETWEEN
GLENBROOK LIFE AND ANNUITY COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "ALLSTATE")
WHEREAS, Glenbrook and Allstate entered into a Coinsurance Agreement
(hereinafter "Agreement") having an effective date of June 5, 1992; and,
WHEREAS, the California Insurance Department has determined that various changes
to the Agreement are required under California insurance law; and,
WHEREAS, Glenbrook and Allstate desire to amend the Agreement with respect to
coverage issued to California residents to meet the California requirements;
NOW THEREFORE, the Agreement is hereby amended with respect to California
residents, as follows;
1.) Article VIII, "INSOLVENCY", is hereby amended by deleting said Article
in its entirety, and replacing it with the following new Article VIII.
ARTICLE VIII
INSOLVENCY
1. The portion of any risk or obligation assumed by Allstate, when such
portion is ascertained, shall be payable on demand of Glenbrook at the
same time as Glenbrook shall pay its net retained portion of such risk
or obligation, and the reinsurance shall be payable by Allstate on the
basis of the liability of Glenbrook under the contract or contracts
reinsured under this Agreement without diminution because of the
insolvency of Glenbrook. In the event of insolvency and the
appointment of a conservator, liquidator or statutory successor of
Glenbrook, such portion shall be payable to such conservator,
liquidator or statutory successor immediately upon demand, on the
basis of claims allowed against
<PAGE>
Glenbrook by any court of competent jurisdiction or, by any
conservator, liquidator, or statutory successor of Glenbrook having
authority to allow such claims, without diminution because of such
insolvency or because such conservator, liquidator or statutory
successor has failed to pay all or a portion of any claims. Payments
by Allstate as above set forth shall be made directly to Glenbrook or
its conservator, liquidator or statutory successor.
2. Further, in the event of the insolvency of Glenbrook, the liquidator,
receiver or statutory successor of the insolvent Glenbrook shall give
written notice to Allstate of the pendency of an obligation of the
insolvent Glenbrook on any policy reinsured, whereupon Allstate may
investigate such claim and interpose at its own expense, in the
proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to Glenbrook or its liquidator or
statutory successor. The expense thus incurred by Allstate shall be
chargeable, subject to court approval, against the insolvent Glenbrook
as part of the expenses of liquidation to the extent of a
proportionate share of the benefit which may accrue to Glenbrook
solely as a result of the defense undertaken by Allstate
2.) Article IX, ARBITRATION, shall be amended to include the following
language at the end of that article:
The decision of the Arbitrators shall be handed down within
45 days of the date on which the arbitration is concluded.
3.) The second paragraph of Article X, PARTIES TO THE AGREEMENT, shall be
deleted in its entirety and shall be replaced with the following language:
This Agreement shall be effective as of June 5, 1992, and
will be unlimited as to its duration; provided, however, it
may be terminated with respect to the reinsurance of new
business by either party giving the other party ninety (90)
days prior written notice of termination to the other party.
4.) In addition, a new Article XII is added to the Agreement, as follows:
ARTICLE XII
OFFSET
All monies due Glenbrook or Allstate under this Agreement shall be
offset against each other dollar for dollar.
<PAGE>
5.) Finally, a new Article XIII is added to the Agreement, as follows:
ARTICLE XIII
ENTIRE AGREEMENT
This Agreement constitutes the entire contract between ALLSTATE and
GLENBROOK. No variation, modification or changes to this Agreement
shall binding unless in writing and signed by an officer of each
party.
This Amendment shall be effective on ___________, 1995. Except as amended
hereby, the Agreement shall remain unchanged.
IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their respective officers on the dates shown
below.
GLENBROOK LIFE AND ANNUITY COMPANY ALLSTATE LIFE INSURANCE
COMPANY
By: ________________________ By: _______________________
Title: ________________________ Title: _______________________
Date: ________________________ Date: _______________________
<PAGE>
AMENDMENT # 2 TO THE
REINSURANCE AGREEMENT
BETWEEN
GLENBROOK LIFE AND ANNUITY COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "GLENBROOK")
AND
ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS
(HEREINAFTER "ALLSTATE")
IT IS HEREBY AGREED, that the Coinsurance Agreement effective June 5, 1992
between GLENBROOK and ALLSTATE (hereafter "Agreement"), is amended as follows;
1.) Schedule A, COVERAGES ELIGIBLE FOR REINSURANCE HEREUNDER, is hereby
amended by deleting said schedule in its entirety and replacing it with the
following Schedule A:
SCHEDULE A
COVERAGES ELIGIBLE FOR REINSURANCE HEREUNDER
1. All reinsurance accepted by GLENBROOK on or after the Effective Date of
this Agreement.
2. Coverages eligible for reinsurance shall be limited to any policy
whose reserve is invested, in whole or in part, in the GLENBROOK
General Account, except for those policies described in paragraph 3,
below; provided, however, that the portion of any such policy which is
not so invested is not so covered under this Agreement.
3. Policies which are registered with the Securities and Exchange
Commission and which are sold to a pension plan as the term "pension
plan" is defined under the Employee Retirement Income Security Act of
1974, including, but not limited to, pension plans qualified under
401(a), 401(k), and 403(b) of the Internal Revenue Code, shall not
be considered coverages eligible for reinsurance under this Agreement.
<PAGE>
2.) This Amendment shall be effective September 1, 1995.
Except as amended hereby, the Agreement shall remain unchanged.
IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be
duly executed in duplicate by their respective officers on the dates shown
below.
GLENBROOK LIFE AND ANNUITY COMPANY ALLSTATE LIFE INSURANCE
COMPANY
By: ________________________ By: _______________________
Title: ________________________ Title: _______________________
Date: ________________________ Date: _______________________
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
GLENBROOK LIFE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
ALLSTATE LIFE FINANCIAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
- - ----------- ----
Section 1. Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 AVAILABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS. . . . . . . . . . . . . 2
1.3 NO SALES TO THE GENERAL PUBLIC . . . . . . . . . . . . . . . . . . . 3
Section 2. Processing Transactions. . . . . . . . . . . . . . . . . . . . . . 3
2.1 TIMELY PRICING AND ORDERS. . . . . . . . . . . . . . . . . . . . . . 3
2.2 TIMELY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 APPLICABLE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . 4
2.5 BOOK ENTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 PARTIES TO COOPERATE . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 TAX LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 INSURANCE AND CERTAIN OTHER LAWS . . . . . . . . . . . . . . . . . . 8
4.3 SECURITIES LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. . . . . . . . 9
4.5 GLENBROOK OR THE UNDERWRITER TO PROVIDE DOCUMENTS; INFORMATION ABOUT
AVIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT GLENBROOK AND THE
UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . .12
5.1 GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.2 DISINTERESTED DIRECTORS. . . . . . . . . . . . . . . . . . . . . . .12
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS . . . . . . . . . .12
5.4 CONFLICT REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . .13
5.5 NOTICE TO GLENBROOK. . . . . . . . . . . . . . . . . . . . . . . . .15
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS. . . . . . . . . . . . .15
5.7 COMPLIANCE WITH SEC RULES. . . . . . . . . . . . . . . . . . . . . .15
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES . . . . . . . . . . . . .15
i
<PAGE>
Section 6. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
6.1 EVENTS OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . .16
6.2 NOTICE REQUIREMENT FOR TERMINATION . . . . . . . . . . . . . . . . .17
6.3 FUNDS TO REMAIN AVAILABLE. . . . . . . . . . . . . . . . . . . . . .17
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS. . . . . . . . . . . . .18
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES. . . . . . . . . . . .18
Section 7. Parties To Cooperate Respecting Termination. . . . . . . . . . . .18
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 9. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . .19
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . .20
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . .20
12.1 OF AVIF BY GLENBROOK AND THE UNDERWRITER . . . . . . . . . . . . . .20
12.2 OF GLENBROOK AND THE UNDERWRITER BY AVIF AND AIM . . . . . . . . . .22
12.3 EFFECT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . .25
12.4 SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 13. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . .26
Section 15. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . .26
Section 17. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________, 1995
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM");
Glenbrook Life and Annuity Company, an Illinois life insurance company
("Glenbrook"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and Allstate Life
Financial Services, Inc., a Delaware corporation and the principal underwriter
of the Contracts and Policies referred to below ("Underwriter") (collectively,
the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of nine separate series, shares ("Shares")
of each of which are registered under the Securities Act of 1933, as amended
(the "1933 Act") and are currently sold to one or more separate accounts of life
insurance companies to fund benefits under variable annuity contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, AIM currently serves as the distributor for the Shares; and
WHEREAS, Glenbrook will be the issuer of certain variable annuity contracts
("Contracts") and/or variable life insurance policies ("Policies") as set forth
on Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts and Policies (hereinafter collectively, the "Policies"), if required
by applicable law, will be registered under the 1933 Act; and
WHEREAS, the Accounts may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires); and
WHEREAS, Glenbrook will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom),
1
<PAGE>
and the security interests deemed to be issued by the Accounts under the
Policies will be registered as securities under the 1933 Act (or exempt
therefrom);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, Glenbrook intends to purchase Shares in one or more of the Funds on
behalf of the Accounts to fund the Policies PROVIDED, that AVIF implements Mixed
and Shared Funding, described below, pursuant to an exemptive order from the SEC
or otherwise;
WHEREAS, the Underwriter is a broker-dealer registered with the SEC under
the Securities and Exchange Act of 1934 (the "1934 Act") and a member in good
standing of the National Association of Securities, Inc. ("NASD"); and
WHEREAS, the Underwriter intends to enter into Selling Group Agreements
with entities that may legally sell the Policies (the "Selling Group Members");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to Glenbrook for purchase and
redemption at net asset value and with no sales charges, subject to the terms
and conditions of this Agreement. The Board of Directors of AVIF may refuse to
sell Shares of any Fund to any person, or suspend or terminate the offering of
Shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Directors
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, such action is deemed in the best interests of the
shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
2
<PAGE>
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
Glenbrook with the net asset value per Share for each Fund by 6:00 p.m. Central
time on each Business Day. As used herein, "Business Day" shall mean any day on
which (i) the New York Stock Exchange is open for regular trading and (ii) AVIF
calculates the Fund's net asset value.
(b) Glenbrook will use the data provided by AVIF each Business Day pursuant
to paragraph (a) immediately above to calculate Account unit values and to
process transactions that receive that same Business Day's Account unit values.
Glenbrook will perform such Account processing the same Business Day, and will
place corresponding orders to purchase or redeem Shares with AVIF by 9 a.m.
Central time the following Business Day; PROVIDED, however, that AVIF shall
provide additional time to Glenbrook in the event that AVIF is unable to meet
the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional
time shall be equal to the additional time that AVIF takes to make the net asset
values available to Glenbrook.
(c) Each order to purchase or redeem Shares will separately describe the
amount of Shares of each Fund to be purchased, redeemed or exchanged and will
not be netted; PROVIDED, however, with respect to payment of the purchase price
by Glenbrook and of redemption proceeds by AVIF, Glenbrook and AVIF shall net
purchase and redemption orders with respect to each Fund and shall transmit one
net payment per Fund in accordance with Section 2.2, below. Each order to
purchase or redeem Shares shall also specify whether the order results from
purchase payments, surrenders, partial withdrawals, routine withdrawals of
charges, or requests for other transactions under Policies (collectively,
"Policy transactions").
(d) If AVIF provides materially incorrect Share net asset value
information, Glenbrook shall be entitled to an adjustment to the number of
Shares purchased or redeemed to reflect the correct net asset value per Share.
Any material error in the calculation or reporting of net asset value per Share,
dividend or capital gain information shall be reported promptly upon discovery
to Glenbrook. Materiality shall be determined in accordance with standards
established by AVIF as provided in Schedule B, attached hereto and incorporated
herein. Schedule B may be modified by AVIF as approved by Glenbrook, provided
that such approval shall not be unreasonably withheld in
3
<PAGE>
consideration of (1) AVIF's need to comply with any SEC rulings, regulations or
interpretations, (2) AVIF's desire to have standards consistent with those of
other mutual funds advised by A I M Advisors, Inc. or its affiliates, and (3)
AVIF's desire to conform to general industry practices.
2.2 TIMELY PAYMENTS.
Glenbrook will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by Glenbrook by 1:00 p.m. Central Time on
the same day as the Order is placed, to the extent practicable, but in any event
within five calendar days after the date the order is placed in order to enable
Glenbrook to pay redemption proceeds within the time specified in Section 22(e)
of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase and redemption orders that result from Policy
transactions and that Glenbrook receives prior to the close of regular trading
on the New York Stock Exchange on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF or its
designated agent of the orders. For purposes of this Section 2.3(a), Glenbrook
shall be the designated agent of AVIF for receipt of orders relating to Policy
transactions on each Business Day and receipt by such designated agent shall
constitute receipt by AVIF; PROVIDED, that AVIF receives notice of such orders
by 9 a.m. Central time on the next following Business Day or such later time
computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by Glenbrook will be effected
at the net asset values of the appropriate Funds next computed after receipt by
AVIF or its designated agent of the order therefor, and such orders will be
irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice promptly to Glenbrook of any income dividends or
capital gain distributions payable on the Shares of any Fund. Glenbrook hereby
elects to reinvest all dividends and capital gains distributions in additional
Shares of the corresponding Fund at the ex-dividend date net asset values until
Glenbrook otherwise notifies AVIF in writing, it being agreed by the Parties
that the ex-dividend date and the payment date with respect to any dividend or
distribution will be the same Business Day. Glenbrook reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash.
4
<PAGE>
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to Glenbrook. Shares ordered from AVIF will be
recorded in an appropriate title for Glenbrook, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule B, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified and
will continue to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
AVIF will notify Glenbrook immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will
notify Glenbrook immediately upon having a reasonable basis for believing that a
Fund has ceased to so comply or that a Fund might not so comply in the future.
5
<PAGE>
(c) Glenbrook agrees that if the Internal Revenue Service ("IRS") asserts
in writing in connection with any governmental audit or review of Glenbrook or,
to Glenbrook's knowledge, of any Participant, that any Fund has failed to comply
with the diversification requirements of section 817(h) of the Code or Glenbrook
otherwise becomes aware of any facts that could give rise to any claim against
AVIF or its affiliates as a result of such a failure or alleged failure to so
comply with section 817(h) (hereinafter respectively referred to in this
paragraph (c) as "failure" or "alleged failure"):
(i) Glenbrook shall promptly notify AVIF of such assertion or potential
claim;
(ii) Glenbrook shall consult with AVIF as to how to minimize any liability
that may arise as a result of such failure or alleged failure;
(iii) Glenbrook shall use its best efforts to minimize any liability of
AVIF or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-
5(a)(2), to the Commissioner of the IRS that such failure was inadvertent,
PROVIDED that Glenbrook shall not be required to make any such
demonstration of inadvertence unless AVIF represents or provides an opinion
of counsel, which representation or opinion shall be reasonably
satisfactory to Glenbrook, to the effect that a reasonable basis exists
for making such a demonstration;
(iv) Glenbrook shall permit AVIF, its affiliates and their legal and
accounting advisors to attend, advise and otherwise assist Glenbrook (which
assistance Glenbrook shall consider and/or accept in good faith) with
respect to any conferences, settlement discussions or other administrative
or judicial proceeding or contests (including judicial appeals thereof)
with the IRS, any Participant or any other claimant regarding any claims
that could give rise to liability to AVIF or its affiliates as a result of
such a failure or alleged failure, PROVIDED that Glenbrook shall control,
in good faith, the conduct of such conferences, discussions, proceedings,
or contests or appeals thereof;
(v) any written materials to be submitted by Glenbrook to the IRS, any
Participant or any other claimant in connection with any of the foregoing
proceedings or contests (including, without limitation, any such materials
to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-
5(a)(2)), (a) shall be provided by Glenbrook to AVIF (together with any
supporting information or analysis) at least ten (10) business days, or
such shorter period to which the Parties hereto may from time to time
agree, prior to the day on which such proposed materials are to be
submitted and (b) shall not be submitted by Glenbrook to any such person
without the express written consent of AVIF which shall not be unreasonably
withheld;
(vi) Glenbrook shall provide AVIF or its affiliates and their accounting
and legal advisors with such cooperation as AVIF shall reasonably request
(including, without limitation, by
6
<PAGE>
providing AVIF and its accounting and legal advisors with copies of any relevant
books and records (or portions thereof) of Glenbrook reasonably requested by or
on behalf of AVIF) in order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the preceding clause or its
assessment of the validity or amount of any claim against its arising from such
a failure or alleged failure;
(vii) Glenbrook shall not with respect to any claim of the IRS or any
Participant that would give rise to a claim against AVIF or its affiliates
(a) compromise or settle any claim, (b) accept any adjustment on audit, or
(c) forego any allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which shall not be
unreasonably withheld, PROVIDED that Glenbrook shall not be required, after
exhausting all administrative remedies, to appeal any adverse IRS or
judicial decision unless AVIF or its affiliates shall have provided an
opinion of counsel approved by Glenbrook, which approval shall not be
unreasonably withheld, to the effect that a reasonable basis exists for
taking such appeal (or, in the case of an appeal to the United States
Supreme Court, that Glenbrook should be more likely than not to prevail on
such appeal), and PROVIDED FURTHER that each Party shall bear one-half of
the expenses of any judicial appeal; and
(viii) AVIF and its affiliates shall have no liability as a result of such
failure or alleged failure if Glenbrook fails to comply with any of the
foregoing clauses (i) through (vii), and such failure could be shown to
have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, Glenbrook may,
in its discretion, authorize AVIF or its affiliates to act in the name of
Glenbrook in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; PROVIDED that in no event shall Glenbrook have liability resulting
from AVIF's refusal to accept the proposed settlement or compromise with respect
to any failure caused by AVIF. As used in this Agreement, the term "affiliates"
shall have the same meaning as "affiliated person" as defined in Section 2(a)(3)
of the 1940 Act.
(d) Glenbrook represents and warrants that the Policies currently are and
will be treated as annuity, endowment, or life insurance contracts under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; Glenbrook will notify AVIF immediately upon having a
reasonable basis for believing that any of the Policies have ceased to be so
treated or that they might not be so treated in the future.
(e) Glenbrook represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. Glenbrook will use its best efforts to continue to meet such
definitional
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requirements, and it will notify AVIF immediately upon having a reasonable basis
for believing that such requirements have ceased to be met or that they might
not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF and AIM will use their best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by Glenbrook.
(b) Glenbrook represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the laws of the
State of Illinois and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 245.21 of the Illinois
Insurance Code and the regulations thereunder, and (iii) the Policies comply in
all material respects with all other applicable federal and state laws and
regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(e) The Underwriter represents and warrants that it is a Delaware
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power, authority, and legal right to
execute, deliver, and perform its duties and comply with its obligations under
this Agreement.
4.3 SECURITIES LAWS.
(a) Glenbrook and the Underwriter represent and warrant that (i) interests
in each Account pursuant to the Policies will be registered under the 1933 Act
to the extent required by the 1933 Act, (ii) the Policies will be duly
authorized for issuance and sold in compliance with all applicable federal and
state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940
Act and Illinois law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each
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Account's 1933 Act registration statement relating to the Policies, together
with any amendments thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and the rules thereunder, (vi) Glenbrook
will amend the registration statement for its Policies under the 1933 Act and
for its Accounts under the 1940 Act from time to time as required in order to
effect the continuous offering of its Policies or as may otherwise be required
by applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF and AIM represent and warrant that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will register and qualify its Shares for sale in accordance with
the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF and/or AIM will immediately notify Glenbrook of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the 1933
Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus, (iii) the initiation of any
proceedings for that purpose or for any other purpose relating to the
registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any Fund in
any state or jurisdiction, including, without limitation, any circumstances in
which (a) such Shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (b) such law
precludes the use of such Shares as an underlying investment medium of the
Policies issued or to be issued by Glenbrook. AVIF will make every reasonable
effort to prevent the issuance, with respect to any Fund, of any such stop
order, cease and desist order or similar order and, if any such order is issued,
to obtain the lifting thereof at the earliest possible time.
(b) Glenbrook and the Underwriter will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with
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respect to each Account's registration statement under the 1933 Act relating to
the Policies or each Account Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Account Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of each Account's interests pursuant to the
Policies, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. Glenbrook will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 GLENBROOK OR THE UNDERWRITER TO PROVIDE DOCUMENTS; INFORMATION ABOUT
AVIF.
(a) Glenbrook or the Underwriter will provide to AVIF or its designated
agent at least one complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Policies,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) The Underwriter will provide to AVIF or its designated agent with at
least one complete copy of each piece of sales literature or other promotional
material not prepared by AVIF or its affiliates, in which AVIF or any of its
affiliates is named, at least ten [10] Business Days prior to its use or such
shorter period as the Parties hereto may, from time to time, agree upon. No
such material shall be used if AVIF or its designated agent objects to such use
within ten [10] Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. AVIF hereby
designates its investment adviser as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to Glenbrook in the manner required by Section 9 hereof.
(c) Neither Glenbrook, the Underwriter, nor any of their respective
affiliates will give any information or make any representations or statements
on behalf of or concerning AVIF or its affiliates in connection with the sale of
the Policies other than (i) the information or representations contained in the
registration statement, including the AVIF Prospectus contained therein,
relating to Shares, as such registration statement and AVIF Prospectus may be
amended from time to time; or (ii) in reports or proxy materials for AVIF; or
(iii) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
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(d) Glenbrook and the Underwriter shall adopt and implement procedures
reasonably designed to ensure that information concerning AVIF and its
affiliates that is intended for use only by brokers or agents selling the
Policies (I.E., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither AVIF
nor any of its affiliates shall be liable for any losses, damages or expense
relating to the improper use of such broker only materials.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT GLENBROOK AND THE
UNDERWRITER.
(a) AVIF will provide to Glenbrook at least one complete copy of all SEC
registration statements, AVIF Prospectuses, reports, any preliminary and final
proxy material, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to AVIF or the Shares of a Fund,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) AVIF will provide to Glenbrook or the Underwriter camera ready or
computer diskette copies of all AVIF Prospectuses, proxy materials, periodic
reports to shareholders and other materials required by law to be sent to
Participants who have allocated any Policy value to a Fund. AVIF will provide
such copies to Glenbrook or the Underwriter in a timely manner so as to enable
Glenbrook or the Underwriter, as the case may be, to print and distribute such
materials within the time required by law to be furnished to Participants.
(c) AIM will provide to Glenbrook or its designated agent with at least
one complete copy of each piece of sales literature or other promotional
material in which Glenbrook, the Underwriter or any of their respective
affiliates is named, or that refers to the Policies, at least 10 Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. No such material shall be used if Glenbrook or its designated
agent objects to such use within 10 Business Days after receipt of such material
or such shorter period as the Parties hereto may, from time to time, agree upon.
Glenbrook shall receive all such sales literature until such time as it appoints
a designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning Glenbrook, the
Underwriter, each Account, or the Policies other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Policies, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
reports or voting instruction materials for each Account; or (iii) in sales
literature or other promotional material approved by Glenbrook or its
affiliates, except with the express written permission of Glenbrook.
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(e) AIM shall adopt and implement procedures reasonably designed to ensure
that information concerning Glenbrook, the Underwriter, and their respective
affiliates that is intended for use only by brokers or agents selling the
Policies (I.E., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither
Glenbrook, the Underwriter, nor any of their respective affiliates shall be
liable for any losses, damages or expense relating to the improper use of such
broker only materials.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
AVIF has applied for an order from the SEC exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable life insurance contracts, separate accounts
of insurance companies unaffiliated with Glenbrook, and trustees of qualified
pension and retirement plans (collectively, "Mixed and Shared Funding"). The
Parties recognize that the SEC has imposed terms and conditions for such orders
that are substantially identical to many of the provisions of this Section 5.
Sections 5.2 through 5.8 below shall apply, if and only if AVIF implements Mixed
and Shared Funding, pursuant to such an exemptive order or otherwise. AVIF
hereby notifies Glenbrook that, in the event that AVIF implements Mixed and
Shared Funding, it may be appropriate to include in the prospectus pursuant to
which a Policy is offered disclosure regarding the potential risks of Mixed and
Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of 45 days if the vacancy or vacancies may
be filled by the Board; (b) for a period of 60 days if a vote of shareholders is
required to fill the vacancy or vacancies; or (c) for such longer period as the
SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the participants
in all separate accounts of life
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insurance companies utilizing AVIF ("Participating Insurance Companies"),
including each Account. Glenbrook agrees to inform the Board of Directors of
AVIF of the existence of or any potential for any such material irreconcilable
conflict of which it is aware. The concept of a "material irreconcilable
conflict" is not defined by the 1940 Act or the rules thereunder, but the
Parties recognize that such a conflict may arise for a variety of reasons,
including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies; or
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants.
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, Glenbrook will assist the Board
of Directors in carrying out its responsibilities by providing the Board of
Directors with all information reasonably necessary for the Board of Directors
to consider any issue raised, including information as to a decision by
Glenbrook to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, Glenbrook will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from
AVIF or any Fund and reinvesting such assets in a different investment
medium, including
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another Fund of AVIF, or submitting the question whether such segregation should
be implemented to a vote of all affected Participants and, as appropriate,
segregating the assets of any particular group (E.G., annuity Participants, life
insurance Participants) that votes in favor of such segregation, or offering to
the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined
as a "management company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of Glenbrook's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Glenbrook may
be required, at AVIF's election, to withdraw each Account's investment in AVIF
or any Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after AVIF
gives notice to Glenbrook that this provision is being implemented, and until
such withdrawal AVIF shall continue to accept and implement orders by Glenbrook
for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Glenbrook conflicts with the
majority of other state regulators, then Glenbrook will withdraw each Account's
investment in AVIF within six months after AVIF's Board of Directors informs
Glenbrook that it has determined that such decision has created a material
irreconcilable conflict (after consideration of the interests of all
Participants), and until such withdrawal AVIF shall continue to accept and
implement orders by Glenbrook for the purchase and redemption of Shares of AVIF.
(d) Glenbrook agrees that any remedial action taken by it in resolving any
material irreconcilable conflict will be carried out at its expense and with a
view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Policies.
Glenbrook will not be required by the terms hereof to establish a new funding
medium for any Policies if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
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5.5 NOTICE TO GLENBROOK.
AVIF will promptly make known in writing to Glenbrook the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Glenbrook and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive application filed with the SEC to permit Mixed and Shared Funding, and
said reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
Board of Directors or other appropriate records, and such minutes or other
records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 REQUIREMENTS FOR OTHER INSURANCE COMPANIES.
AVIF will require that each Participating Insurance Company enter into an
agreement with AVIF that contains in substance the same provisions as are set
forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this
Agreement.
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SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of AVIF or Glenbrook upon the approval by (i) a majority
of the Disinterested Directors or (ii) a majority vote of the Shares of the
affected Fund that are held in the corresponding Subaccount of an Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Shares in accordance with Participant instructions); or
(b) at the option of AVIF or AIM upon institution of formal proceedings
against Glenbrook or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding Glenbrook's obligations under
this Agreement or related to the sale of the Policies, the operation of each
Account, or the purchase of Shares, if, in each case, AVIF reasonably determines
that such proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences on the Fund
with respect to which the Agreement is to be terminated; or
(c) at the option of Glenbrook upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, Glenbrook
reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on Glenbrook, or the Subaccount corresponding to the Fund
with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by Glenbrook; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of Glenbrook if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
Glenbrook reasonably believes that the Fund may fail to so qualify;
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(g) at the option of Glenbrook if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if Glenbrook
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF or AIM if the Policies issued by Glenbrook cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Policies are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Section 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Section 6.1(b) or Section 6.1(c) hereof, such prior written notice shall be
given at least ninety (90) days in advance of the effective date of termination
unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Section 6.1(d), Section 6.1(f), Section 6.1(g), Section 6.1(h) or Section 6.1(i)
hereof, such prior written notice shall be given as soon as possible within
twenty-four (24) hours after the terminating Party learns of the event causing
termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Except (a) as necessary to implement Participant-initiated transactions,
(b) as required by state insurance laws or regulations, (c) as required pursuant
to Section 5 of this Agreement, or (d) with respect to any Fund as to which this
Agreement has terminated pursuant to Section 6.1 hereof, Glenbrook shall not (i)
redeem AVIF Shares attributable to the Policies (as opposed to AVIF Shares
attributable to Glenbrook's assets held in each Account), or (ii) prevent
Participants from allocating
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payments to or transferring amounts from a Fund that was otherwise available
under the Policies, until six (6) months after Glenbrook shall have notified
AVIF of its intention to do so and until 36 full calendar months shall have
expired from the date on which an Account first invested in any Fund.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date
as of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that Glenbrook may, by written notice shorten said six (6) month period in the
case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
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SECTION 9. NOTICES
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
Glenbrook Life and Annuity Company
3100 Sanders Road, Suite J5D
Northbrook, Illinois 60062
Facsimile: (708) 402-3781
Attn: Michael Velotta, Esq.
Allstate Life Financial Services, Inc.
3100 Sanders Road, Suite J5B
Northbrook, Illinois 60062
Facsimile: (708) 402-3781
Attn: John Hedrick, Esq.
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Glenbrook will distribute all proxy material furnished by AVIF to Participants
to whom pass-through voting privileges are required to be extended and will
solicit voting instructions from Participants. Glenbrook will vote Shares in
accordance with timely instructions received from Participants.
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Glenbrook will vote Shares that are (a) not attributable to Participants or (b)
attributable to Participants, but for which no timely instructions have been
received, in the same proportion as Shares for which said instructions have been
received from Participants. Neither Glenbrook nor any of its affiliates will in
any way recommend action in connection with or oppose or interfere with the
solicitation of proxies for the Shares held for such Participants, provided,
however, that AVIF acknowledges that Glenbrook may disregard Participant voting
instructions to the extent permitted by Rules 6e-2 and 6e-3(T) under the 1940
Act. Neither Glenbrook nor any of its affiliates will in any way recommend
action in connection with or oppose or interfere such Participants, except with
respect to matters as to which Glenbrook has the right, under Rule 6e-2 or 6e-
3(T) under the 1940 Act, to vote the Shares without regard to voting
instructions from Participants. Glenbrook reserves the right to vote shares
held in any Account in its own right, to the extent permitted by law. Glenbrook
shall be responsible for assuring that each of its Accounts holding Shares
calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by any Mixed and
Shared Funding exemptive order that AVIF may obtain in the future. AVIF will
notify Glenbrook (i) of any changes of interpretations or amendments to any
Mixed and Shared Funding exemptive order it obtains in the future and (ii) of
any proposal to be submitted to shareholders for their approval.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Glenbrook concerning any decision to
elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF BY GLENBROOK AND THE UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
Glenbrook and the Underwriter each agrees to indemnify and hold harmless AVIF,
its affiliates, and each of their respective directors and officers, and each
person, if any, who controls AVIF or its affiliates within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 12.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Glenbrook) or
actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or actions are related to the sale or acquisition of AVIF's
Shares and:
20
<PAGE>
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Policies, or sales
literature or advertising for the Policies (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 Glenbrook or the
Underwriter by or on behalf of AVIF for use in any Account's 1933 Act
registration statement, any Account Prospectus, the Policies, or sales
literature or advertising or otherwise for use in connection with the
sale of Policies or Shares (or any amendment or supplement to any of
the foregoing); or
(ii) arise out of or as a result of any other statements or representations
(other than statements or representations contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of Glenbrook
or the Underwriter and on which such persons have reasonably relied)
or the negligent, illegal or fraudulent conduct of Glenbrook, the
Underwriter or their respective affiliates or persons under their
control (including, without limitation, their employees and
"Associated Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Policies or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF by or on behalf of Glenbrook, the
Underwriter or their respective affiliates for use in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by Glenbrook or the Underwriter to
perform the obligations, provide the services and furnish the
materials required of them under the terms of this Agreement, or any
material breach of any representation and/or warranty made by
Glenbrook or the Underwriter in this Agreement or arise out of or
result from any other material breach of this Agreement by Glenbrook
or the Underwriter; or
21
<PAGE>
(v) arise as a result of failure by the Policies issued by Glenbrook to
qualify as life insurance, endowment, or annuity contracts under the
Code, otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) Neither Glenbrook nor the Underwriter shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement or (ii) to
AVIF.
(c) Neither Glenbrook nor the Underwriter shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
shall have notified Glenbrook or the Underwriter in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the action shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify Glenbrook or the Underwriter of any
such action shall not relieve Glenbrook or 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 Section 12.1. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party,
Glenbrook or the Underwriter shall be entitled to participate, at its own
expense, in the defense of such action and Glenbrook or the Underwriter also
shall be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from Glenbrook or the Underwriter to such Indemnified
Party of its election to assume the defense thereof, the Indemnified Party will
cooperate fully with Glenbrook and shall bear the fees and expenses of any
additional counsel retained by it, and Glenbrook will not be liable to such
Indemnified Party under this Agreement for any legal or other expenses
subsequently incurred by such Indemnified Party independently in connection with
the defense thereof, other than reasonable costs of investigation.
12.2 OF GLENBROOK AND THE UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(d), 12.2(e) and
12.2(f), below, AVIF and/or AIM, as appropriate, each agrees to indemnify and
hold harmless Glenbrook, the Underwriter, their respective affiliates, and each
of their respective directors and officers, and each person, if any, who
controls Glenbrook, the Underwriter, or their respective affiliates within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 12.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
AVIF and/or AIM, as appropriate) or actions in respect thereof (including, to
the extent reasonable, legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law, or
otherwise, insofar as
22
<PAGE>
such losses, claims, damages, liabilities or actions are related to the sale or
acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus or sales literature or
advertising of AVIF (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 AVIF or its affiliates by or
on behalf of Glenbrook or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales literature or
advertising (or any amendment or supplement to any of the foregoing);
or
(ii) arise out of or as a result of any other statements or representations
(other than statements or representations contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Policies, or any amendment or
supplement to any of the foregoing, not supplied for use therein by or
on behalf of AVIF or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct of
AVIF, its affiliates or persons under their control (including,
without limitation, their employees and "Associated Persons"), in
connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Policies, or any amendment
or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon and in conformity with information furnished to Glenbrook,
the Underwriter, or their respective affiliates by AVIF or AIM
for use in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising covering the
Policies, or any amendment or supplement to any of the foregoing;
or
(iv) arise as a result of any failure by AVIF or AIM to perform their
respective obligations, provide the services and furnish the
materials required of it under the terms of this Agreement, or any
material breach of any representation and/or
23
<PAGE>
warranty made by AVIF or AIM in this Agreement or arise out of or result from
any other material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(d), 12.2(e) and 12.2(f)
hereof, AVIF agrees to indemnify and hold harmless the Indemnified Parties from
and against any and all losses, claims, damages, liabilities (including amounts
paid in settlement thereof with, except as set forth in Section 12.2(c) below,
the written consent of AVIF) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions
directly or indirectly result from or arise out of the failure of any Fund to
operate as a regulated investment company in compliance with (i) Subchapter M of
the Code and regulations thereunder or (ii) Section 817(h) of the Code and
regulations thereunder, including, without limitation, any income taxes and
related penalties, rescission charges, liability under state law to Participants
asserting liability against Glenbrook or the Underwriter pursuant to the
Policies, the costs of any ruling and closing agreement or other settlement with
the IRS, and the cost of any substitution by Glenbrook of Shares of another
investment company or portfolio for those of any adversely affected Fund as a
funding medium for each Account that Glenbrook reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) The written consent of AVIF referred to in Section 12.2(b) above shall
not be required with respect to amounts paid in connection with any ruling and
closing agreement or other settlement with the IRS.
(d) AVIF shall not be liable under this Section 12.2 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement or (ii) to Glenbrook, each Account, the
Underwriter or Participants.
(e) AVIF shall not be liable under this Section 12.2 with respect to any
action against an Indemnified Party unless the Indemnified Party shall have
notified AVIF in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify AVIF of any such action shall not relieve AVIF from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this Section 12.2. Except as otherwise provided
herein, in case any such action is brought against an Indemnified Party, AVIF
will be entitled to participate, at its own expense, in the defense of such
action and also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall not
be unreasonably withheld. After notice from AVIF to such Indemnified Party of
AVIF's election to assume the defense thereof, the Indemnified Party will
cooperate fully with AVIF and shall bear the fees and expenses of any additional
counsel retained
24
<PAGE>
by it, and AVIF will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
(f) In no event shall AVIF be liable under the indemnification provisions
contained in this Agreement to any individual or entity, including without
limitation, Glenbrook, the Underwriter, or any other Participating Insurance
Company or any Participant, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of any
representation, warranty, and/or covenant made by Glenbrook or the Underwriter
hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants; (ii)
the failure by Glenbrook or any Participating Insurance Company to maintain its
segregated asset account (which invests in any Fund) as a legally and validly
established segregated asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the 1940 Act (unless
exempt therefrom); or (iii) the failure by Glenbrook or any Participating
Insurance Company to maintain its variable annuity and/or variable life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as life insurance, endowment or annuity contracts under
applicable provisions of the Code; provided, however, that the limitation of
liability contained in this paragraph (f) shall not apply if the breach or
failures described in subparagraphs (i), (ii) and (iii), above, by Glenbrook or
any Participating Insurance Company resulted from the failure of AVIF to comply
with the requirements of Subchapter M or Section 817(h) of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Section 12.1(c) or 12.2(e) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
25
<PAGE>
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
26
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
By_____________________________________
Title___________________________________
A I M DISTRIBUTORS, INC.
By_____________________________________
Title___________________________________
GLENBROOK LIFE AND ANNUITY COMPANY, on behalf of itself and
its Separate Account A
By_____________________________________
Title___________________________________
ALLSTATE LIFE FINANCIAL SERVICES, INC.
By_____________________________________
Title___________________________________
27
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
AIM Variable Insurance Funds, Inc.
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Glenbrook Life and Annuity Company Separate Account A
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
Individual and Group Flexible Premium Deferred Variable Annuity Contracts
28
<PAGE>
SCHEDULE B
[To be Provided]
29
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM
----------- --------- ---
<S> <C> <C>
REGISTRATION
Prepare and file Account registration Fund registration
registration statements statements
statements 1
Payment of fees Account fees Fund fees
PROSPECTUSES
Text composition Account Prospectuses Fund Prospectuses
Printing 2 Account Prospectuses Fund Prospectuses
SAIs
Text composition Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
SUPPLEMENTS (TO
PROSPECTUSES OR
SAIs)
Account Supplements Fund Supplements (UNLESS
Text composition (UNLESS changes relate changes relate only to
only to the Fund) the Account)
Printing Account Supplements Fund Supplements
</TABLE>
- - ------------------------
1 Includes all filings and costs necessary to keep
registrations current and effective; including, without
limitation, filing Forms N-SAR and Rule 24f-2 Notices as required
by law.
2 To the extent that documents prepared by Glenbrook and AIM
are printed together, the printing cost shall be allocated in
proportion to the number of pages attributable to each document.
30
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM
----------- --------- ---
<S> <C> <C>
FINANCIAL REPORTS
Preparation Account Reports Fund Reports
Printing 2 Account Reports Fund Reports
MAILING AND DISTRIBUTION 3
To Contractowners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAIs,
Supplements and Reports
PROXIES 4
Text composition, Account and Fund Proxies Account and Fund Proxies
printing and mailing where the matters where the matters submitted
of proxy solicitation submitted are solely are solely Fund related
materials and voting Account related
instruction solicitation
materials and
tabulation of proxies
SALES LITERATURE
Preparation Policies (Account) and Fund
Regulatory Filing Account and Fund - state Policies and Fund - except for
insurance regulatory state insurance regulatory
filings only filings
</TABLE>
- - ---------------------------------
3 To the extent required by law.
4 When proxy materials are required for both Account and Fund
matters, the costs shall be split proportionately based upon
those materials related solely to the Account and those materials
related solely to the Fund. The cost with respect to joint
materials shall be allocated evenly between Glenbrook and AIM.
31
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION GLENBROOK AIM
----------- --------- ---
<S> <C> <C>
OTHER (SALES RELATED)
Contractowner Account related items Fund related items
communication
Distribution Policies Fund
Administration Account (Policies) Fund
</TABLE>
32
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No.33-62203 on Form N-4, of our report dated April 1, 1995
accompanying the financial statements and financial statement schedule of
Glenbrook Life and Annuity Company contained in the Prospectus which is part
of such registration statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Chicago, Illinois
November 17, 1995
<PAGE>
ROUTIER AND JOHNSON, P.C.
ATTORNEYS AT LAW
1700 K STREET N.W.
SUITE 1003
WASHINGTON, D.C. 20006
(202) 296-4852
November 15, 1995
CONSENT OF COUNSEL
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus forming part of the registration statement on Form N-
4 for Glenbrook Life and Annuity Company Separate Account A (File No. 33-62203).
Routier and Johnson, P.C.
By: /s/ Gregor B. McCurdy
---------------------------
Gregor B. McCurdy
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> SEP-30-1995 DEC-31-1994
<DEBT-HELD-FOR-SALE> 55,397 49,807
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 57,679 50,731
<CASH> 0 0
<RECOVER-REINSURE> 1,175,035 696,854
<DEFERRED-ACQUISITION> 0 0
<TOTAL-ASSETS> 1,235,648 751,680
<POLICY-LOSSES> 0 0
<UNEARNED-PREMIUMS> 0 0
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 1,175,035 696,854
<NOTES-PAYABLE> 0 0
<COMMON> 2,100 2,100
0 0
0 0
<OTHER-SE> 55,857 50,558
<TOTAL-LIABILITY-AND-EQUITY> 1,235,648 751,680
0 0
<INVESTMENT-INCOME> 3,045 2,017
<INVESTMENT-GAINS> 0 0
<OTHER-INCOME> 0 0
<BENEFITS> 0 0
<UNDERWRITING-AMORTIZATION> 0 0
<UNDERWRITING-OTHER> 0 0
<INCOME-PRETAX> 3,045 2,017
<INCOME-TAX> 1,078 723
<INCOME-CONTINUING> 1,967 1,294
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1967 1294
<EPS-PRIMARY> 46.83 30.81
<EPS-DILUTED> 46.83 30.81
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
