<PAGE>
Registration No. 333-79471
As filed with the Securities and Exchange Commission on November 5, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-6
FOR REGISTRATION UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VL-R
(Exact Name of Trust)
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(Exact Name of Depositor)
125 Maiden Lane
New York, New York 10038
(Complete Address of Depositor's Principal Executive Offices)
Pauletta P. Cohn, Esq.
Associate General Counsel and Secretary
American General Life Companies
2929 Allen Parkway
Houston, Texas 77019-2155
(Name and Complete Address of Agent for Service)
Securities Being Offered: Flexible Premium Variable Life Insurance Policies.
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or date 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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VL-R
RECONCILIATION AND TIE BETWEEN ITEMS IN FORM
N-8B-2 AND THE PROSPECTUS
(PURSUANT TO INSTRUCTION 4 OF FORM S-6)
CROSS REFERENCE SHEET
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ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION
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1 Additional Information: Separate Account USL VL-R.
2 Additional Information: USL.
3 Inapplicable.
4 Additional Information: Distribution of Policies.
5, 6 Additional Information: Separate Account USL VL-R.
7 Inapplicable.**
8 Inapplicable.**
9 Additional Information: Legal Matters.
10(a) Additional Information: Your Beneficiary. Assigning
Your Policy.
10(b) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
10(c)(d) Basic Questions You May Have: How can I change
my Policy's insurance coverage? How can I access my
investment in a Policy? Can I choose the form in which USL
pays out any proceeds from my Policy? Additional
Information: Tax Effects. Assigning Your Policy. Payment of
Policy Proceeds.
10(e) Basic Questions You May Have: Must I invest any
minimum amount in a policy? Additional Information:
Tax Effects.
10(f) Additional Information: Voting Privileges.
10(g)(1), 10(g)(4), 10(h)(3), 10(h)(2) Basic Questions You May Have: To what extent will
USL vary the terms and conditions of the Policies in
particular cases? Additional Information: Voting
Privileges; Additional Rights That We Have.
10(g)(3), 10(g)(4), 10(h)(3), 10(h)(4) Inapplicable.**
10(i) Basic Questions You May Have: How can I change my
Policy's insurance coverage? What additional rider
benefits might I select? Additional Information:
Separate Account USL VL-R. Tax Effects.
11 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
Additional Information: Separate Account USL VL-R.
12(a) Additional Information: Separate Account USL VL-R.
Front Cover.
12(b) Inapplicable.**
12(c), 12(d) Inapplicable.**
12(e) Inapplicable, because the Separate Account has not commenced
operations.
13(a) Basic Questions You May Have: What charges will
USL deduct from my investment in a Policy? What charges and
expenses will the Mutual Funds deduct from amounts I invest
through my Policy? How can I change my Policy's insurance
coverage? How can I access my investment? Additional
Information: More About Policy Charges. More about our
Declared Fixed
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Interest Account Option.
13(b) Inapplicable.
13(c) Inapplicable.**
13(d) Basic Questions You May Have: To what extent will USL vary
the terms and conditions of the Policy in particular cases?
13(e) None.
13(f), 13(g) Inapplicable.**
14 Basic Questions You May Have: How can I invest
money in a Policy? How will the value of my investment in a
Policy change over time? Additional Information: Service
Agreements.
15 Basic Questions You May Have: How can I invest money in a
Policy? How do I communicate with USL? Additional
Information: Effective Date of Policy and Related
Transactions.
16 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
Additional Information: Separate Account USL VL-R.
ITEM NO. ADDITIONAL INFORMATION
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17(a), 17(b) Captions referenced under Items 10(c), 10(d), and 10(e).
17(c) Inapplicable.**
18(a) Captions referred to under Item 16.
18(b), 18(d) Inapplicable.**
18(c) Additional Information: Separate Account USL VL-R.
19 Additional Information: Separate Account USL VL-R.
Performance Information: Our Reports to Policy
Owners.
20(a), 20(b), 20(c), 20(d), 20(e), 20(f) Inapplicable.**
21(a), 21(b) Basic Questions You May Have: How can I access
my investment in a Policy? Additional Information:
Payment of Policy Proceeds.
21(c) Inapplicable.**
22 Additional Information: USL. Tax Effects. Payment of
Policy Proceeds. Service Agreements.
23 Inapplicable.**
24 Additional Information: Additional Rights That We
Have.
25 Additional Information: USL.
26 Inapplicable, because the Separate Account has
not commenced operations.
27 Inapplicable, because the Separate Account has
not commenced operations.
28 Additional Information: USL's Management.
29 Additional Information: USL.
30, 31, 32, 33, 34 Inapplicable, because the Separate Account has
not commenced operations.
35 Inapplicable, because the Separate Account has not
commenced operations.
36 Inapplicable.**
37 None.
38, 39 Additional Information: Distribution of the Policies.
40 Inapplicable, because the Separate Account has not
commenced operations.
41(a) Additional Information: Distribution of the Policies.
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41(b), 41(c) Inapplicable**
42,43 Inapplicable, because the Separate Account has not
commenced operations or issued any securities.
44(a)(1) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
44(a)(2) Inapplicable.
44(a)(3), 44(a)(4), 44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will USL deduct
from my investment in a Policy? Additional Information: Tax
Effects.
44(b) Inapplicable.**
44(c) Caption referenced in 13(a), 13(c) and 13(d) above.
45 Inapplicable, because the Separate Account has not
commenced operations.
46(a) Captions referenced in 44(a) above.
46(b) Inapplicable.**
47, 48, 49 Inapplicable.**
50 Inapplicable.**
51 Inapplicable.**
52(a), 52(c) Basic Questions You May Have: To what extent can USL vary the
terms and conditions of the Policy in particular cases?
Additional Information:
Additional Rights That We Have.
52(b) Inapplicable, because the Separate Account has not
commenced operations or issued any securities.
52(d) None.
53(a) Additional Information: Separate Account USL VL-R.
Tax Effects.
53(b), 54 Inapplicable.**
55 Illustrations of Hypothetical Policy Benefits.
56-58 Inapplicable.**
59 Financial Statements.
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* Registrant includes this Reconciliation and Tie in its Registration
Statement in compliance with Instruction 4 as to the Prospectus as set out
in Form S-6. Separate Account USL VL-R (Account) has previously filed a
notice of registration as an investment company on Form N-8A under the
Investment Company Act of 1940 (Act), and a Form N-8B-2 Registration
Statement. Pursuant to Sections 8 and 30(b)(1) of the Act, Rule 30a-1 under
the Act, and Forms N-8B-2 and N-SAR under that Act, the Account will keep
its Form N-8B-2 Registration Statement current through the filing of
periodic reports required by the Securities and Exchange Commission
(Commission).
** Not required pursuant to either Instruction 1(a) as to the Prospectus as set
out in Form S-6 or the administrative practice of the Commission and its
staff of adapting the disclosure requirements of the Commission's
registration statement forms in recognition of the differences between
variable life insurance policies and other periodic payment plan
certificates issued by investment companies and between separate accounts
organized as management companies and unit investment trusts.
<PAGE>
PLATINUM INVESTOR(SM)
Flexible Premium Variable Life Insurance Policies (the "Policies") Issued by
The United States Life Insurance Company in the City of New York ("USL")
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ADMINISTRATIVE CENTER: HOME OFFICE: PREMIUM PAYMENTS:
<S> <C> <C>
(Express Delivery) 125 Maiden Lane (Express Delivery)
2727-A Allen Parkway New York, New York 10038-4992 The United States Life Insurance
Houston, Texas 77019-2191 1-212-709-6000 Company in the City of New York
1-800-251-3720; 1-713-831-3913 c/o Southwest Bank of Texas
Fax: 1-713-620-3371 4400 Post Oak Parkway
(Except premium payments) Houston, Texas 77027
Attention: Lockbox Processing
(U.S. Mail) (U.S. Mail)
VUL Administration The United States Life Insurance
P.O. Box 4880 Company in the City of New York
Houston, Texas 77210-4880 P.O. Box 4728, Dept. L
Houston, Texas 77210-4728
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This booklet is called the "prospectus."
Investment options. The USL declared fixed interest account is the fixed
investment option for these Policies. You can also use USL's Separate Account
USL VL-R ("Separate Account") to invest in the following variable investment
options. You may change your selections from time to time:
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<CAPTION>
<S> <C> <C> <C>
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AIM Variable Insurance American General Series Dreyfus Variable MFS Variable Insurance
Funds, Inc. Portfolio Company Investment Fund Trust
.AIM V.I. International .International Equities .Quality Bond .MFS Emerging Growth
Equity Fund Fund/1/ Portfolio Series
.AIM V.I. Value Fund .MidCap Index Fund/1,2/ .Small Cap Portfolio
.Money Market Fund/1/
.Stock Index Fund/1,2/
/1/The Variable Annuity Life Massachusetts Financial
A I M Advisors, Inc.* Insurance Company* The Dreyfus Corporation * Services Company*
/2/Bankers Trust Company+
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Putnam Variable Trust SAFECO Resource Van Kampen Life
Witter Universal Funds, Inc. .Putnam VT Diversified Series Trust Investment Trust
.Equity Growth Portfolio/1/ Income Fund .Equity Portfolio .Strategic Stock Portfolio
.High Yield Portfolio/2/ .Putnam VT Growth .Growth Portfolio
and Income Fund
.Putnam VT International
/1/Morgan Stanley Dean Witter Growth and Income Fund Van Kampen Asset
Investment Management Inc.* SAFECO Asset Management Inc.*
/2/Miller Anderson & Sherrerd, Putnam Investment Management
LLP* Management, Inc.* Company*
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* The Investment Adviser of the investment option
+ The Investment Sub-Adviser of the investment option
<PAGE>
Separate prospectuses contain more information about the mutual funds
("Funds" or "Mutual Funds") in which we invest the amounts that you allocate to
any of the above-listed investment options (other than our declared fixed
interest account option). The formal name of each such Fund is set forth in the
chart that appears on page 1. Your investment results in any such option will
depend on those of the related Fund. You should be sure you also read the
prospectus of the Mutual Fund for any such investment option you may be
interested in. You can request free copies of any or all of the Mutual Fund
prospectuses from your USL representative or from us at our Administrative
Center listed above.
Other choices you have. During the insured person's lifetime, you may,
within limits, (1) request a change in the amount of insurance, (2) borrow or
withdraw amounts you have invested, (3) choose when and how much you invest, and
(4) choose whether your accumulation value under your Policy, upon the insured
person's death, will be added to the insurance proceeds we otherwise will pay to
the beneficiary.
Charges and expenses. We deduct charges and expenses from the amounts you
invest. These are described beginning on page 8.
Right to return. If for any reason you are not satisfied with your Policy,
you may return it to us and we will return you the greater of (i) all premiums
paid or (ii) your accumulation value plus any taxes or charges that have been
deducted. To exercise your right to return your Policy, you must mail it
directly to the Administrative Center address shown on the first page of this
prospectus or return it to the USL representative through whom you purchased the
Policy within 10 days after you receive it. Because you have this right, we will
invest your initial net premium payment in the money market investment option
from the date your investment performance begins until the first business day
that is at least 15 days later. Then we will automatically allocate your
investment among the above-listed investment options as you have chosen. Any
additional premium we receive during the 15-day period will also be invested in
the money market option and allocated to your chosen investment options at the
same time as your initial net premium.
We have designed this prospectus to provide you with information that you
should have before investing in the Policies (Policy Form No. 97600N). Please
read the prospectus carefully and keep it for future reference.
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense. The Policies are not available in all states.
The Policies are not insured by the FDIC or any other agency. They are not
deposits or other obligations of any bank and are not bank guaranteed. They are
subject to investment risks and possible loss of principal invested.
This Prospectus is dated ____________.
2
<PAGE>
GUIDE TO THIS PROSPECTUS
This prospectus contains information that you should know before you
purchase a Platinum Investor(SM) variable life policy ("Policy") or exercise any
of your rights or privileges under a Policy.
Basic Information. Here are the page numbers in this prospectus where you
may find answers to most of your questions:
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Pages to See
Basic Questions You May Have in this Prospectus
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. What are the Policies?...................................................... 1 - 2
. How can I invest money in a Policy?......................................... 5 - 6
. How will the value of my investment in a Policy change over time?........... 6 - 7
. What is the basic amount of insurance ("death benefit") that USL pays
when the insured person dies?............................................... 7 - 8
. What charges will USL deduct from my investment in a Policy?................ 8 - 10
. What charges and expenses will the Mutual Funds deduct from
amounts I invest through my Policy?......................................... 10 - 12
. Must I invest any minimum amount in a Policy?............................... 12 - 13
. How can I change my Policy's investment options?............................ 13
. How can I change my Policy's insurance coverage?............................ 13 - 14
. What additional rider benefits might I select?.............................. 14 - 15
. How can I access my investment in a Policy?................................. 15 - 17
. Can I choose the form in which USL pays out the proceeds from my
Policy?..................................................................... 17 - 18
. To what extent can USL vary the terms and conditions of the Policies
in particular cases?........................................................ 18
. How will my Policy be treated for income tax purposes?...................... 18
. How do I communicate with USL?.............................................. 19 - 20
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3
<PAGE>
Illustrations of a hypothetical policy. Starting on page 20, we have
included some examples of how the values of a sample Policy would change over
time, based on certain assumptions we have made. Because your circumstances may
vary considerably from our assumptions, your USL representative can also provide
you with a similar sample illustration that is more tailored to your own
circumstances and wishes.
Additional information. You may find the answers to any other questions
you have under "Additional Information" beginning on page 23, or in the forms of
our Policy and riders. A table of contents for the "Additional Information"
portion of this prospectus also appears on page 23. You can obtain copies of
our Policy and rider forms from (and direct any other questions to) your USL
representative or our Administrative Center (shown on the first page of this
prospectus).
Financial statements. We have included certain financial statements of USL
in this prospectus. These begin on page Q-1.
Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the end of this prospectus (page 50, which
follows all of the financial pages). That index will tell you on what page you
can read more about many of the words and phrases that we use.
4
<PAGE>
BASIC QUESTIONS YOU MAY HAVE
How can I invest money in a Policy?
Premium payments. We call the investments you make in a Policy "premiums" or
"premium payments." The amount we require as your first premium varies depending
on the specifics of your Policy and the insured person. (Policies issued with
automatic premium payment plans may have different minimums.) Otherwise, with a
few exceptions mentioned below, you can make premium payments at any time and in
any amount. Premium payments we receive after your right to return expires, as
discussed on page 2, will be allocated upon receipt to the available investment
options you have chosen.
Limits on premium payments. Federal tax law limits your ability to make
certain very large amounts of premium payments (relative to the amount of your
Policy's insurance coverage) and may impose penalties on amounts you take out of
your Policy if you do not observe certain additional requirements. These tax
law requirements are summarized further under "Tax Effects" beginning on page
24. We will monitor your premium payments, however, to be sure that you do not
exceed permitted amounts or inadvertently incur any tax penalties. Also, in
certain limited circumstances (if your Policy is determined to be a "modified
endowment contract" or if additional premiums cause the death benefit to
increase more than the accumulation value), we may refuse to accept an
additional premium if the insured person does not provide us with adequate
evidence that he/she continues to meet our requirements for issuing insurance.
Ways to pay premiums. You can pay premiums by check or money order drawn on a
U.S. bank in U.S. dollars and made payable to "The United States Life Insurance
Company in the City of New York," or "USL." Premiums after the first premium
should be sent directly to the appropriate address shown on your billing
statement. If you do not receive a billing statement, send your premium
directly to the address for premium payments shown on the first page of this
prospectus. We also accept premium payments by bank draft, wire, or by exchange
from another insurance company. You may obtain further information about how to
make premium payments by any of these methods from your USL representative or
from our Administrative Center shown on the first page of this prospectus.
We have a premium financing program available for certain qualified
applicants. If you intend to make an initial premium payment of at least
$50,000 and you have a net worth of at least $3,000,000, you may qualify under
this program. For more information, you may contact your registered
representative or our Administrative Center at 1-800-677-3311.
Dollar cost averaging. Dollar cost averaging is an investment strategy
designed to reduce the risks that result from market fluctuations. The strategy
spreads the allocation of your accumulation value over a period of time. This
allows you to reduce the risk of investing most of your funds at a time when
prices are high. The success of this strategy depends on market trends and is
not guaranteed.
5
<PAGE>
Under dollar cost averaging, we automatically make transfers of your
accumulation value from the money market investment option to one or more of the
other investment options that you choose (but not to our declared fixed interest
account option). You tell us whether you want these transfers to be made
monthly, quarterly, semi-annually or annually. We make the transfers as of the
end of the valuation period on any day of the month except the 29th, 30th or
31st. (The term "valuation period" is described on page 33.) You must have at
least $5,000 of accumulation value to start dollar cost averaging and each
transfer under the program must be at least $100. You cannot participate in
dollar cost averaging while also using automatic rebalancing (discussed below).
Dollar cost averaging ceases upon your request, or if your accumulation value in
the money market option becomes exhausted.
Automatic rebalancing. This feature automatically rebalances the proportion
of your accumulation value in each investment option under your Policy (other
than our declared fixed interest account option) to correspond to your then
current premium allocation designation. You tell us whether you want us to do
the rebalancing quarterly, semi-annually or annually. The date automatic
rebalancing occurs will be based on the date of issue of your Policy. For
example, if your Policy is dated January 17, and you have requested automatic
rebalancing on a quarterly basis, automatic rebalancing will start on April 17,
and will occur quarterly thereafter. Automatic rebalancing will occur as of the
end of the valuation period that contains the date of the month your Policy was
issued. You must have a total accumulation value of at least $5,000 to begin
automatic rebalancing. You cannot participate in this program while also
participating in dollar cost averaging (discussed above). Rebalancing ends upon
your request.
How will the value of my investment in a Policy change over time?
Your accumulation value. From each premium payment you make, we deduct the
charges that we describe beginning on page 8, under "Deductions from each
premium payment." We invest the rest in one or more of the investment options
you have selected from the list on the front cover of this prospectus. We call
the amount that is at any time invested under your Policy your "accumulation
value."
Your investment options. We invest the accumulation value that you have
allocated to any investment option (except our declared fixed interest account
option) in shares of a Mutual Fund that follows investment practices, policies
and objectives that are appropriate to that option. Over time, your accumulation
value in any investment option will increase or decrease by the same amount as
if you had invested in the related Fund's shares directly (and reinvested all
dividends and distributions from the Fund in additional Fund shares); except
that your accumulation value will be reduced by certain charges that we deduct.
We describe these charges beginning on page 8, under "What charges will USL
deduct from my investment in a Policy?"
You can review other important information about the Mutual Funds that you can
choose in the separate prospectuses for those Funds. This includes information
about the investment performance that each Fund's investment manager has
achieved. You can request additional free copies of these prospectuses from
your USL representative or from our Administrative Center.
6
<PAGE>
We invest any accumulation value you have allocated to our declared fixed
interest account option as part of our general assets. We credit a fixed rate
of interest on that accumulation value, which we declare from time to time. We
guarantee that this will be at an effective annual rate of at least 4%. Although
this interest increases the amount of any accumulation value that you have in
our declared fixed interest account option, such accumulation value will also be
reduced by any charges that are allocated to this option under the procedures
described under "Allocation of charges" on page 10. The "daily charge"
described on page 8 and the charges and expenses of the Mutual Funds discussed
on pages 10 - 12 below do not apply to our declared fixed interest account
option.
Policies are "non-participating." You will not be entitled to any dividends
from USL.
What is the basic amount of insurance ("death benefit") that USL pays when the
insured person dies?
Your specified amount of insurance. In your application to buy a Platinum
Investor Policy, you will tell us how much life insurance coverage you want on
the life of the insured person. We call this the "specified amount" of
insurance.
Your death benefit. The basic death benefit we will pay is reduced by any
outstanding loans. You also choose whether the basic death benefit we will pay
is
. Option 1 - The specified amount on the date of the insured person's
death, or
. Option 2 - The specified amount plus the Policy's accumulation value
on the date of death.
Under Option 2, your death benefit will tend to be higher than under Option 1.
However, the monthly insurance charge we deduct will also be higher to
compensate us for our additional risk. Because of this, your accumulation value
will tend to be higher under Option 1 than under Option 2.
We will automatically pay an alternative basic death benefit if it is higher
than the basic Option 1 or Option 2 death benefit (whichever you have selected).
The alternative basic death benefit is computed by multiplying your Policy's
accumulation value on the insured person's date of death by the following
percentages:
7
<PAGE>
TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF POLICY
ACCUMULATION VALUE
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INSURED
PERSON'S 40 or
AGE*: Under 45 50 55 60 65 70 75 to 90 95+
%: 250% 215% 185% 150% 130% 120% 115% 105% 100%
</TABLE>
__________________________________
* Nearest birthday at the beginning of the Policy year in which the insured
person dies. The percentages are interpolated for ages that are not shown here.
What charges will USL deduct from my investment in a Policy?
Deductions from each premium payment. We deduct from each premium a charge
for the tax that is then applicable to us in your state or other jurisdiction.
Taxes currently range from .75% to 3.5%. You are not permitted to deduct the
amount of these taxes on your income tax return. We also currently deduct an
additional 2.5% from each after-tax premium payment. We use this 2.5% deduction
primarily to pay our distribution expenses and to a lesser extent our
administrative expenses, other taxes, licenses and fees related to the Policy.
We have the right at any time to increase this additional charge to not more
than 5% on all future premium payments.
Daily charge. We make a daily deduction at an annual effective rate of .75%
of your accumulation value that is then being invested in any of the investment
options (other than our declared fixed interest option). After a Policy has
been in effect for 10 years, we will reduce the rate of the charge to a maximum
of .50%, and after 20 years, we will further reduce the charge to a maximum of
.25%. The daily deduction charges, including the current charge of .75%, are
the maximums we may charge; we may charge less, but we can never charge more.
Flat monthly charge. We will deduct $6 per month from your accumulation
value. Also, we have the right to raise this charge at any time to not more
than $12 per month.
Monthly insurance charge. Every month we will deduct from your accumulation
value a charge based on the cost of insurance rates applicable to your Policy on
the date of the deduction and our "amount at risk" on that date. Our amount at
risk is the difference between (a) the death benefit that would be payable if
the insured person died on that date and (b) the then total accumulation value
under the Policy. For otherwise identical Policies, a greater amount at risk
results in a higher monthly insurance charge.
For otherwise identical Policies, a higher cost of insurance rate also results
in a higher monthly insurance charge. Our cost of insurance rates are
guaranteed not to exceed those that will be specified in your Policy. Our
current rates are lower for insured persons in most age and risk classes,
although we have the right at any time to raise these rates to not more than the
guaranteed maximum.
8
<PAGE>
In general, our cost of insurance rates increase with the insured person's
age. The longer you own your Policy, the higher the cost of insurance rate will
be. Also our cost of insurance rates will generally be lower if the insured
person is a female than if a male.
Similarly, our current cost of insurance rates are generally lower for non-
smokers than smokers, and lower for persons that have other highly favorable
health characteristics, as compared to those that do not. On the other hand,
insured persons who present particular health, occupational or non-work related
risks may be charged higher cost of insurance rates and other additional charges
based on the specified amount of insurance coverage under their Policy.
Finally, our current cost of insurance rates are lower for Policies having a
specified amount of at least $1,000,000 on the day the charge is deducted. This
means that if your specified amount for any reason decreases from $1,000,000 or
more to less than $1,000,000, your subsequent cost of insurance rates will be
higher under your Policy than they otherwise would be. The reverse is also
true. Our cost of insurance rates also are generally higher under a Policy that
has been in force for some period of time than they would be under an otherwise
identical Policy purchased more recently on the same insured person.
Under New York law, a portion of our cost of insurance rates is used to
recover acquisition costs associated with issuing your Policy. Such charges are
higher in the early policy years.
Under New York law, any changes in the cost of insurance rates, interest
rates, mortality and expense charges, percentage of premium charges or the
monthly administration fee will be based on our expectations as to investment
earnings, mortality, persistency and expenses (including, reinsurance costs and
applicable tax charges.) Such changes in policy cost factors will be determined
in accordance with procedures and standards on file with the New York Insurance
Department and will be determined at least every five years.
Monthly charges for additional benefit riders. We will deduct charges monthly
from your accumulation value, if you select certain additional benefit riders.
These are described beginning on page 14, under "What additional rider benefits
might I select?"
Surrender charge. The Policies have a surrender charge that applies for the
first 10 Policy years (and the first 10 years after any requested increase in
the Policy's specified amount). The amount of the surrender charge depends on
the age and other insurance characteristics of the insured person. The maximum
amount of the surrender charge will be shown on pages 23 and 24 of the Policy.
It may initially be as high as $40 per $1,000 of specified amount or as low as
$1.80 per $1,000 of specified amount (or any increase in the specified amount).
Any amount of surrender charge decreases automatically by a constant amount each
year beginning in the fourth year of its 10 year period referred to above until,
in the eleventh year, it is zero.
We will deduct the entire amount of any then applicable surrender charge from
the accumulation value at the time of a full surrender of a Policy. Upon a
requested decrease in such a Policy's specified amount of coverage, we will
deduct any remaining amount of the surrender charge that was associated with the
specified amount that is canceled. This includes any specified amount decrease
that, as described under "Partial surrender" beginning on page 15,
9
<PAGE>
results from any requested partial surrender. For this purpose, we deem the most
recent increases of specified amount to have been canceled first.
Transaction Fee. We will charge you the lesser of 5% of the surrender amount
or a $25 fee for each partial surrender you make.
Charge for taxes. We can make a charge in the future for taxes we incur or
reserves we set aside for taxes in connection with the Policies. This would
reduce the investment experience of your accumulation value.
Transfer Charges. We also reserve the right to charge a fee of $25.00 for each
transfer in excess of 12 during a policy year. Any such suspension or charge
will be administered in a nondiscriminatory manner. The $25.00 charge will not
apply to transfers made under the Dollar Cost Averaging or Automatic Rebalancing
provisions.
Allocation of charges. You may choose the investment options from which we
deduct all monthly charges. If you do not choose or have enough accumulation
value in the investment options you select, we will deduct these charges in
proportion to the amount of accumulation value you then have in each investment
option. Any surrender charge upon a decrease in specified amount that is
requested under a Platinum Investor Policy will be allocated in the same manner
as if it were a monthly deduction.
What charges and expenses will the Mutual Funds deduct from amounts I invest
through my Policy?
Each Mutual Fund pays its investment management fees and other operating
expenses. Because they reduce the investment return of a Fund, these fees and
expenses also will reduce the return you will earn on any accumulation value
that you have invested in that Fund. These charges and expenses are as
follows:
10
<PAGE>
THE MUTUAL FUNDS' ANNUAL EXPENSES/1/ (as a percentage of average net assets)
<TABLE>
<CAPTION>
Fund Other Fund Total Fund
Management Operating Operating
Fees (After Expenses (After Expenses (After
Expense Expense Expense
Name of Fund Reimbursement) 12b-1 Fees Reimbursement) Reimbursement)
------------ ------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
The following funds of AIM Variable
Insurance Funds, Inc./(1)/
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
The following funds of American General
Series Portfolio Company:/(1)/
International Equities Fund 0.35% 0.05% 0.40%
MidCap Index Fund 0.32% 0.04% 0.36%
Money Market Fund 0.50% 0.04% 0.54%
Stock Index Fund 0.27% 0.04% 0.31%
The following funds of Dreyfus Variable
Investment Fund:/(1)/
Quality Bond Portfolio 0.65% 0.08% 0.73%
Small Cap Portfolio 0.75% 0.02% 0.77%
The following series of MFS Variable
Insurance Trust:/(1)/
MFS Emerging Growth Series 0.75% 0.10% 0.85%
The following portfolios of Morgan
Stanley Dean Witter Universal
Funds, Inc./(1)/
Equity Growth Portfolio /(2)/ 0.09% 0.76% 0.85%
High Yield Portfolio /(2)/ 0.15% 0.65% 0.80%
The following portfolios of Putnam Variable
Trust: Class "IB" Funds
Putnam VT Diversified Income 0.50% 0.11% 0.08% 0.69%
Fund/(3)/ 0.35% 0.11% 0.03% 0.49%
Putnam VT Growth and Income Fund/(3)/
Putnam VT International Growth 0.59% 0.11% 0.14% 0.84%
and Income Fund/(3)/
(footnotes on next page)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Fund Other Fund Total Fund
Management Operating Operating
Fees (After Expenses (After Expenses (After
Expense Expense Expense
Name of Fund Reimbursement) 12b-1 Fees Reimbursement) Reimbursement)
------------ ------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
The following portfolios of SAFECO
Resources Series Trust:/(1)/
Equity Portfolio 0.74% 0.04% 0.78%
Growth Portfolio 0.74% 0.06% 0.80%
The following portfolio of Van Kampen
Life Investment Trust:/(1)/
Strategic Stock Portfolio/(2)/ 0.00% 0.65% 0.65%
</TABLE>
_____________________________
/1/ The Mutual Funds' advisers or administrators have entered into service
agreements with USL. Under these arrangements, the advisers or
administrators pay fees to USL for certain administrative services. The
fees do not have a direct relationship to the Mutual Funds' Annual
Expenses. (See "Service Agreements.")
/2/Management fees and other expenses as shown for fiscal year 1998 would
have been the percentages shown below without certain voluntary expense
reimbursements from the investment adviser. Current and future fees and
expenses may vary from the fiscal year 1998 fees and expenses.
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Annual Expenses
----------- --------- ----------------
<S> <C> <C> <C>
Morgan Stanley Dean Witter
Equity Growth Portfolio 0.55% 0.76% 1.31%
High Yield Portfolio 0.50% 0.65% 1.15%
Van Kampen
Strategic Stock Portfolio 0.50% 0.75% 1.25%
</TABLE>
/3/The prospectus for Putnam Variable Trust under "Distribution Plan"
discusses this 12b-1 fee.
Must I invest any minimum amount in a Policy?
Planned periodic premiums. Page 3 of your Policy will specify a
"Planned Periodic Premium." This is the amount that you (within limits)
choose to have us bill you. Our current practice is to bill quarterly,
semi-annually or annually. However, payment of this amount or any other
specific amounts of premiums is not mandatory. You need to invest enough to
ensure that your Policy's accumulation value, less any indebtedness and
after your monthly deductions, stays above zero. The less you invest, the
more likely it is that your Policy's accumulation value, less any
indebtedness and after your monthly deductions, could fall to zero, as a
result of the deductions we periodically make from your accumulation value.
12
<PAGE>
Policy lapse and reinstatement. If your Policy's accumulation value does
fall to zero, we will notify you and give you a grace period to pay at least the
amount we estimate is necessary to keep your Policy in force for a reasonable
time. If we do not receive your payment by the end of the grace period, your
Policy and all riders will end without value and all coverage under your Policy
will cease. Although you can apply to have your Policy "reinstated," you must
do this within 5 years (or, if earlier, before the Policy's maturity date), and
you must present evidence that the insured person still meets our requirements
for issuing coverage. Also, you will have to pay enough premium to keep your
Policy in force for two months as well as pay or reinstate any indebtedness. In
the Policy, you will find additional information about the values and terms of a
Policy after it is reinstated.
How can I change my Policy's investment options?
Future premium payments. You may at any time change the investment options
in which your future premiums will be invested. Your allocation must, however,
be in whole percentages that total 100%.
Transfers of existing accumulation value. You may also transfer your
existing accumulation value from one investment option under the Policy to
another. Unless you are transferring the entire amount you have in an
investment option, each transfer must be at least $500. See "Additional Rights
That We Have," beginning on page 38. Also, you may not in any one Policy year
make transfers out of our declared fixed interest account option that aggregate
more than 25% of the accumulation value you had invested in that option at the
beginning of that Policy year.
You may make transfers at any time, except that transfers out of our
declared fixed interest account option must be made within 60 days after a
Policy anniversary. We will not honor any request received outside that period.
Market timing. The Policies are not designed for professional market
timing organizations or other entities using programmed and frequent transfers.
We may not unilaterally terminate or discontinue transfer privileges. However,
we reserve the right to suspend such privileges for a reasonable period.
Maximum number of investment options. We can at any time limit the number
of investment options you may use. Our current rule is that you cannot use more
than 18 different options over the life of your Policy.
How can I change my Policy's insurance coverage?
Increase in coverage. You may at any time request an increase in the
specified amount of coverage under your Policy. You must, however, provide us
with satisfactory evidence that the insured person continues to meet our
requirements for issuing insurance coverage.
We treat an increase in specified amount in many respects as if it were the
issuance of a new Policy. For example, the monthly insurance charge for the
increase will be based on the age and risk class of the insured person at the
time of the increase. Also, a new amount of surrender charge
13
<PAGE>
applies to the specified amount increase. These amounts are the same as they
would be if we were instead issuing the same amount of additional coverage as a
new Policy.
Decrease in coverage. After the first Policy year, you may request a
reduction in the specified amount of coverage, but not below certain minimums.
The minimum is $100,000 (or, if greater, the minimum amount that the tax law
requires. At the time of a decrease under such a Policy, we will deduct from
the Policy's accumulation value an amount of any remaining surrender charge. If
there is not sufficient accumulation value to pay the surrender charge at the
time you request a reduction, the decrease will not be allowed. We compute the
amount we deduct in the manner described on page 32, under "Decreases in the
specified amount."
Change of death benefit option. You may at any time request us to change
your coverage from death benefit Option 1 to 2 or vice-versa.
.If you change from Option 1 to 2, we automatically reduce your
Policy's specified amount of insurance by the amount of your Policy's
accumulation value (but not below zero) at the time of the change.
.If you change from Option 2 to 1, we automatically increase your
Policy's specified amount by the amount of your Policy's accumulation
value.
Tax consequences of changes in insurance coverage. Please read "Tax
Effects" starting on page 24 of this prospectus to learn about possible tax
consequences of changing your insurance coverage under your Policy.
What additional rider benefits might I select?
You can request that your Policy include the additional rider benefits
described below. For most of the riders that you choose, a charge, which will
be shown on page 3 of your Policy, will be deducted from your accumulation value
on each monthly deduction date. Eligibility for and changes in these benefits
are subject to our rules and procedures as in effect from time to time. More
details are included in the form of each rider, which we suggest that you review
if you choose any of these benefits.
. Accidental Death Benefit Rider, which pays an additional death benefit
------------------------------
if the insured person dies from certain accidental causes.
. Children's Insurance Benefit Rider, which provides term life insurance
----------------------------------
coverage on the eligible children of the person insured under the
Policy. This rider is convertible into any other insurance (except for
term coverage) available for conversions, under our published rules at
the time of conversion.
. Waiver of Monthly Deduction Rider, under which we will waive all
---------------------------------
monthly charges under your Policy and riders that we otherwise would
deduct from your accumulation value, so long as the insured person is
totally disabled (as defined in the rider). While we are paying
benefits under this rider we will not permit you to request any
14
<PAGE>
increase in the specified amount of your Policy's coverage. However,
loan interest will not be paid for you under this rider, and the
Policy could, under certain circumstances, lapse for nonpayment of
loan interest.
Tax consequences of additional rider benefits. Adding or deleting riders,
or increasing or decreasing coverage under existing riders can have tax
consequences. See "Tax Effects" starting on page 24. You should consult a
qualified tax adviser.
How can I access my investment in a Policy?
Full surrender. You may at any time surrender your Policy in full. If you
do, we will pay you the accumulation value, less any Policy loans, less any
surrender charge that then applies. We call this your "cash surrender value."
Because of the surrender charge, it is unlikely that your Policy will have any
cash surrender value during at least the first year.
Partial surrender. You may, at any time after the first Policy year, make
a partial surrender of your Policy's cash surrender value. A partial surrender
must be at least $500.
. If the Option 1 death benefit is then in effect, we will also
automatically reduce your Policy's specified amount of insurance by
the amount of your withdrawal and any related charges.
. If we reduce your Policy's specified amount because you have requested
a partial surrender while the Option 1 death benefit is in effect, we
will deduct the same amount of surrender charge, if any, that would
have applied if you had requested such specified amount decrease
directly. See "Decreases in the specified amount," on page 32.
. We will not permit a partial surrender if it would cause your Policy
to fail to qualify as life insurance under the tax laws or if it would
cause your specified amount to fall below the minimum allowed.
. You may choose the investment option or options from which money that
you withdraw will be taken. Otherwise, we will allocate the withdrawal
in the same proportions as then apply for deducting monthly charges
under your Policy or, if that is not possible, in proportion to the
amount of accumulation value you then have in each investment option.
Option to Exchange Policy During First 18 Months. Under New York law, at
any time during the first 18 months from the Date of Issue of your Policy, and
while the Policy is in force on a premium paying basis, it may be exchanged for
any general account fixed benefit plan of life insurance offered by us, subject
to the following conditions:
. the new policy will be issued with the same Date of Issue, insurance
age, and risk classification as your Policy;
15
<PAGE>
. the amount of insurance will be the same as the initial amount of
insurance under your Policy;
. the new policy may include any additional benefit rider included in
this policy if such rider is available for issue with the new policy;
. the exchange will be subject to an equitable premium or cash value
adjustment that takes appropriate account of the premiums and cash
values under the original and new policies; and
. evidence of insurability will not be required for the exchange.
Right to Convert in the Event of a Material Change in Investment Policy.
Under New York law, if there is a material change in the investment policy of
the Separate Account USL VL-R which has been approved by the Superintendent of
the New York Department of Insurance, and you object to such change, you shall
have the option to convert, without evidence of insurability, to a general
account fixed benefit life insurance policy within 60 days after the later of:
(1) the effective date of such change in investment policy; or (2) the receipt
of the notice of the options available.
Policy loans. You may at any time borrow from us an amount equal to your
Policy's cash surrender value (less our estimate of three months' charges and
less the interest that will be payable on your loan through your next Policy
anniversary.) The minimum amount of each loan is $500, or, if less, the entire
remaining borrowable amount under your Policy.
We remove from your investment options an amount equal to your loan and
hold that amount as additional collateral for the loan. We will credit your
Policy with interest on this collateral amount at an effective annual rate of 4%
(rather than any amount you could otherwise earn in one of our investment
options), and we will charge you interest on your loan at an effective annual
rate of 4.75%, payable in arrears. Loan interest is payable annually, on the
Policy anniversary, in advance, at a rate of 4.54%. Any amount not paid by its
due date will automatically be added to the loan balance as an additional loan.
Interest you pay on Policy loans will not in most cases be deductible on your
tax returns.
You may choose which of your investment options the loan will be taken
from. If you do not so specify, we will allocate the loan in the same way that
charges under your Policy are being allocated. If this is not possible, we will
make the loan pro-rata from each investment option that you then are using.
You may repay all or part (but not less than $100) of your loan at any time
before the death of the Insured while the Policy is in force. You must
designate any loan repayment as such. Otherwise, we will treat it as a premium
payment instead. Any loan repayments go first to repay all loans that were taken
from our declared fixed interest account option. We will invest any additional
loan repayments you make in the investment options you request. In the absence
of such a request we will invest the repayment in the same proportion as you
then have selected for premium payments that we receive from you. Any unpaid
loan will be deducted from the proceeds we pay following the insured person's
death.
16
<PAGE>
Preferred loan interest rate. We will credit a higher interest rate on an
amount of the collateral securing Policy loans taken out after the first 10
Policy years. The maximum amount of new loans that will receive this preferred
loan interest rate for any year is:
. 10% of your Policy's accumulation value (including any loan collateral
we are holding for your Policy loans) at the beginning of the Policy
year; or
. if less, your Policy's maximum remaining loan value at that
anniversary.
We intend to set the rate of interest we credit to your preferred collateral
amount equal to the loan interest rate you are paying, resulting in a zero net
cost of borrowing for that amount. We have full discretion to vary the
preferred rate, provided that it will always be greater than the rate we are
then crediting in connection with regular Policy loans, and will never be less
than an effective annual rate of 4.5%.
Maturity of your Policy. If the insured person is still living on the
"Maturity Date" shown on page 3 of your Policy, we will automatically pay you
the cash surrender value of the Policy, and the Policy will end. The maturity
date is the Policy anniversary nearest the insured person's 100th birthday.
Can I choose the form in which USL pays out the proceeds from my Policy?
Choosing a payment option. You may choose to receive the full proceeds
from the Policy (and any riders) as a single sum. This includes proceeds that
become payable upon the death of the insured person, full surrender or the
maturity date. Alternatively, you may elect that all or part of such proceeds
be applied to one or more of the following payment options:
. Option 1 - Equal monthly payments for a specified period of time.
. Option 2 - Equal monthly payments of a specified amount until all
amounts are paid out.
. Option 3 - Equal monthly payments for the payee's life, but with
payments guaranteed for a specified number of years. These payments
are based on annuity rates that are set forth in the Policy or, at the
payee's request, the annuity rates that we then are using.
. Option 4 - Proceeds left to accumulate with interest.
Additional payment options may also be available with our consent. We have the
right to veto any payment option, if the payee is a corporation or other entity.
You can read more about each of these options in our Policy form and in the
separate form of payment contract that we issue when any such option takes
effect.
Within 60 days after the insured person's death, any payee entitled to
receive proceeds as a single sum may elect one or more payment options.
Interest rates that we credit under each option will be at least 3%.
17
<PAGE>
Change of payment option. You may change any payment option you have
elected at any time while the Policy is in force and before the start date of
the payment option.
Tax impact. If a payment option is chosen, you or your beneficiary may
have tax consequences. You should consult with a qualified tax adviser before
deciding whether to elect one or more payment options.
To what extent can USL vary the terms and conditions of the Policies in
particular cases?
Listed below are some variations we may make in the terms of a Policy. Any
variations will be made only in accordance with uniform rules that we establish.
Policies purchased through "internal rollovers." We maintain published
rules that describe the procedures necessary to replace the other life insurance
we issue with one of the Policies. Not all types of other insurance we issue
are eligible to be replaced with one of the Policies. Our published rules may
be changed from time to time, but are evenly applied to all our customers.
Policies purchased through term life conversions. We maintain rules about
how to convert term insurance to a Platinum Investor Policy. This is referred
to as a term conversion. Term conversions are available to owners of term life
insurance we have issued. Any right to a term conversion is stated in the term
life insurance policy. Again, our published rules about term conversions may be
changed from time to time, but are evenly applied to all our customers.
Variations in expenses or risks. USL may vary the charges and other terms
of the Policies where special circumstances result in sales or administrative
expenses, mortality risks, or other risks that are different from those normally
associated with the Policies. The New York Insurance Department may have to
give its prior approval to some of these changes.
How will my Policy be treated for income tax purposes?
Generally, death benefits paid under a Policy are not subject to income
tax, and earnings on your accumulation value are not subject to income tax as
long as we do not pay them out to you. If we do pay any amount of your Policy's
accumulation value upon surrender, partial surrender, or maturity of your
Policy, all or part of that distribution may be treated as a return of the
premiums you paid, which is not subject to income tax.
Amounts you receive as Policy loans are not taxable to you, unless you have
paid such a large amount of premiums that your Policy becomes what the tax law
calls a "modified endowment contract." In that case, the loan will be taxed as
if it were a partial surrender. Furthermore, loans, partial surrenders and other
distributions from a modified endowment contract may require you to pay
additional taxes and penalties that otherwise would not apply.
For further information about the tax consequences of owning a Policy,
please read "Tax Effects" starting on page 24.
18
<PAGE>
How do I communicate with USL?
When we refer to "you," we mean the person who is authorized to take any
action with respect to a Policy. Generally, this is the owner named in the
Policy. Where a Policy has more than one owner, each owner generally must join
in any requested action.
General. You should mail or express checks and money orders for premium
payments and loan repayments directly to the appropriate address shown on your
billing statement. If you do not receive a billing statement, send your premium
directly to the address for premium payments shown on the first page of this
prospectus.
The following requests must be made in writing and signed by you:
. transfer of accumulation value;
. loan;
. full surrender;
. partial surrender;
. change of beneficiary or contingent beneficiary;
. change of allocation percentages for premium payments;
. change of allocation percentages for policy deductions;
. loan repayments or charges;
. change of death benefit option or manner of death benefit payment;
. increase or decrease in specified amount;
. addition or cancellation of, or other action with respect to, any
rider benefits;
. election of a payment option for Policy proceeds; and
. tax withholding elections.
You should mail or express these requests to our Administrative Center at the
appropriate address shown on the first page of this prospectus. You should also
communicate notice of the insured person's death, and related documentation, to
our Administrative Center.
We have special forms which should be used for loans, assignments, partial
and full surrenders, changes of owner or beneficiary, and all other contractual
changes. You will be asked to return your Policy when you request a full
surrender. You may also obtain these forms from our
19
<PAGE>
Administrative Center or from your USL representative. Each communication must
include your name, Policy number and, if you are not the insured person, that
person's name. We cannot process any requested action that does not include all
required information.
ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS
To help explain how our Policies work, we have prepared the following
tables:
Page to see in this
Table Prospectus
----------
Death Benefit Option 1 - Current Charges 22
Death Benefit Option 1 - Guaranteed Maximum Charges 22
The tables show how death benefits, accumulation values, and cash surrender
values ("Policy benefits") under sample Platinum Investor Policies would change
over time if the investment options had constant hypothetical gross annual
investment returns of 0%, 6% or 12% over the years covered by each table. The
tables are for a 45 year-old male non-tobacco user and who is a better-than-
average mortality risk in other respects as well. Planned premium payments of
$1,368 for an initial $100,000 of specified amount of coverage are assumed to be
paid at the beginning of each Policy year for the Platinum Investor Policy. The
samples assume no Policy loan has been taken. The differences between the
accumulation values and the cash surrender values for the first 10 years in the
tables for the Platinum Investor version are that version's surrender charges.
Although the tables below do not include examples of a Policy with an
Option 2 death benefit, such a Policy would have higher death benefits, lower
cash surrender values, and a greater risk of lapse.
Separate tables are included to show both current and guaranteed maximum
charges for the Platinum Investor Policy. The charges assumed in the following
tables include:
. a daily charge at an annual effective rate of .75% for the first 10
Policy years (for both current and guaranteed maximum charges);
. a daily charge at an annual effective rate of .50% after 10 Policy
years (for both current and guaranteed maximum charges);
. a daily charge at an annual effective rate of .25% after 20 Policy
years (for both current and guaranteed maximum charges);
. a charge for state premium tax ranging from .75% to 3.5% of each
premium payment, depending on the state, assumed to be 2.5% (for both
current and guaranteed maximum charges);
. a charge of 2.5% and 5.0% from each after-tax premium payment for
current charges and guaranteed maximum charges, respectively;
20
<PAGE>
. the current monthly insurance charges and guaranteed maximum monthly
insurance charges for current charges and guaranteed maximum charges,
respectively; and
. a flat monthly charge of $6 and $12 for current charges and
guaranteed maximum charges, respectively.
The charges assumed by both the current and guaranteed maximum charge
tables also include Mutual Fund expenses of 0.67% of aggregate Mutual Fund
assets, which is the arithmetic average of the advisory fees payable with
respect to each Mutual Fund, after all reimbursements, plus the arithmetic
average of all other operating expenses of each such Fund, after all
reimbursements, as reflected on pages 10 - 12. We expect the reimbursement
arrangements to continue in the future. If the reimbursement arrangements were
not currently in effect, the arithmetic average of Mutual Fund expenses would
equal .76% of aggregate Mutual Fund assets. The total assumed tax charges for
all of the tables are 2.5% of premiums.
Preliminary Information Statement and Policy Summary. We will provide you
with a Buyer's Guide and a preliminary information statement describing some of
the values and benefits of your Policy at the time of policy application. We
will also provide you with a policy summary at the time that your Policy is
delivered demonstrating the values and benefits contained in your Policy as
issued.
21
<PAGE>
<TABLE>
<CAPTION>
Platinum Investor
-----------------
Planned Premium $1,368.00 Initial Specified Amount $100,000
Death Benefit Option 1
Male Age 45
Preferred risk Non-Tobacco User
Assuming Current Charges
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 100,000 100,000 100,000 893 958 1,023 0 0 0
2 100,000 100,000 100,000 1,752 1,938 2,132 384 570 764
3 100,000 100,000 100,000 2,591 2,954 3,349 1,223 1,586 1,981
4 100,000 100,000 100,000 3,386 3,985 4,663 2,189 2,788 3,466
5 100,000 100,000 100,000 4,162 5,056 6,109 3,136 4,030 5,083
6 100,000 100,000 100,000 4,919 6,168 7,701 4,064 5,313 6,846
7 100,000 100,000 100,000 5,668 7,336 9,467 4,984 6,652 8,783
8 100,000 100,000 100,000 6,388 8,539 11,405 5,875 8,026 10,892
9 100,000 100,000 100,000 7,089 9,791 13,545 6,747 9,449 13,203
10 100,000 100,000 100,000 7,773 11,095 15,909 7,602 10,924 15,738
15 100,000 100,000 100,000 11,092 18,760 32,629 11,092 18,760 32,629
20 100,000 100,000 100,000 13,666 28,059 60,426 13,666 28,059 60,426
<CAPTION>
Platinum Investor
-----------------
Planned Premium $1,368.00 Initial Specified Amount $100,000
Death Benefit Option 1
Male Age 45
Preferred risk Non-Tobacco User
Assuming Guaranteed Charges
Death Benefit Accumulation Value Cash Surrender Value
End of Assuming Hypothetical Gross Assuming Hypothetical Gross Assuming Hypothetical Gross
Policy Annual Investment Return of Annual Investment Return of Annual Investment Return of
Year 0.0% 6.0% 12.0% 0.0% 6.0% 12.0% 0.0% 6.0% 12.0%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 100,000 100,000 100,000 658 715 772 0 0 0
2 100,000 100,000 100,000 1,275 1,429 1,591 0 61 223
3 100,000 100,000 100,000 1,851 2,143 2,463 483 775 1,095
4 100,000 100,000 100,000 2,375 2,846 3,383 1,178 1,649 2,186
5 100,000 100,000 100,000 2,849 3,538 4,357 1,823 2,512 3,331
6 100,000 100,000 100,000 3,273 4,219 5,392 2,418 3,364 4,537
7 100,000 100,000 100,000 3,637 4,877 6,484 2,953 4,193 5,800
8 100,000 100,000 100,000 3,929 5,500 7,629 3,416 4,987 7,116
9 100,000 100,000 100,000 4,152 6,087 8,834 3,810 5,745 8,492
10 100,000 100,000 100,000 4,293 6,626 10,098 4,122 6,455 9,927
15 100,000 100,000 100,000 3,612 8,383 17,616 3,612 8,383 17,616
20 0 100,000 100,000 0 7,069 27,397 0 7,069 27,397
</TABLE>
The values in both tables will change if premiums are paid in different amounts
or frequencies.
The investment results are examples only and are not a representation of past
or future investment results. Actual investment results may be more or less
than those shown in both tables.
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ADDITIONAL INFORMATION
A general overview of the Policies appears at pages 1 through 22. The
additional information that follows gives more details, but generally does not
repeat what is set forth above.
<TABLE>
<CAPTION>
page to
see in this
Contents of Additional Information Prospectus
- ---------------------------------- ----------
<S> <C>
USL.................................................... 23
Separate Account USL VL-R.............................. 24
Tax Effects............................................ 24
Voting Privileges...................................... 30
Your Beneficiary....................................... 30
Assigning Your Policy.................................. 31
More About Policy Charges.............................. 31
Effective Date of Policy and Related Transactions...... 33
More About Our Declared Fixed Interest Account Option.. 35
Distribution of the Policies........................... 35
Payment of Policy Proceeds............................. 37
Adjustments to Death Benefit........................... 38
Additional Rights That We Have......................... 38
Performance Information................................ 39
Our Reports to Policy Owners........................... 40
USL's Management....................................... 40
Principal Underwriter's Management..................... 44
Legal Matters.......................................... 45
Independent Auditors................................... 45
Actuarial Expert....................................... 45
Service Agreements..................................... 46
Certain Potential Conflicts............................ 46
Year 2000 Considerations............................... 46
</TABLE>
Special words and phrases. If you want more information about any words or
phrases that you read in this prospectus, you may wish to refer to the Index of
Words and Phrases that appears at the end of this prospectus (page 50, which
follows all of the financial pages). That index will tell you on what page you
can read more about many of the words and phrases that we use.
USL
USL is a stock life insurance company, which was organized under the laws of
the State of New York on February 25, 1850. USL is an indirect, wholly-owned
subsidiary of American General Corporation, a diversified financial services
holding company engaged primarily in the insurance business. The commitments
under the Policies are USL's, and American General Corporation has no legal
obligation to back those commitments.
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USL is a member of the Insurance Marketplace Standards Association
("IMSA"). IMSA is a voluntary membership organization created by the life
insurance industry to promote ethical market conduct for individual life
insurance and annuity products. USL's membership in IMSA applies only to USL and
not its products.
Separate Account USL VL-R
We hold the Mutual Fund shares in which any of your accumulation value is
invested in our Separate Account USL VL-R. Separate Account USL VL-R is a
"separate account," as defined by the SEC and is registered as a unit investment
trust with the SEC under the Investment Company Act of 1940, as amended. We
created the separate account on August 8, 1997 under New York law.
For record keeping and financial reporting purposes, Separate Account USL
VL-R is divided into 17 separate "divisions," which correspond to the 17
variable investment options available since the inception of the Policy. The 17
divisions are currently available under certain variable life policies offered
by an affiliate of USL. We hold the Mutual Fund shares in which we invest your
accumulation value for an investment option in the division that corresponds to
that investment option.
The assets in the Separate Account are our property. The assets in the
Separate Account would be available only to satisfy the claims of owners of the
Policies, to the extent they have allocated their accumulation value to the
Separate Account. Our other creditors could reach only those Separate Account
assets (if any) that are in excess of the amount of our reserves and other
contract liabilities under the Policies with respect to the Separate Account.
USL also issues variable annuities through its Separate Account USL VA-R,
which is also a registered investment company.
Tax Effects
This discussion is based on current federal income tax law and
interpretations. It assumes that the Policy owner is a natural person who is a
U.S. citizen and resident. The tax effects on corporate taxpayers, non-U.S.
residents or non-U.S. citizens, may be different. This discussion is general in
nature, and should not be considered tax advice, for which you should consult a
qualified tax adviser.
General. A Platinum Investor Policy will be treated as "life insurance" for
federal income tax purposes (a) if it meets the definition of life insurance
under Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
and (b) for as long as the investments made by the underlying Mutual Funds
satisfy certain investment diversification requirements under Section 817(h) of
the Code. We believe that the Policies will meet these requirements and that:
. the death benefit received by the beneficiary under your Policy will
not be subject to federal income tax; and
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<PAGE>
. increases in your Policy's accumulation value as a result of interest
or investment experience will not be subject to federal income tax
unless and until there is a distribution from your Policy, such as a
surrender or a partial surrender.
The federal income tax consequences of a distribution from your Policy can be
affected by whether your Policy is determined to be a "modified endowment
contract" as defined under Section 7702A of the Code (which is discussed below).
In all cases, however, the character of all income that is described below as
taxable to the payee will be ordinary income (as opposed to capital gain).
Testing for modified endowment contract status. Your Policy will be a
"modified endowment contract" if, at any time during the first seven Policy
years, you have paid a cumulative amount of premiums that exceeds the premiums
that would have been paid by that time under a similar fixed-benefit insurance
policy that was designed (based on certain assumptions mandated under the Code)
to provide for paid-up future benefits after the payment of seven level annual
premiums. This is called the "seven-pay" test.
Whenever there is a "material change" under a Policy, the Policy will
generally be (a) treated as a new contract for purposes of determining whether
the Policy is a modified endowment contract and (b) subjected to a new seven-pay
period and a new seven-pay limit. The new seven-pay limit would be determined
taking into account, under a prescribed formula, the accumulation value of the
Policy at the time of such change. A materially changed Policy would be
considered a modified endowment if it failed to satisfy the new seven-pay limit.
A material change for these purposes could occur as a result of a change in
death benefit option or the selection of additional rider benefits. A material
change will occur as a result of an increase in your Policy's specified amount
of coverage, and certain other changes.
If your Policy's benefits are reduced during the first seven Policy years
(or within seven years after a material change), the calculated seven-pay
premium limit will be redetermined based on the reduced level of benefits and
applied retroactively for purposes of the seven-pay test. (Such a reduction in
benefits could include, for example, a decrease in specified amount you request
or, in some cases, a partial surrender or termination of additional benefits
under a rider.) If the premiums previously paid are greater than the
recalculated seven-payment premium level limit, the Policy will become a
modified endowment contract. A life insurance policy that is received in
exchange for a modified endowment contract will also be considered a modified
endowment contract.
Other effects of Policy changes. Changes made to your Policy (for example,
a decrease in benefits or a lapse or reinstatement of your Policy) may also have
other effects on your Policy. Such effects may include impacting the maximum
amount of premiums that can be paid under your Policy, as well as the maximum
amount of accumulation value that may be maintained under your Policy.
Taxation of pre-death distributions if your Policy is not a modified
---
endowment contract. As long as your Policy remains in force during the insured
person's lifetime, as a non-modified endowment contract, a Policy loan will be
treated as indebtedness, and no part of the loan proceeds will be subject to
current federal income tax. Interest on the loan generally will not be tax
deductible.
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<PAGE>
After the first 15 Policy years, the proceeds from a partial surrender will
not be subject to federal income tax except to the extent such proceeds exceed
your tax "basis" in your Policy. (Your tax basis generally will equal the
premiums you have paid, less the amount of any previous distributions from your
Policy that were not taxable.) During the first 15 Policy years, the proceeds
from a partial surrender could be subject to federal income tax, under a complex
formula, to the extent that your accumulation value exceeds your tax basis in
your Policy.
On the maturity date or upon full surrender, any excess in the amount of
proceeds we pay (including amounts we use to discharge any Policy loan) over
your tax basis in the Policy, will be subject to federal income tax. In
addition, if a Policy ends after a grace period while there is a policy loan,
the cancellation of such loan and accrued loan interest will be treated as a
distribution and could be subject to tax under the above rules. Finally, if you
make an assignment of rights or benefits under your Policy you may be deemed to
have received a distribution from your Policy, all or part of which may be
taxable.
Taxation of pre-death distributions if your Policy is a modified endowment
contract. If your Policy is a modified endowment contract, any distribution
from your Policy during the insured person's lifetime will be taxed on "income
out first" before recovery of your tax basis. Distributions for this purpose
include a loan (including any increase in the loan amount to pay interest on an
existing loan or an assignment or a pledge to secure a loan) or partial
surrender. Any such distributions will be considered taxable income to you to
the extent your accumulation value exceeds your tax basis in the Policy. For
modified endowment contracts, your tax basis is similar to the basis described
above for other Policies, except that it also would be increased by the amount
of any prior loan under your Policy that was considered taxable income to you.
For purposes of determining the taxable portion of any distribution, all
modified endowment contracts issued by the same insurer (or its affiliate) to
the same owner (excluding certain qualified plans) during any calendar year are
aggregated. The U.S. Treasury Department has authority to prescribe additional
rules to prevent avoidance of "income out first" taxation on distributions from
modified endowment contracts.
A 10% penalty tax also will apply to the taxable portion of most
distributions from a Policy that is a modified endowment contract. The penalty
tax will not, however, apply to distributions:
. to taxpayers 59 1/2 years of age or older;
. in the case of a disability (as defined in the Code); or
. received as part of a series of substantially equal periodic annuity
payments for the life (or life expectancy) of the taxpayer or the
joint lives (or joint life expectancies) of the taxpayer and his or
her beneficiary.
If your Policy ends after a grace period while there is a Policy loan, the
cancellation of the loan will be treated as a distribution to the extent not
previously treated as such and could be subject to income tax, including the 10%
penalty tax, as described above. In addition, on the maturity date or upon a
full surrender, any excess of the proceeds we pay (including any amounts we use
to discharge any loan) over your tax basis in the Policy, will be subject to
federal income tax and, unless an exception applies, the 10% penalty tax.
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<PAGE>
Distributions that occur during a Policy year in which your Policy becomes
a modified endowment contract, and during any subsequent Policy years, will be
taxed as described in the two preceding paragraphs. In addition, distributions
from a Policy within two years before it becomes a modified endowment contract
also will be subject to tax in this manner. This means that a distribution made
from a Policy that is not a modified endowment contract could later become
taxable as a distribution from a modified endowment contract. The Treasury
Department has been authorized to prescribe rules which would treat similarly
other distributions made in anticipation of a policy becoming a modified
endowment contract.
Policy lapses and reinstatements. A Policy which has lapsed may have the
tax consequences described above, even though you may be able to reinstate that
Policy. For tax purposes, some reinstatements may be treated as the purchase of
a new insurance contract.
Terminal illness rider. Amounts received under an insurance policy on the
life of an individual who is terminally ill, as defined by the tax law, are
generally excludable from the payee's gross income. We believe that the
benefits provided under our terminal illness rider meet the law's definition of
terminally ill and can qualify for this income tax exclusion. This exclusion
does not apply, however, to amounts paid to someone other than the insured
person, if the payee has an insurable interest in the insured person's life
because the insured is a director, officer or employee of the payee or by reason
of the insured person being financially interested in any trade or business
carried on by the payee.
Diversification. Under Section 817(h) of the Code, the Treasury Department
has issued regulations that implement investment diversification requirements.
Our failure to comply with these regulations would disqualify your Policy as a
life insurance policy under Section 7702 of the Code. If this were to occur, you
would be subject to federal income tax on the income under the Policy for the
period of the disqualification and for subsequent periods. Also, if the insured
died during such period of disqualification or subsequent periods, a portion of
the death benefit proceeds would be taxable to the beneficiary. Separate
Account USL VL-R, through the Mutual Funds, intends to comply with these
requirements. Although we do not have direct control over the investments or
activities of the Mutual Funds, we will enter into agreements with them
requiring the Mutual Funds to comply with the diversification requirements of
the Section 817(h) Treasury Regulations.
In connection with the issuance of then temporary diversification
regulations, the Treasury Department stated that it anticipated the issuance of
guidelines prescribing the circumstances in which the ability of a policy owner
to direct his or her investment to particular Mutual Funds within a separate
account may cause the policy owner, rather than the insurance company, to be
treated as the owner of the assets in the account. Due to the lack of specific
guidance on investor control, there is some uncertainty about when a policy
owner is considered the owner of the assets for tax purposes. If you were
considered the owner of the assets of the separate account, income and gains
from the account would be included in your gross income for federal income tax
purposes. Under current law, however, we believe that USL, and not the owner of
a Policy, would be considered the owner of the assets of our separate
account.
Estate and generation skipping taxes. If the insured person is the
Policy's owner, the death benefit under a Platinum Investor Policy will
generally be includable in the owner's estate for purposes of federal estate
tax. If the owner is not the insured person, under certain conditions,
only
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<PAGE>
an amount approximately equal to the cash surrender value of the Policy would be
includable. The federal estate tax is integrated with the federal gift tax under
a unified rate schedule and unified credit. The Taxpayer Relief Act of 1997
gradually raises the credit over the next seven years to $1,000,000. In
addition, an unlimited marital deduction may be available for federal estate tax
purposes.
As a general rule, if a "transfer" is made to a person two or more
generations younger than the Policy's owner, a generation skipping tax may be
payable at rates similar to the maximum estate tax rate in effect at the time.
The generation skipping tax provisions generally apply to "transfers" that would
be subject to the gift and estate tax rules. Individuals are generally allowed
an aggregate generation skipping tax exemption of $1 million. Because these
rules are complex, you should consult with a qualified tax adviser for specific
information, especially where benefits are passing to younger generations.
The particular situation of each Policy owner, insured person or
beneficiary will determine how ownership or receipt of Policy proceeds will be
treated for purposes of federal estate and generation skipping taxes, as well as
state and local estate, inheritance and other taxes.
Life Insurance in Split Dollar Arrangements. The Internal Revenue Service
("IRS") has released a technical advice memorandum ("TAM") on the taxability of
the insurance policies used in certain split dollar arrangements. A TAM
provides advice as to the internal revenue laws, regulations, and related
statutes with respect to a specific set of facts and a specific taxpayer. In
the TAM, among other things, the IRS concluded that an employee was subject to
current taxation on the excess of the cash surrender value of the policy over
the premiums to be returned to the employer. Purchasers of life insurance
policies to be used in split dollar arrangements are strongly advised to consult
with a qualified tax adviser to determine the tax treatment resulting from such
an arrangement.
Pension and profit-sharing plans. If Platinum Investor Policies are
purchased by a trust or other entity that forms part of a pension or profit-
sharing plan qualified under Section 401(a) of the Code for the benefit of
participants covered under the plan, the federal income tax treatment of such
Policies will be somewhat different from that described above.
The reasonable net premium cost for such amount of insurance that is
purchased as part of a pension or profit-sharing plan is required to be included
annually in the plan participant's gross income. This cost (generally referred
to as the "P.S. 58" cost) is reported to the participant annually. If the plan
participant dies while covered by the plan and the Policy proceeds are paid to
the participant's beneficiary, then the excess of the death benefit over the
Policy's accumulation value will not be subject to federal income tax. However,
the Policy's accumulation value will generally be taxable to the extent it
exceeds the participant's cost basis in the Policy. The participant's cost
basis will generally include the costs of insurance previously reported as
income to the participant. Special rules may apply if the participant had
borrowed from the Policy or was an owner-employee under the plan.
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There are limits on the amounts of life insurance that may be purchased on
behalf of a participant in a pension or profit-sharing plan. Complex rules, in
addition to those discussed above, apply whenever life insurance is purchased by
a tax qualified plan. You should consult a qualified tax adviser.
Other employee benefit programs. Complex rules may also apply when a
Policy is held by an employer or a trust, or acquired by an employee, in
connection with the provision of other employee benefits. These Policy owners
must consider whether the Policy was applied for by or issued to a person having
an insurable interest under applicable state law and with the insured person's
consent. The lack of an insurable interest or consent may, among other things,
affect the qualification of the Policy as life insurance for federal income tax
purposes and the right of the beneficiary to receive a death benefit.
ERISA. Employers and employer-created trusts may be subject to reporting,
disclosure and fiduciary obligations under the Employee Retirement Income
Security Act of 1974, as amended. You should consult a qualified legal adviser.
Our taxes. We report the operations of Separate Account USL VL-R in our
federal income tax return, but we currently pay no income tax on the separate
account's investment income and capital gains, because these items are, for tax
purposes, reflected in our variable life insurance policy reserves. We
currently make no charge to any separate account division for taxes. We reserve
the right to make a charge in the future for taxes incurred; for example, a
charge to the separate account for income taxes we incur that are allocable to
the Policies.
We may have to pay state, local or other taxes in addition to applicable
taxes based on premiums. At present, these taxes are not substantial. If they
increase, we may make charges for such taxes when they are attributable to our
separate account or allocable to the Policies.
Certain Mutual Funds in which your accumulation value is invested may elect
to pass through to USL taxes withheld by foreign taxing jurisdictions on foreign
source income. Such an election will result in additional taxable income and
income tax to USL. The amount of additional income tax, however, may be more
than offset by credits for the foreign taxes withheld which are also passed
through. These credits may provide a benefit to USL.
When we withhold income taxes. Generally, unless you provide us with an
election to the contrary before we make the distribution, we are required to
withhold income tax from any proceeds we distribute as part of a taxable
transaction under your Policy. In some cases, where generation skipping taxes
may apply, we may also be required to withhold for such taxes unless we are
provided satisfactory written notification that no such taxes are due.
In the case of non-resident aliens who own a policy, the withholding rules
may be different. With respect to distributions from modified endowment
contracts, nonresident aliens are generally subject to federal income tax
withholding at a statutory rate of 30% of the distributed amount. In some
cases, the non-resident alien may be subject to lower or even no withholding if
the United States has entered into a tax treaty with his or her country of
residence.
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Tax changes. The U.S. Congress frequently considers legislation that, if
enacted, could change the tax treatment of life insurance policies. In
addition, the Treasury Department may amend existing regulations, issue
regulations on the qualification of life insurance and modified endowment
contracts, or adopt new interpretations of existing law. State and local tax
law or, if you are not a U.S. citizen and resident, foreign tax law, may also
affect the tax consequences to you, the insured person or your beneficiary, and
are subject to change. Any changes in federal, state, local or foreign tax law
or interpretation could have a retroactive effect. We suggest you consult a
qualified tax adviser.
Voting Privileges
We are the legal owner of the Funds' shares held in Separate Account USL
VL-R. However, you may be asked to instruct us how to vote the Fund shares held
in the various Mutual Funds and attributable to your Policy at meetings of
shareholders of the Funds. The number of votes for which you may give
directions will be determined as of the record date for the meeting. The number
of votes that you may direct related to a particular Fund is equal to (a) your
accumulation value invested in that Fund divided by (b) the net asset value of
one share of that Fund. Fractional votes will be recognized.
We will vote all shares of each Fund that we hold of record, including any
shares we own on our own behalf, in the same proportions as those shares for
which we have received instructions from owners participating in that Fund
through Separate Account USL VL-R.
If you are asked to give us voting instructions, we will send you the proxy
material and a form for providing such instructions. Should we determine that
we are no longer required to send the owner such materials, we will vote the
shares as we determine in our sole discretion.
In certain cases, we may disregard instructions relating to changes in a
Fund's investment manager or its investment policies. We will advise you if we
do and explain the reasons in our next report to Policy owners. USL reserves
the right to modify these procedures in any manner that the laws in effect from
time to time allow.
Your Beneficiary
You name your beneficiary when you apply for a Policy. The beneficiary is
entitled to the insurance benefits of the Policy. You may change the
beneficiary during the insured person's lifetime. We also require the consent
of any irrevocably named beneficiary. A new beneficiary designation is
effective as of the date you sign it, but will not affect any payments we may
make before we receive it. If no beneficiary is living when the insured person
dies, we will pay the insurance proceeds to the owner or the owner's estate.
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Assigning Your Policy
You may assign (transfer) your rights in a Policy to someone else as
collateral for a loan or for some other reason, if we agree. We will not be
bound by an assignment unless it is received in writing. You must provide us
with two copies of the assignment. We are not responsible for any payment we
make or any action taken before we receive complete notice of the assignment in
good order. We are not responsible for the validity of the assignment. An
absolute assignment is a change of ownership. All collateral assignees of
record must consent to any full surrender, partial surrender, loan or payment
from a Policy under a terminal illness rider. Because there may be unfavorable
tax consequences, including recognition of taxable income and the loss of income
tax-free treatment for any death benefit payable to the beneficiary, you should
consult a qualified tax adviser before making an assignment.
More About Policy Charges
Purpose of our charges. The charges under the Policies are designed to
cover, in total, our direct and indirect costs of selling, administering and
providing benefits under the Policies. They are also designed, in total, to
compensate us for the risks we assume and services that we provide under the
Policies. These include:
. mortality risks (such as the risk that insured persons will, on
average, die before we expect, thereby increasing the amount of claims
we must pay);
. investment risks (such as the risk that adverse investment performance
will make it more difficult for us to reduce the amount of our daily
charge for revenues below what we anticipate);
. sales risks (such as the risk that the number of Policies we sell and
the premiums we receive, net of withdrawals, are less than we expect,
thereby depriving us of expected economies of scale);
. regulatory risks (such as the risk that tax or other regulations may
be changed in ways adverse to issuers of variable life insurance
policies); and
. expense risks (such as the risk that the costs of administrative
services that the Policies require us to provide will exceed what we
currently project).
If the charges that we collect from the Policies exceed our total costs in
connection with the Policies, we will earn a profit. Otherwise we will incur a
loss.
The current charges that we deduct from premiums have been designed to
compensate us for taxes we have to pay to the state where you live when we
receive a premium from you, as well as similar federal taxes we incur as a
result of premium payments, and certain distribution expenses. The current flat
monthly charge that we deduct has been designed primarily to compensate us for
the continuing administrative functions we perform in connection with the
Policies. The current
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monthly insurance charge has been designed primarily to provide funds out of
which we can make payments of death benefits under the Policies as insured
persons die.
Any excess from the charges discussed in the preceding paragraph, as well
as revenues from the daily charge, are primarily intended to:
. offset other expenses in connection with the Policies (such as the
costs of processing applications for Policies and other unreimbursed
administrative expenses, costs of paying sales commissions and other
marketing expenses for the Policies, and costs of paying death claims
if the mortality experience of insured persons is worse than we
expect);
. compensate us for the risks we assume under the Policies; or
. otherwise to be retained by us as profit.
The surrender charge has also been designed primarily for these purposes.
Although the paragraphs above describe the primary purposes for which
charges under the Policies have been designed, these purposes are subject to
considerable change over the life of a Policy. We can retain or use the
revenues from any charge or charge increase for any purpose.
Change of tobacco use. If the person insured under your Policy is a
tobacco user, you may apply to us for an improved risk class if the insured
person meets our then applicable requirements for demonstrating that he or she
has stopped tobacco use for a sufficient period.
Gender neutral Policies. Congress and the legislatures of various states
have from time to time considered legislation that would require insurance rates
to be the same for males and females of the same age, rating class and tobacco
user status. In addition, employers and employee organizations should consider,
in consultation with counsel, the impact of Title VII of the Civil Rights Act of
1964 on the purchase of life insurance policies (including Platinum Investor
policies) in connection with an employment-related insurance or benefit plan.
In a 1983 decision, the United States Supreme Court held that, under Title VII,
optional annuity benefits under a deferred compensation plan could not vary on
the basis of gender.
Cost of insurance rates. Because of specified amount increases, different
cost of insurance rates may apply to different increments of specified amount
under your Policy. If so, we attribute your accumulation value first to the
oldest increments of specified amount to compute our net amount at risk at each
cost of insurance rate. See "Monthly Insurance Charge" beginning on page 8.
Decreases in the specified amount. An amount of any remaining surrender
charge will be deducted upon a decrease in specified amount. If:
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. there have been no previous specified amount increases, the amount we
deduct will bear the same proportion to the total surrender charge
then applicable as the amount of the specified amount decrease bears
to the Policy's total specified amount. The remaining amount of
surrender charge that we could impose at a future time, however, will
also be reduced proportionally.
. there have been increases in specified amount, we decrease first
those portions of specified amount that were most recently
established. We also deduct any remaining amount of the surrender
charge that was established with that portion of specified amount
(which we pro-rate if less than that entire portion of specified
amount is being canceled).
Miscellaneous. Each of the distributors or advisers of the Mutual Funds
listed on page 1 of this prospectus reimburses us, on a quarterly basis, for
certain administrative, Policy, and Policy owner support expenses, up to an
annual rate of 0.25% of the average daily net asset value of shares of the
Mutual Funds purchased by the divisions at the instruction of owners. These
reimbursements will be reasonable for the services performed and are not
designed to result in a profit. These reimbursements are paid by the
distributors or the advisers, and will not be paid by the Mutual Funds, the
divisions or the owners.
Effective Date of Policy and Related Transactions
Valuation dates, times, and periods. We generally compute values under
Policies on each day that the New York Stock Exchange is open for business
except, with respect to any investment option, days on which the related Mutual
Fund does not value its shares. We call each such day a "valuation date."
We compute policy values as of 4:00 p.m., Eastern time, on each valuation
date. We call this our "close of business." We call the time from the close of
business on one valuation date to the close of business of the next valuation
date a "valuation period."
Date of receipt. Generally we consider that we have received a premium
payment or another communication from you on the day we actually receive it in
full and proper order. If we receive it after the close of business on any
valuation date, however, we consider that we have received it on the day
following that valuation date.
Commencement of insurance coverage. After you apply for a Policy, it can
sometimes take up to several weeks for us to gather and evaluate all the
information we need to decide whether to issue a Policy to you and, if so, what
the insured person's insurance rate class should be. We will not pay a death
benefit under a Policy unless (a) it has been delivered to and accepted by the
owner and at least the minimum first premium has been paid, and (b) at the time
of such delivery and payment, there have been no adverse developments in the
insured person's health or risk of death. However, if you pay at least the
minimum first premium payment with your application for a Policy, we will
provide temporary coverage of up to $300,000 provided the insured person meets
certain medical and risk requirements. The terms and conditions of this coverage
are described in our
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"Limited Temporary Life Insurance Agreement." You can obtain a copy from our
Administrative Center by writing to the appropriate address shown on the first
page of this prospectus or from your USL representative.
Date of issue; Policy months and years. We prepare the Policy only after we
approve an application for a Policy and assign an appropriate insurance rate
class. The day we begin to deduct charges will appear on page 3 of your Policy
and is called the "date of issue." Policy months and years are measured from the
date of issue. To preserve a younger age at issue for the insured person, we may
assign a date of issue to a Policy that is up to 6 months earlier than otherwise
would apply.
Monthly deduction days. Each charge that we deduct monthly is assessed
against your accumulation value at the close of business on the date of issue
and at the end of each subsequent valuation period that includes the first day
of a Policy month. We call these "monthly deduction days."
Commencement of investment performance. We begin to credit an investment
return to the accumulation value resulting from your initial premium payment on
the later of (a) the date of issue, or (b) the date all requirements needed to
place the Policy in force have been satisfied, including underwriting approval
and receipt of the necessary premium. In the case of a back-dated Policy, we do
not credit an investment return to the accumulation value resulting from your
initial premium payment until the date stated in (b) above.
Effective date of other premium payments and requests that you make.
Premium payments (after the first) and transactions made in response to your
requests and elections are generally effected at the end of the valuation period
in which we receive the payment, request or election and based on prices and
values computed as of that same time. Exceptions to this general rule are as
follows:
. Increases or decreases you request in the specified amount of
insurance, and reinstatements of Policies that have lapsed take effect
on the Policy's monthly deduction day on or next following our
approval of the transaction;
. We may return premium payments if we determine that such premiums
would cause your Policy to become a modified endowment contract or to
cease to qualify as life insurance under federal income tax law;
. If you exercise the right to return your Policy described on the
second page of this prospectus, your coverage will end when you mail
us your Policy or deliver it to your USL representative; and
. If you pay a premium in connection with a request which requires our
approval, your payment will be applied when received rather than
following the effective date of the change requested so long as your
coverage is in force and the amount paid will not cause you to exceed
premium limitations under the Code. If we do not approve your
request, no premium will be refunded to you except to the extent
necessary to cure
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any violation of the maximum premium limitations under the Code. We
will not apply this procedure to premiums you pay in connection with
reinstatement requests.
More About Our Declared Fixed Interest Account Option
Our general account. Our general account assets are all of our assets that
we do not hold in legally segregated separate accounts. Our general account
supports our obligations to you under your Policy's declared fixed interest
account option. Because of applicable exemptions, no interest in this option
has been registered under the Securities Act of 1933, as amended. Neither our
general account nor our declared fixed interest account is an investment company
under the Investment Company Act of 1940. We have been advised that the staff
of the SEC has not reviewed the disclosures that are included in this prospectus
for your information about our general account or our declared fixed interest
account option. Those disclosures, however, may be subject to certain generally
applicable provisions of the federal securities laws relating to the accuracy
and completeness of statements made in prospectuses.
How we declare interest. We can at any time change the rate of interest we
are paying on any accumulation value allocated to our declared fixed interest
account option, but it will always be at an effective annual rate of at least
4%.
Under these procedures, it is possible that, at any time, different
interest rates will apply to different portions of your accumulation value,
depending on when each portion was allocated to our declared fixed interest
account option. Any charges, partial surrenders, or loans that we take from any
accumulation value that you have in our declared fixed interest account option
will be taken from each portion in reverse chronological order based on the date
that accumulation value was allocated to this option.
Distribution of the Policies
American General Securities Incorporated ("AGSI") is the principal
underwriter of the Policies. AGSI is a wholly-owned subsidiary of American
General Life Insurance Company. AGSI's principal office is at 2727 Allen
Parkway, Houston, Texas 77019. AGSI was organized as a Texas corporation on
March 8, 1983 and is a registered broker-dealer under the Securities Exchange
Act of 1934, as amended ("1934 Act") and is a member of the National Association
of Securities Dealers, Inc. ("NASD"). AGSI is also the principal underwriter for
USL's Separate Account USL VA-R and for American General Life Insurance
Company's Separate Accounts A, D and VL-R, and Separate Account E of American
General Life Insurance Company of New York, which is a wholly-owned subsidiary
of American General Life Insurance Company. These separate accounts are
registered investment companies. AGSI, as the principal underwriter, is not paid
any fees on the Policies.
We and AGSI have sales agreements with various broker-dealers and banks
under which the Policies will be sold by registered representatives of the
broker-dealers or employees of the banks. These registered representatives and
employees are also required to be authorized under applicable
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state regulations as life insurance agents to sell variable life insurance. The
broker-dealers are ordinarily required to be registered with the SEC and must be
members of the NASD.
We pay compensation directly to broker-dealers and banks for promotion and
sales of the Policies. AGSI also has its own registered representatives who
will sell the Policies, and we will pay compensation to AGSI for these sales.
The compensation payable to broker-dealers or banks for sales of the
Policies may vary with the sales agreement, but is generally not expected to
exceed:
. 90% of the premiums paid in the first Policy year up to a "target"
amount;
. 4% of the premiums not in excess of the target amount paid in each of
Policy years 2 through 10;
. 2.5% of all premiums in excess of the target amount paid in any of
Policy years 1 through 10; and
. .25% annually of the Policy's accumulation value (reduced by any
outstanding loans) in the investment options after Policy year 1.
The target amount is an amount of level annual premium that would be necessary
to support the benefits under your Policy, based on certain assumptions that we
believe are reasonable.
The maximum value of any alternative amounts we may pay for sales of the
Policies is expected to be equivalent over time to the amounts described above.
For example, we may pay a broker-dealer compensation in a lump sum which will
not exceed the aggregate compensation described above.
We pay a comparable amount of compensation to the broker-dealers or banks
with respect to any increase in the specified amount of coverage that you
request as long as additional premium is paid on the increase.
At our sole discretion, we may pay certain broker-dealers an additional
expense allowance payment of up to 5% of first year target premium. In the
event that the broker-dealer personally produces any particular policy, and we
determine that such broker-dealer qualifies in the aggregate for some additional
expense allowance payment, such broker-dealer would only be eligible to receive
an additional expense allowance payment of up to 1% (instead of the 5% stated
above) of first year target premium as to that policy.
Whether or not a particular broker-dealer may be eligible to receive this
discretionary payment will, at a minimum, depend upon the ratio of the broker-
dealers total production offset by our expenses relative to such production. In
the event that we determine, in our sole discretion, that a particular broker-
dealer is eligible for an additional expense allowance payment, such
broker-
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<PAGE>
dealer will ensure that none of the additional expense allowance payment is
passed on to a registered representative.
We pay the compensation directly to AGSI or any other selling broker-dealer
firm or bank. We pay the compensation from our own resources which does not
result in any additional charge to you that is not described on page 8 of the
prospectus. Each broker-dealer firm or bank, in turn, may compensate its
registered representative or employee who acts as agent in selling you a Policy.
Payment of Policy Proceeds
General. We will pay any death benefit, maturity benefit, cash surrender
value or loan proceeds within seven days after we receive the last required form
or request (and any other documents that may be required for payment of death
benefit). If we do not have information about the desired manner of payment
within 60 days after the date we receive notification of the insured person's
death, we will pay the proceeds as a single sum, normally within seven days
thereafter.
Delay of declared fixed interest account option proceeds. We have the
right, however, to defer payment or transfers of amounts out of our declared
fixed interest account option for up to six months. If we delay more than 30
days in paying you such amounts, we will pay interest of at least 3% a year from
the date we receive all items we require to make the payment.
Delay for check clearance. We reserve the right to defer payment of that
portion of your accumulation value that is attributable to a payment made by
check for a reasonable period of time (not to exceed 15 days) to allow the check
to clear the banking system.
Delay of separate account proceeds. We reserve the right to defer payment
of any death benefit, loan or other distribution that comes from that portion of
your accumulation value that is allocated to Separate Account USL VL-R, if:
. the New York Stock Exchange is closed other than customary weekend and
holiday closings, or trading on the New York Stock Exchange is
restricted;
. an emergency exists, as a result of which disposal of securities is
not reasonably practicable or it is not reasonably practicable to
fairly determine the accumulation value; or
. the SEC by order permits the delay for the protection of owners.
Transfers and allocations of accumulation value among the investment options may
also be postponed under these circumstances. If we need to defer calculation of
separate account values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
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Delay to challenge coverage. We may challenge the validity of your
insurance Policy based on any material misstatements in your application and any
application for a change in coverage. However,
. We cannot challenge the Policy after it has been in effect, during the
insured person's lifetime, for two years from the date the Policy was
issued or restored after termination.
. We cannot challenge any Policy change that requires evidence of
insurability (such as an increase in specified amount) after the
change has been in effect for two years during the insured person's
lifetime.
. We cannot challenge an additional benefit rider that provides benefits
if the insured person becomes totally disabled, after two years from
the later of the Policy's date of issue or the date the additional
benefit rider becomes effective.
Adjustments to Death Benefit
Suicide. If the insured person commits suicide within two years after the
date on which the Policy was issued, the death benefit will be limited to the
total of all premiums that have been paid to the time of death minus any
outstanding Policy loan and any partial surrenders. If the insured person
commits suicide within two years after the effective date of an increase in
specified amount that you requested, we will pay the death benefit based on the
specified amount which was in effect before the increase, plus the monthly
insurance deductions for the increase.
Wrong age or gender. If the age or gender of the insured person was
misstated on your application for a Policy (or for any increase in benefits), we
will adjust any death benefit to be what the monthly insurance charge deducted
for the current month would have purchased based on the correct information.
Death during grace period. If the insured person dies during the Policy's
grace period, we will deduct any overdue monthly charges from the insurance
proceeds.
Additional Rights That We Have
We have the right at any time to:
. transfer the entire balance in an investment option in accordance with
any transfer request you make that would reduce your accumulation
value for that option to below $500;
. transfer the entire balance on a pro-rata basis to any other
investment options you then are using, if the accumulation value in an
investment option is below $500 for any other reason;
. change the underlying Mutual Fund that any investment option uses or
make any new Mutual Fund available to you;
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<PAGE>
. add or delete investment options, combine two or more investment
options, or withdraw assets relating to Platinum Investor from one
investment option and put them into another;
. make any changes required to comply with the requirements of any
investment option;
. operate the separate account, or one or more investment options, in
any other form the law allows, including a form that allows us to make
direct investments. Our separate account may be charged an advisory
fee if its investments are made directly rather than through another
investment company. In that case, we may make any legal investments we
wish; or
. make other changes in the Policy that in our judgment are necessary or
appropriate to ensure that the Policy continues to qualify for tax
treatment as life insurance, or that do not reduce any cash surrender
value, death benefit, accumulation value, or other accrued rights or
benefits.
You will be notified as required by law if there are any material changes
in the underlying investments of an investment option that you are using. We
intend to comply with all applicable laws in making any changes and, if
necessary, we will seek Policy owner approval.
Performance Information
From time to time, we may quote performance information for the divisions
of the Separate Account USL VL-R in advertisements, sales literature, or reports
to owners or prospective investors.
We may quote performance information in any manner permitted under
applicable law. We may, for example, present such information as a change in a
hypothetical owner's cash value or death benefit. We also may present the yield
or total return of the division based on a hypothetical investment in a Policy.
The performance information shown may cover various periods of time, including
periods beginning with the commencement of the operations of the division or the
Mutual Fund in which it invests. The performance information shown may reflect
the deduction of one or more charges, such as the premium charge or surrender
charge, and we generally expect to exclude cost of insurance charges because of
the individual nature of these charges.
We may compare a division's performance to that of other variable life
separate accounts or investment products, as well as to generally accepted
indices or analyses, such as those provided by research firms and rating
services. In addition, we may use performance ratings that may be reported
periodically in financial publications, such as Money Magazine, Forbes, Business
Week, Fortune, Financial Planning, and The Wall Street Journal. We also may
advertise ratings of USL's financial strength or claims-paying ability as
determined by firms that analyze and rate insurance companies and by nationally
recognized statistical rating organizations.
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<PAGE>
Performance information for any division reflects the performance of a
hypothetical Policy and is not illustrative of how actual investment performance
would affect the benefits under your Policy. You should not consider such
performance information to be an estimate or guarantee of future performance.
Our Reports to Policy Owners
Shortly after the end of each Policy year, we will mail you a report that
includes information about your Policy's current death benefit, accumulation
value, cash surrender value and policy loans. We will send you notices to
confirm premium payments, transfers and certain other Policy transactions. We
will mail to you at your last known address of record, these and any other
reports and communications required by law. You should give us prompt written
notice of any address change.
USL's Management:
The directors, executive officers, and (to the extent responsible for
variable life operations) the other principal officers of USL are listed below.
Name Business Experience Within Past Five Years
- -------------------------------------------------------------------------------
Rodney O. Martin, Jr. Director and Chairman of the Board of USL since June
1997. President and CEO of American General Life
Insurance Company (August 1996-July 1998). President of
American General Life Insurance Company of New York
(November 1995-August 1996). Vice President Agencies,
with Connecticut Mutual Life Insurance Company (1990-
1995).
Donald W. Britton President of USL since September 1999. Director of USL
since June 1999. Director and Vice Chairman of the
Board of American General Life Insurance Company since
April 1999. President of First Colony Life, Lynchburg,
Virginia (1996 - April 1997) and Executive Vice
President of First Colony Life (1992 - 1996).
William M. Keeler President and Chief Executive Officer - Group Insurance
Operations of USL since June 1998. President and Chief
Executive Officer of American General Indemnity
Company, USLIFE Agency Services and American General
Assurance Company, Schaumburg, Illinois since July
1998. President and Chief Executive Officer of USLIFE
Indemnity Company (May 1995 - May 1998.)
David J. Dietz President and Chief Executive Officer - Individual
Insurance Operations of USL since September 1997.
Director of USL since November 1997. President of
Prudential Select Life, Newark New Jersey (August 1990
- September 1997).
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David A. Fravel Executive Vice President of USL since September 1998
and a Director of USL since November 1997. Director and
Senior Vice President of American General Life
Insurance Company since November 1996. Elected
Executive Vice President in April, 1998. Senior Vice
President Massachusetts Mutual, Springfield, Missouri
(March 1996-June 1996); Vice President, New Business,
Connecticut Mutual Life, Hartford, Connecticut
(December 1978-March 1996).
John V. LaGrasse Director of USL since September 1999. Executive Vice
President and Chief Technology Officer of USL since
June 1998. Director, Senior Vice President and Chief
Systems Officer of American General Life Insurance
Company since August 1996. Elected Executive Vice
President in July, 1998. Prior thereto, Director of
Citicorp Insurance Services, Inc., Dover, Delaware
(1986-1996).
Paul L. Mistretta Executive Vice President of USL since September 1999.
Executive Vice President of American General Life
Insurance Company since July 1999. Senior Vice
President of First Colony Life Insurance, Lynchburg,
Virginia (1992 - July 1999).
Brian D. Murphy Executive Vice President of USL since September 1999.
In April 1998 named as Senior Vice President-Insurance
Operations of American General Life Insurance Company.
Vice President-Sales, Phoenix Home Life, Hartford, CT
(January 1997-April 1998). Vice President of
Underwriting and Issue, Phoenix Home Life (July 1994-
January 1997).
Gary D. Reddick Executive Vice President of USL since June 1998 and
Director of USL since March 1999. Executive Vice
President of American General Life Insurance Company
since April 1998 and Director since October 1998. Vice
Chairman since July 1997 and Executive Vice President-
Administration of The Franklin Life Insurance Company
since February 1995. Senior Vice President-
Administration of American General Corporation (October
1994-February 1995). Senior Vice President for American
General Life Insurance Company (September 1986-October
1994).
Thomas M. Zurek General Counsel of USL since December 1998. Secretary
of USL since June 1999 and Executive Vice President
since September 1999. In February 1998 named as Senior
Vice President and Deputy General Counsel of American
General Corporation. Attorney Shareholder with
Nyemaster, Goode, Voigts, West, Hansell & O'Brien, Des
Moines, Iowa (June 1992 - February 1998).
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Wayne A. Barnard Senior Vice President of USL since September 1998.
Senior Vice President of American General Life
Insurance Company since November 1997 and Vice
President since February, 1991.
Robert M. Beuerlein Senior Vice President and Chief Actuary of USL since
September 1999. Senior Vice President and Chief Actuary
of American General Life Insurance Company since
September 1999. Previously held position of Vice
President of American General Life Insurance Company
since December 1998. Director, Senior Vice President
and Chief Actuary of The Franklin Life Insurance
Company, Springfield, Illinois (January 1991 - June
1999).
Don L. Bolen Senior Vice President - Dallas Service Center of USL
since June 1999. Vice President of USL from 1990.
Felix C. Curcuru Senior Vice President of USL since 1967.
Ross D. Friend Senior Vice President and Chief Compliance Officer of
USL since November 1998. In July 1998 named as Senior
Vice President and Chief Compliance Officer of American
General Life Insurance Company. Senior Vice President
and General Counsel of The Franklin Life Insurance
Company, Springfield, Illinois (August 1996 - July
1998). Attorney-in-Charge for The Prudential Insurance
Company, Jacksonville, Florida (July 1995 - August
1996). Chief Legal Officer for Confederation Life
Insurance, Atlanta, Georgia (1982 - June 1995).
William F. Guterding Senior Vice President and Chief Underwriting Officer of
USL since October of 1991.
Kevin Harty Senior Vice President and Chief Agency Officer of USL
since January 1995. Vice President of Sales for
Security Mutual Life Insurance Company, Binghamton, New
York. (January 1989 - December 1994).
Robert F. Herbert, Jr. Senior Vice President of USL since September 1998 and a
Director of USL since June 1997. Director, Senior Vice
President and Treasurer of American General Life
Insurance Company since May 1996, and Controller and
Actuary from June 1988 to May 1996.
William J. Leary Senior Vice President - Sales and Marketing of USL
since June 1999. Vice President of Aetna U.S.
Healthcare, Hartford, Connecticut (1995 -1999). Vice
President of Healthnetwork, Oakbrook, Illinois (1994 -
1995).
Simon J. Leech Senior Vice President, Houston Service Center of USL
since September 1998. In July 1997 named as Senior Vice
President-Houston Service
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Center for American General Life Insurance Company.
Various positions with American General Life Insurance
Company since 1981, including Director of Policy
Owners' Service Department in 1993, and Vice President-
Policy Administration in 1995.
Randy J. Marash Senior Vice President and Actuary of USL since July
1991.
Robert Stuchiner Senior Vice President - Marketing of USL since
September 1998. Chief Marketing Office of TowerMark
Brokerage Services, Inc., New York, New York (September
1990 - September 1998).
R. Stephen Watson Senior Vice President and Chief Administrative Officer
of USL since 1997 and a Director of USL since August
1997. Vice President and Chief Administrative Officer
of American General Life Insurance Company of New York,
Syracuse, New York (1995 - 1997). Director of Insurance
Administration, American General Finance, Evansville,
Indiana (1991 -1995).
William A. Bacas Director of USL since June 1997. Partner with Bacas &
Krogmann, Attorneys at Law, Glens Falls, NY since 1972.
James P. Corcoran Director of USL since September 1999. Partner with
Cadwalader, Wickersham & Taft, New York, New York
(1995 - 1998). Partner with Donovan, Leisure, Newton &
Irvine, New York, New York (1992- 1995).
John R. Corcoran Director of USL since June 1997. Currently retired.
Various positions, including Vice President of Sales,
for Mutual Life of New York, New York, New York (1956 -
1996).
Patricia O. Ewers Director of USL since June 1997. President of Pace
University, New York, New York since 1990.
Thomas H. Fox Director of USL since June 1997. Director of American
General Life Insurance Company since 1995 and Director
of Swiss Re America Holding Corporation, New York, New
York since 1992.
William J. O'Hara, Jr. Director of USL since June 1997. Chief Executive
Officer of A J Tech, Vista, California since 1997.
President of William J. O'Hara, New York, New York
(1992 - 1996).
George B. Trotta Director of USL since June 1997. Currently retired.
Senior Vice President of Metropolitan Life Insurance
Company, New York, New York (1982- 1995).
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The principal business address of each officer listed above is our Home
Office; except that the street number for Messrs. Fravel, LaGrasse, Martin,
Reddick, Britton and Zurek is 2929 Allen Parkway, the street number for Mr.
Friend is 2727 Allen Parkway, the street address for Messrs. Herbert, Barnard,
Mistretta, Murphy, Beuerlein and Leech is 2727-A Allen Parkway, the street
address for Messrs. Keeler, Curcuru, Leary and Marash is 3600 Rt. 66, Neptune,
New Jersey and the street address for Mr. Bolen is 6363 Forest Park Road,
Dallas, Texas 75235.
Principal Underwriter's Management
The directors and principal officers of the principal underwriter are:
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
- ----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General Securities Incorporated President and Chief Executive
2727 Allen Parkway Officer
Houston, TX 77019
Rodney O. Martin, Jr. Director and Vice Chairman
American General Life Companies
2929 Allen Parkway
Houston, TX 77019
Donald W. Britton Director
American General Life Companies
2929 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019
Michael M. Nicholson Director
Franklin Life Insurance Company
#1 Franklin Square
Springfield, IL 62713-0001
John A. Kalbaugh Vice President -
American General Life Companies Chief Marketing Officer
2727 Allen Parkway
Houston, TX 77019
44
<PAGE>
Robert M. Roth Vice President -
American General Securities Incorporated Administration and Compliance,
2727 Allen Parkway Treasurer and Secretary
Houston, TX 77019
Julie A. Cotton Assistant Secretary
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert, Jr. Assistant Treasurer
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019
K. David Nunley Assistant Associate Tax
2727-A Allen Parkway Officer
Houston, TX 77019
Legal Matters
We are not involved in any legal proceedings that would be considered
material with respect to a Policy owner's interest in Separate Account USL VL-R.
Pauletta P. Cohn, Esquire, Associate General Counsel of American General Life
Companies, an affiliate of USL, has opined as to the validity of the Policies.
Independent Auditors
The financial statements of USL for the years 1996, 1997 and 1998 have been
audited by Ernst & Young LLP, independent auditors and the interim financial
statements as of June 30, 1999 for USL have been reviewed by Ernst & Young LLP,
as set forth in their reports appearing elsewhere in this prospectus. Such
financial statements have been included in this prospectus in reliance upon the
reports of Ernst & Young LLP given upon the authority of such firm as experts in
accounting and auditing. Ernst & Young LLP is located at 99 Wood Avenue South,
P.O. Box 751, Iselin, NJ 08830-0471.
Actuarial Expert
Actuarial matters have been examined by Robert M. Beuerlein, who is Senior
Vice President and Chief Actuary of USL. His opinion on actuarial matters is
filed as an exhibit to the registration statement we have filed with the SEC in
connection with the Policies.
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Service Agreements
American General Life Companies ("AGLC") is party to an existing general
services agreement with USL. AGLC, an affiliate of American General Life
Insurance Company, is a corporation incorporated in Delaware on November 24,
1997. Pursuant to this agreement, AGLC provides services to USL, including most
of the administrative, data processing, systems, customer services, product
development, actuarial, auditing, accounting and legal services for USL and the
Platinum Investor Policies.
We have entered into administrative services agreements with the advisers
or administrators for the Mutual Funds. We receive fees for the administrative
services we perform. These fees do not result in any additional charges under
the Policies that are not described under "What charges will USL deduct from my
investment in a Policy?"
Certain Potential Conflicts
The Mutual Funds sell shares to separate accounts of insurance companies,
both affiliated and not affiliated with USL. We currently do not foresee any
disadvantages to you arising out of such sales. Differences in treatment under
tax and other laws, as well as other considerations, could cause the interests
of various owners to conflict. For example, violation of the federal tax laws by
one separate account investing in the Funds could cause the contracts funded
through another separate account to lose their tax-deferred status, unless
remedial action were taken. However, each Mutual Fund has advised us that its
board of trustees (or directors) intends to monitor events to identify any
material irreconcilable conflicts that possibly may arise and to determine what
action, if any, should be taken in response. If we believe that a Fund's
response to any such event insufficiently protects our Policy owners, we will
see to it that appropriate action is taken to do so. If it becomes necessary for
any separate account to replace shares of any Mutual Fund in which it invests,
that Fund may have to liquidate securities in its portfolio on a disadvantageous
basis.
Year 2000 Considerations
Internal Systems. Our ultimate parent, American General Corporation ("AGC"),
- ----------------
has numerous technology systems that are managed on a decentralized basis.
AGC's Year 2000 readiness efforts have been performed by its key business units
with centralized oversight. Each business unit, including USL, has executed a
plan to minimize the risk of a significant negative impact on its operations.
While the specifics of the plans varied, the plans included the following
activities: (1) perform an inventory of the company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose us to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will function into the next century as they do currently; and (5) return
the systems to operations. As of June 30, 1999, these activities had been
substantially completed, making our critical systems Year 2000 ready. We will
continue to test our systems throughout 1999 to maintain Year 2000 readiness. In
addition, we currently are developing plans for the century transition, which
will restrict systems
46
<PAGE>
modifications from November 1999 through January 2000, create rapid response
teams to address problems, and limit vacations for key technical personnel.
Third Party Relationships. We have relationships with various third parties who
- -------------------------
must also be Year 2000 ready. These third parties provide (or receive)
resources and services to (or from) us and include organizations with which we
exchange information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors; customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that we exercise less, or no, control over such parties'
Year 2000 readiness.
We assessed and mitigated the risks associated with the potential failure of
third parties to achieve Year 2000 readiness. Our activities included the
following: (1) identify and classify third party dependencies; (2) research,
analyze, and document Year 2000 readiness for critical third parties; and (3)
test critical hardware and software products and electronic interfaces. As of
June 30, 1999, these activities have been substantially completed. Where
necessary, critical third party dependencies have been included in our
contingency plans. Due to the various stages of Year 2000 readiness for these
critical third-party dependencies, the company's testing activities related to
critical third parties will extend throughout 1999.
Contingency Plans. We have undertaken contingency planning to reduce the risk
- -----------------
of Year 2000-related business failures. The contingency plans, which address
both internal systems and third party relationships, included the following
activities: (1) evaluate the consequences of failure of critical business
processes with significant exposure to Year 2000 risk; (2) determine the
probability of a Year 2000-related failure for those critical processes that
have a high consequence of failure; (3) develop an action plan to complete
contingency plans for critical processes that rank high in consequence and
probability of failure; and (4) complete the applicable contingency plans. As
of June 30, 1999, these activities have been substantially completed. The
contingency plans will continue to be tested and updated throughout 1999.
Risks and Uncertainties. Based on the Year 2000 readiness of internal systems,
- -----------------------
century transition plans, plans to deal with third party relationships, and
contingency plans, we believe that we will experience at most isolated and minor
disruptions of business processes following the turn of the century. Such
disruptions are not expected to have a material effect on our future results of
operations, liquidity, or financial condition. However, due to the magnitude
and complexity of this project, risks and uncertainties exist and we are not
able to predict a most reasonably likely worst case scenario. If Year 2000
readiness is not achieved due to our failure to maintain critical systems as
Year 2000 ready, failure of critical third parties to achieve Year 2000
readiness on a timely basis, failure of contingency plans to reduce Year 2000-
related business failures, or other unforseen circumstances in completing our
plans, the Year 2000 issues could have a material adverse impact on our
operations following the turn of the century.
Costs. Through June 30, 1999, we have incurred, and anticipate that we will
- -----
continue to incur, costs relative to achieving and maintaining Year 2000
readiness. The cost of activities related to Year 2000 readiness has not had a
material adverse effect on our results of operations or financial
47
<PAGE>
condition. In addition, we have elected to accelerate the planned replacement of
certain systems as part of the Year 2000 plans. Costs of the replacement systems
are being capitalized and amortized over their useful lives, in accordance with
our normal accounting policies. None of the costs associated with Year 2000
readiness are passed to Divisions of the Separate Account.
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<PAGE>
FINANCIAL STATEMENTS
The financial statements of USL contained in this prospectus should be
considered to bear only upon the ability of USL to meet its obligations under
Platinum Investor Policies. They should not be considered as bearing upon the
investment experience of Separate Account USL VL-R. No financial statements of
Separate Account USL VL-R are included because, at the date of this prospectus,
Separate Account USL VL-R had not yet commenced operations and had no assets or
liabilities.
Financial Statements of Page to
The United States Life Insurance Company See in this
in the City of New York Prospectus
----------
Report of Ernst & Young LLP, Independent Auditors Q-1
Unaudited Balance Sheets as of six months ended June 30, 1999 Q-2
Unaudited Income Statement as of six months ended June 30, 1999 Q-4
Unaudited Statements of Comprehensive Income as of
six months ended June 30, 1999 Q-5
Unaudited Statements of Shareholder's Equity as of
six months ended June 30, 1999 Q-6
Unaudited Statements of Cash Flow as of
six months ended June 30, 1999 Q-7
Notes to Financial Statements Q-8
Report of Ernst & Young LLP, Independent Auditors F-3
Balance Sheets as of December 31, 1998 and 1997 F-4
Income Statements for the years ended
December 31, 1998, 1997 and 1996 F-6
Statements of Comprehensive Income for
the years ended December 31, 1998, 1997 and 1996 F-7
Statements of Shareholder's Equity for the years
ended December 31, 1998, 1997 and 1996 F-8
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-9
Notes to Financial Statements F-10
49
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
The United States Life Insurance Company
in the City of New York
We have reviewed the accompanying balance sheet of The United States Life
Insurance Company in the City of New York as of June 30, 1999, and the related
statements of income and cash flows for the six-month periods ended June 30,
1999 and 1998. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheets of The United States Life Insurance Company in the
City of New York as of December 31, 1998 and 1997, and the related statements of
income, shareholder's equity and cash flows for each of the three years in the
period ended December 31, 1998, and in our report dated April 23, 1999, we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying balance sheet as of December 31,
1998, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
August 5, 1999 /s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Q-1
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Balance Sheets
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
--------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost $1,796,713 in 1999 and $1,835,225 $2,047,519
$1,897,758 in 1998)
Equity securities, at fair value (cost $568 in
1999 and $568 in 1998) 581 584
Mortgage loans on real estate 100,173 84,387
Policy loans 84,036 84,412
Investment real estate 3,955 6,101
Other long-term investments 13,045 1,385
Short-term investments 130,126 3,005
--------------------------------
Total investments 2,167,141 2,227,393
Cash 56,964 5,045
Indebtedness from affiliates 2,126 6,832
Accrued investment income 36,486 37,227
Accounts and premiums receivable 120,522 231,863
Reinsurance recoverable 712,714 620,661
Deferred policy acquisition costs 135,250 98,552
Property and equipment 4,314 4,318
Other assets 20,227 12,886
--------------------------------
Total assets $3,255,744 $3,244,777
================================
</TABLE>
Q-2
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Balance Sheets
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
-----------------------------------
(In Thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,702,228 $1,729,001
Accident & Health 508,812 407,942
Other policy claims and benefits payable 115,789 116,912
Other policyholders' funds 109,864 108,159
Federal income taxes (24,105) (6,614)
Indebtedness to affiliates 46,002 1,848
Ceded reinsurance payable 242,287 245,576
Other liabilities 93,281 118,339
-----------------------------------
Total liabilities 2,794,158 2,721,163
-----------------------------------
Shareholder's equity:
Common stock, $2 par value, 1,980,658 shares
authorized, issued, and outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income 11,712 53,394
Retained earnings 437,552 457,898
-----------------------------------
Total shareholder's equity 461,586 523,614
-----------------------------------
Total liabilities and shareholder's equity $3,255,744 $3,244,777
===================================
</TABLE>
Q-3
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Statements of Income
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1999 1998
--------------------------------------
(In Thousands)
<S> <C> <C>
Revenues:
Premiums and other considerations $ 97,459 $346,534
Net investment income 84,923 95,237
Net realized investment gains 6,716 72
(losses)
Other 3,222 2,500
--------------------------------------
Total revenues 192,320 444,343
--------------------------------------
Benefits and expenses:
Benefits 94,222 290,500
Operating costs and expenses 52,636 120,382
--------------------------------------
Total benefits and expenses 146,858 410,882
--------------------------------------
Income before income tax expense 45,462 33,461
Income tax expense 15,808 10,988
--------------------------------------
Net income $ 29,654 $ 22,473
======================================
</TABLE>
Q-4
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Statements of Comprehensive Income
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1999 1998
-------------------------------------
(In Thousands)
<S> <C> <C>
Net income $ 29,654 $ 22,473
-------------------------------------
Other comprehensive income:
Gross change in unrealized (losses)
gains on securities (pretax: 1999:
$(66,791); 1998: $(1,019)) (43,414) (662)
Less: gains (losses) realized in net 1,732 (19)
income
-------------------------------------
Change in net unrealized (losses) gains
on securities (pretax: 1999:
$(64,127); 1998: $(1,048)) (41,682) (681)
-------------------------------------
Comprehensive (loss) income $ (12,028) $ 21,792
=====================================
</TABLE>
Q-5
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Statements of Shareholder's Equity
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
-----------------------------------
(In Thousands)
<S> <C> <C>
Common stock:
Balance at beginning of year $ 3,961 $ 3,961
Change during period - -
-----------------------------------
Balance at end of period 3,961 3,961
-----------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361
Change during period - -
-----------------------------------
Balance at end of period 8,361 8,361
-----------------------------------
Accumulated other comprehensive income:
Balance at beginning of year 53,394 53,830
Change in unrealized gains (losses) on
securities (41,682) (436)
-----------------------------------
Balance at end of period 11,712 53,394
-----------------------------------
Retained earnings:
Balance at beginning of year 457,898 483,349
Net income (loss) 29,654 (25,451)
Dividends paid (50,000) -
-----------------------------------
Balance at end of period 437,552 457,898
-----------------------------------
Total shareholder's equity $461,586 $523,614
===================================
</TABLE>
Q-6
<PAGE>
The United States Life Insurance Company in the City of New York
Unaudited Statements of Cash Flows
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
1999 1998
--------------------------------------------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 29,654 $ 22,473
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts and premiums receivable 111,522 34
Change in future policy benefits 80,408 (26,950)
Amortization of policy acquisition costs 22,240 33,248
Policy acquisition costs deferred (15,789) (33,132)
Change in other policyholders' funds 5,086 10,961
Provision for deferred income tax expense 6,062 (1,231)
Depreciation 723 698
Amortization (1,046) (854)
Change in indebtedness to/from affiliates 4,760 (5,593)
Change in reinsurance balances (95,342) (1,946)
Net (gain) loss on sale of investments (6,091) (72)
Other, net (33,919) 14,277
--------------------------------------------
Net cash (used in) provided by operating activities 108,268 11,913
--------------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (1,283,540) (1,225,746)
Sales or maturities of investments and receipts from
repayment of loans 1,240,121 1,262,163
Sales and purchases of property, equipment, and
software, net (719) (1,135)
--------------------------------------------
Net cash (used in) provided by investing activities (44,138) 35,282
--------------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 67,767 67,535
Policyholder account withdrawals (74,078) (153,635)
Dividends paid (50,000) -
Short-term collateralized financings - 47,338
Affiliate borrowings 44,100 -
--------------------------------------------
Net cash provided by (used in) financing activities (12,211) (38,762)
--------------------------------------------
(Decrease) increase in cash 51,919 8,433
Cash at beginning of period 5,045 4,834
--------------------------------------------
Cash at end of period $ 56,964 $ 13,267
============================================
</TABLE>
Interest paid amounted to approximately $167 thousand and $7 thousand for the
six months ended June 30, 1999 and 1998 respectively.
Q-7
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements
June 30, 1999
BASIS OF PRESENTATION
The financial statements for the interim periods herein are unaudited. However,
they have been prepared in accordance with generally accepted accounting
principles for interim financial information and in the opinion of management,
such information reflects all adjustments considered necessary for a fair
presentation. Operating results for the interim period are not necessarily
indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes of the Company for the year ended December 31,
1998.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to current year
presentation.
Q-8
<PAGE>
FINANCIAL STATEMENTS
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
F-1
<PAGE>
The United States Life Insurance Company in the City of New York
Financial Statements
Years ended December 31, 1998, 1997, and 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors....... F-3
Audited Financial Statements
Balance Sheets....................... F-4
Statements of Income................. F-6
Statements of Comprehensive Income... F-7
Statements of Shareholder's Equity... F-8
Statements of Cash Flows............. F-9
Notes to Financial Statements........ F-10
</TABLE>
F-2
<PAGE>
[ERNST & YOUNG LLP LOGO] . 787 Seventh Avenue . Phone: 212 773 3000
New York, New York 10019
Report of Independent Auditors
Board of Directors and Stockholder
The United States Life Insurance Company
in the City of New York
We have audited the accompanying balance sheets of The United States Life
Insurance Company in the City of New York (an indirectly wholly owned subsidiary
of American General Corporation) as of December 31, 1998 and 1997, and the
related statements of income, comprehensive income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The United States Life
Insurance Company in the City of New York at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York ---------------------
April 23, 1999 ERNST & YOUNG LLP
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-3
<PAGE>
The United States Life Insurance Company in the City of New York
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $1,897,758 in 1998 and
$2,215,928 in 1997) $2,047,519 $2,352,376
Equity securities, at fair value (cost - $568 in
1998 and $568 in 1997) 584 578
Mortgage loans on real estate 84,387 60,565
Policy loans 84,412 87,726
Investment real estate 6,101 7,731
Other long-term investments 1,385 971
Short-term investments 3,005 55,908
------------------------------
Total investments 2,227,393 2,565,855
Cash 5,045 4,834
Indebtedness from affiliates 6,832 1,711
Accrued investment income 37,227 44,050
Accounts and premiums receivable 231,863 64,717
Reinsurance recoverable 620,661 58,479
Deferred policy acquisition costs 98,552 185,243
Property and equipment 4,318 1,971
Other assets 12,886 9,702
------------------------------
Total assets $3,244,777 $2,936,562
==============================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------
<S> <C> <C>
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,729,001 $1,876,294
Accident & Health 407,942 186,879
Other policy claims and benefits payable 116,912 115,712
Other policyholders' funds 109,130 86,400
Federal income taxes (7,585) 32,457
Indebtedness to affiliates 1,848 4,746
Ceded reinsurance payable 245,576 5,127
Other liabilities 118,339 79,446
-------------------------------
Total liabilities 2,721,163 2,387,061
-------------------------------
Shareholder's equity:
Common stock, $2 par value, 1,980,658 shares
authorized, issued, and outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income 53,394 53,830
Retained earnings 457,898 483,349
-------------------------------
Total shareholder's equity 523,614 549,501
-------------------------------
Total liabilities and shareholder's equity $3,244,777 $2,936,562
===============================
</TABLE>
See accompanying notes.
F-5
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Revenues:
Premiums and other considerations $594,155 $666,173 $609,582
Net investment income 185,838 189,262 195,687
Net realized investment (losses)
gains (3,951) (3,116) 3,836
Other 4,901 26,576 8,355
-----------------------------------------------
Total revenues 780,943 878,895 817,460
-----------------------------------------------
Benefits and expenses:
Benefits 514,020 594,021 559,396
Operating costs and expenses 221,115 212,977 225,291
Loss on reinsurance settlements 59,878 - -
Litigation settlement 30,689 - -
Change in control costs - 6,955 -
-----------------------------------------------
Total benefits and expenses 825,702 813,953 784,687
-----------------------------------------------
(Loss) income before income tax
(benefit) expense (44,759) 64,942 32,773
Income tax (benefit) expense (19,308) 22,700 10,943
-----------------------------------------------
Net (loss) income $(25,451) $ 42,242 $ 21,830
===============================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net (loss) income $(25,451) $42,242 $ 21,830
----------------------------------------------
Other comprehensive (loss) income:
Gross change in unrealized (losses)
gains on securities (pretax: 1998:
$(4,920); 1997: $46,905; 1996:
($73,462)) (3,198) 30,488 (47,750)
Less: (losses) gains realized in
net income (2,762) 2,060 1,812
----------------------------------------------
Change in net unrealized (losses)
gains on securities (pretax: 1998:
$(671); 1997: $43,735; 1996:
($76,249) (436) 28,428 (49,562)
----------------------------------------------
Comprehensive (loss) income $(25,887) $70,670 $(27,732)
==============================================
</TABLE>
See accompanying notes.
F-7
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Common stock:
Balance at beginning of year $ 3,961 $ 3,961 $ 3,961
Change during year - - -
-----------------------------------------------
Balance at end of year 3,961 3,961 3,961
-----------------------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361 8,361
Change during year - - -
-----------------------------------------------
Balance at end of year 8,361 8,361 8,361
-----------------------------------------------
Accumulated other comprehensive
income:
Balance at beginning of year 53,830 25,402 74,964
Change in unrealized (losses) gains
on securities (436) 28,428 (49,562)
-----------------------------------------------
Balance at end of year 53,394 53,830 25,402
-----------------------------------------------
Retained earnings:
Balance at beginning of year 483,349 441,107 419,277
Net (loss) income (25,451) 42,242 21,830
-----------------------------------------------
Balance at end of year 457,898 483,349 441,107
-----------------------------------------------
Total shareholder's equity $ 523,614 $549,501 $478,831
===============================================
</TABLE>
See accompanying notes.
F-8
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net (loss) income $ (25,451) $ 42,242 $ 21,830
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts and premiums receivable (167,146) (6,977) (7,385)
Change in future policy benefits 174,629 82,006 64,811
Amortization of policy acquisition costs 66,331 58,583 85,536
Policy acquisition costs deferred (62,766) (62,651) (63,041)
Change in other policyholders' funds 22,573 21,783 11,452
Provision for deferred income tax expense (45,403) (995) 1,992
Depreciation 1,327 1,100 1,024
Amortization (1,734) (2,360) (2,306)
Change in indebtedness to/from affiliates (8,019) 3,415 732
Change in reinsurance balances (321,733) (9,492) (8,537)
Net (gain) loss on sale of investments 3,951 3,116 (3,836)
Other, net 118,537 39,806 26,497
--------------------------------------------------------------------
Net cash (used in) provided by operating
activities (244,904) 169,576 128,769
--------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (2,833,731) (2,407,890) (1,246,498)
Sales or maturities of investments and receipts
from repayment of loans 3,183,379 2,507,408 1,280,163
Sales and purchases of property, equipment, and
software, net (3,674) 274 (1,861)
--------------------------------------------------------------------
Net cash provided by investing activities 345,974 99,792 31,804
--------------------------------------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 131,386 135,668 133,763
Policyholder account withdrawals (232,245) (407,383) (307,065)
--------------------------------------------------------------------
Net cash (used in) financing activities (100,859) (271,715) (173,302)
--------------------------------------------------------------------
Increase (decrease) in cash 211 (2,347) (12,729)
Cash at beginning of year 4,834 7,181 19,910
--------------------------------------------------------------------
Cash at end of year $ 5,045 $ 4,834 $ 7,181
====================================================================
</TABLE>
Interest paid amounted to approximately $5.3 million in 1998. There was no
interest paid in 1997 or 1996.
See accompanying notes.
F-9
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements
December 31, 1998
NATURE OF OPERATIONS
The United States Life Insurance Company in the City of New York (the "Company")
is domiciled in the State of New York. The Company is a wholly owned subsidiary
of USLIFE Corporation. Through the acquisition of USLIFE Corporation by American
General Corporation (the "Parent Company") on June 17, 1997, American General
Corporation became the ultimate parent of the Company.
The Company offers a broad portfolio of individual life and annuity products as
well as group and credit insurance.
The individual life line of business includes universal life, level term, whole
life and interest sensitive whole life as well as annuities. These individual
and annuity products are sold primarily to affluent markets, generally through
independent general agencies and producers as well as financial institutions.
The Company also provides products for preferred international markets and other
target markets through lower cost distribution channels.
Group insurance products include group life, accidental death & dismemberment
("AD&D"), dental, vision and disability coverage and are sold through
independent general agents and producers as well as third party administrators.
These products are marketed nationwide to employers, professional and affinity
associations. The Company also offers managed care medical products to small
employers in four states (New York, New Jersey, Colorado and Illinois).
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Transactions with the Parent Company
and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
1.2 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include both
long-duration and short-duration contracts.
Long-duration contracts include traditional whole life, endowment, guaranteed
renewable term life, universal life, limited payment, and investment contracts.
Long-duration
F-10
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 INSURANCE CONTRACTS (CONTINUED)
contracts generally require the performance of various functions and services
over a period of more than one year.
Short-duration contracts include group major medical, dental, term life, AD&D,
excess major medical, hospital indemnity and long-term and short-term disability
policies. Short-term contracts generally require the performance of various
functions and services over a period of one year or less.
The contract provisions generally cannot be changed or canceled by the insurer
during the contract period; however, most new contracts written by the Company
allow the insurer to revise certain elements used in determining premium rates
or policy benefits, subject to guarantees stated in the contracts.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1998, 1997, and 1996. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
F-11
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 INVESTMENTS (CONTINUED)
POLICY LOANS
Policy loans are reported at unpaid principal balance.
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life contracts is charged to expense in
relation to the estimated gross profits of those contracts. DPAC associated with
insurance investment contracts is effectively charged off over the period ending
one year beyond the surrender charge period. DPAC associated with all other
insurance contracts is charged to expense over the premium-paying period or as
the premiums are earned over the life of the contract.
DPAC is adjusted for the impact on estimated future gross profits as if net
unrealized gains (losses) on securities had been realized at the balance sheet
date. The impact of this adjustment is included in accumulated other
comprehensive income within shareholder's equity.
The Company reviews the carrying amount of DPAC on at least an annual basis.
Management considers estimated future gross profits or future premiums, future
lapse
F-12
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
rates, expected mortality/morbidity, interest earned and credited rates,
persistency, and expenses in determining whether the carrying amount is
recoverable.
1.5 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.4).
For all other contracts, premiums are recognized when due.
1.6 POLICY AND CONTRACT CLAIMS RESERVES
The Company's insurance and annuity liabilities relate to both long-duration and
short-duration contracts. The contracts normally cannot be changed or canceled
by the Company during the contract period.
For long-duration contracts such as interest-sensitive life and insurance
investment contracts, reserves equal the sum of the policy account balance and
deferred revenue charges. Reserves for other long-duration contracts are based
on estimates of the cost of future policy benefits. Reserves are determined
using the net level premium method. Interest assumptions used to compute
reserves ranged from 2.2% to 11.25% at December 31, 1998.
Short-duration contracts are rated based on attained age and are guaranteed
issue and thus not subject to the normal wear-off mortality/morbidity patterns.
No policy reserves other than unearned premium reserves are held. The unearned
premium reserve is based on gross premium and is calculated on a pro rata basis.
Incurred but not reported claim reserves are based upon patterns demonstrated
through run-out studies. Reserves for open long-term disability claims are based
on the 1964 and 1985 Commissioner Disability Tables, modified for company
experience. The interest assumption is 6%.
1.7 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. The Company remains obligated
for amounts ceded in the
F-13
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.7 REINSURANCE (CONTINUED)
event that the reinsurers do not meet their obligations.
A recoverable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance recoverables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.8 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 36.7%, 33.2%, and 24.3%
of individual life insurance in force at December 31, 1998, 1997 and 1996
respectively.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $2.4 million, $2.6 million and $2.8 million in 1998, 1997 and
1996 respectively.
1.9 INCOME TAXES
The Company was acquired by American General Corporation on June 17, 1997.
Following the acquisition, the Company will file a separate life company federal
income tax return for five years.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment.
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset is included in income. Changes related to
fluctuations in fair value of available-for-sale securities are included in
accumulated other comprehensive income in shareholder's equity.
F-14
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1.10 CHANGES IN ACCOUNTING AND REPORTING STANDARDS
During 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) 130, Reporting Comprehensive Income, which establishes standards for
reporting and displaying comprehensive income and its components in the
financial statements. The Company elected to report comprehensive income and its
components in a separate statement of comprehensive income. Adoption of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's results of operations or financial
position.
Effective January 1, 1998, the Company adopted SFAS 132, Employers' Disclosures
about Pension and Other Postretirement Benefits, which revised disclosure
requirements for employers' pension and other retiree benefits. SFAS 132 did not
change the measurement or recognition of pension or other postretirement benefit
plans. The Company has restated disclosures for earlier years presented, as
required under SFAS 132.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for years beginning after June 15, 1999. Adoption of SFAS 133 is not
expected to have a material impact on the Company's results of operations or
financial position.
F-15
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities $176,449 $176,714 $183,290
Equity securities 49 49 49
Mortgage loans on real estate 5,766 7,277 7,644
Investment real estate 1,556 1,365 1,530
Policy loans 5,521 5,683 5,649
Other long-term investments 310 652 1,691
Short-term investments 2,742 1,280 1,164
Investment income from affiliates 57 - -
---------------------------------------------
Gross investment income 192,450 193,020 201,017
Investment expenses 6,612 3,758 5,330
---------------------------------------------
Net investment income $185,838 $189,262 $195,687
=============================================
</TABLE>
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 2,860 $ 6,704 $ 15,241
Gross losses (7,111) (3,534) (12,230)
------------------------------------------------
Total fixed maturities (4,251) 3,170 3,011
Equity securities - - (259)
Other investments 300 (6,286) 1,084
------------------------------------------------
Net realized investment gains
(losses) before tax (3,951) (3,116) 3,836
Income tax expense (benefit) (1,383) (1,090) 1,344
------------------------------------------------
Net realized investment gains
(losses) after tax $(2,568) $(2,026) $ 2,492
================================================
</TABLE>
F-16
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.3). Amortized cost and fair value at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $1,626,339 $131,810 $(1,684) $1,756,465
Below investment-grade 112,767 3,415 (1,173) 115,009
Mortgage-backed securities* 50,036 912 - 50,948
U.S. government obligations 19,968 4,238 - 24,206
Foreign governments 79,794 11,944 - 91,738
State and political
subdivisions 6,469 139 - 6,608
Redeemable preferred stocks 2,385 160 - 2,545
-------------------------------------------------------------
Total fixed maturity
securities $1,897,758 $152,618 $(2,857) $2,047,519
=============================================================
Equity securities $ 568 $ 25 $ (9) $ 584
=============================================================
</TABLE>
*Primarily include pass-through securities guaranteed by the U.S. government and
government agencies.
F-17
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed maturity securities:
Corporate securities:
Investment-grade $1,969,450 $118,880 $(1,019) $2,087,311
Below investment-grade 113,181 2,745 (426) 115,500
Mortgage-backed securities* 3,725 459 - 4,184
U.S. government obligations 20,916 3,001 (24) 23,893
Foreign governments 96,162 12,254 - 108,416
State and political
subdivisions 9,992 293 (1) 10,284
Redeemable preferred stock 2,502 286 - 2,788
-----------------------------------------------------------------
Total fixed maturity
securities $2,215,928 $137,918 $(1,470) $2,352,376
=================================================================
Equity securities $ 568 $ 22 $ (12) $ 578
=================================================================
</TABLE>
*Primarily include pass-through securities guaranteed by the U.S. government and
government agencies.
F-18
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $152,643 $137,940
Gross unrealized losses (2,866) (1,482)
DPAC and other fair value adjustments (67,632) (53,643)
Deferred federal income taxes (28,751) (28,985)
-------------------------------
Net unrealized gains on securities $ 53,394 $ 53,830
===============================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity
securities, excluding
mortgage-backed
securities:
Due in one year or
less $ 193,010 $ 196,606 $ 91,283 $ 91,461
Due after one year
through five years 551,151 579,964 762,673 795,257
Due after five years
through ten years 357,288 382,038 521,239 542,858
Due after ten years 746,273 837,963 837,008 918,616
Mortgage-backed
securities 50,036 50,948 3,725 4,184
------------------------------------------------------------
Total fixed maturity
securities $1,897,758 $2,047,519 $2,215,928 $2,352,376
============================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $587.3 million,
$576.2 million, and $404.5 million during 1998, 1997, and 1996, respectively.
F-19
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. For new loans, the
Company requires loan-to-value ratios of 75% or less, based on management's
credit assessment of the borrower. The mortgage loan portfolio was distributed
as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
--------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1998
Geographic distribution:
South Atlantic $16 19.0% - %
Pacific 7 8.3 27.6
Mid-Atlantic 32 38.1 -
East North Central 14 16.7 -
Mountain 3 3.6 -
West South Central 5 6.0 -
East South Central - - -
West North Central 1 1.2 -
New England 11 13.1 -
Allowance for losses (5) (6.0) -
-------------------------------
Total $84 100.0% 2.4%
===============================
Property type:
Office $39 46.4% - %
Retail 28 33.3 6.5
Industrial 16 19.0 -
Apartments 2 2.4 -
Other 4 4.9 -
Allowance for losses (5) (6.0) -
-------------------------------
Total $84 100.0% 2.4%
===============================
</TABLE>
F-20
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
---------------------------------------------
(In Millions)
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 2 3.3% -%
Pacific 2 3.3 95.5
Mid-Atlantic 39 65.0 -
East North Central 9 15.0 -
Mountain 4 6.7 -
West South Central 3 5.0 -
East South Central - - -
West North Central 1 1.7 -
New England 5 8.3 -
Allowance for losses (5) (8.3) -
-------------------
Total $60 100.0% 3.1%
===================
Property type:
Office $15 25.0% -%
Retail 28 46.7 6.5
Industrial 15 25.0 -
Apartments 2 3.3 -
Other 5 8.3 -
Allowance for losses (5) (8.3) -
-------------------
Total $60 100.0% 3.1%
===================
F-21
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
-----------------------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
-----------------------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and
government agencies and
authorities $ 19,968 $ 24,206 $ 24,206 $ 20,916 $ 23,893 $ 23,893
States, municipalities, and
political subdivisions 6,469 6,608 6,608 9,992 10,284 10,284
Foreign governments 79,794 91,738 91,738 96,162 108,416 108,416
Public utilities 320,947 345,320 345,320 392,640 411,186 411,186
Mortgage-backed securities 50,036 50,948 50,948 3,725 4,184 4,184
All other corporate bonds 1,418,159 1,526,154 1,526,154 1,689,991 1,791,625 1,791,625
Redeemable preferred stocks 2,385 2,545 2,545 2,502 2,788 2,788
-----------------------------------------------------------------------------------------------
Total fixed maturities 1,897,758 2,047,519 2,047,519 2,215,928 2,352,376 2,352,376
Equity securities:
Nonredeemable preferred stocks 568 584 584 568 578 578
-----------------------------------------------------------------------------------------------
Total fixed maturities and
equity securities 1,898,326 $2,048,103 2,048,103 2,216,496 $2,352,954 2,352,954
========== ==========
Mortgage loans on real estate* 84,387 84,387 60,565 60,565
Investment real estate 6,101 6,101 7,731 7,731
Policy loans 84,412 84,412 87,726 87,726
Other long-term investments 1,385 1,385 971 971
Short-term investments 3,005 3,005 55,908 55,908
---------- --------------------------- ----------
Total investments $2,077,616 $2,227,393 $2,429,397 $2,565,855
========== =========================== ==========
</TABLE>
* Amount is net of allowance for losses of $5 million at both December 31,
1998 and 1997.
F-22
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
1998 1997 1996
---------------------------------------
(In Thousands)
Balance at January 1 $185,243 $197,572 $199,268
Capitalization 62,766 62,651 63,041
Amortization (66,331) (58,583) (85,536)
Effect of unrealized gains (losses)
on securities (13,832) (15,656) 20,799
Effect of realized gains (losses) (85) (741) -
Reinsurance transfer (69,209) - -
---------------------------------------
Balance at December 31 $ 98,552 $185,243 $197,572
=======================================
On January 29, 1996, USLIFE Corporation announced that the Company would
discontinue new sales of traditional indemnity major medical products. Further,
it would only offer major medical coverage through managed care plans in
selected markets where it has both a significant presence and an appropriate
managed care network in place, while continuing to provide full support and
service to all existing indemnity customers regardless of location.
Concurrently, USLIFE Corporation announced that it would carefully monitor
persistency experience of its group insurance lines in order to determine
whether financial statement adjustments would become necessary.
Recoverability of deferred policy acquisition costs depends on future revenues
and gross profits from the business to which it relates. Evaluation of this
asset, as well as the reserve for policy benefits, requires assumptions as to
the amount and timing of these future revenues and gross profits. USLIFE
Corporation's continuing study disclosed that persistency on this business
deteriorated to a point that a revision in assumptions was necessary.
During the second quarter of 1996, the Company recorded a pre-tax charge of
$49.6 million to recognize revised assumptions reflecting current experience on
its traditional indemnity group major medical and related products, including
group life insurance cases sold in tandem with these major medical policies. The
charge includes a $37.2 million writedown of deferred policy acquisition costs
on this block of business and a related adjustment of the reserve for policy
benefits amounting to $12.4 million which is included in Benefits in the
accompanying statements of income. The charge, on an after-tax basis, amounts to
$32.3 million. The impact of this charge on 1996 pre-tax results of the group
life and group health lines was $6.2 million and $43.4 million, respectively.
F-23
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. OTHER ASSETS
Other assets consisted of the following:
DECEMBER 31
1998 1997
----------------------
(In Thousands)
Prepaid expenses $ 9,225 $7,384
Deferred systems costs 1,218 -
Supply inventory 826 1,298
Other 1,617 1,020
----------------------
Total other assets $12,886 $9,702
======================
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
DECEMBER 31
1998 1997
----------------------
(In Thousands)
Current tax payable $ 6,208 $ 613
Deferred tax liabilities, applicable to:
Net income (42,544) 2,859
Net unrealized investment gains 28,751 28,985
----------------------
Total deferred tax liabilities (13,793) 31,844
----------------------
Total current and deferred tax (assets) liabilities $ (7,585) $32,457
======================
F-24
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 Tax Liabilities (continued)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 32,544 $ 40,279
Basis differential of investments 54,056 49,421
Other 8,619 26,940
-----------------------
Total deferred tax liabilities 95,219 116,640
Deferred tax assets applicable to:
Policy reserves (56,269) (69,968)
Other (52,743) (14,828)
-----------------------
Total deferred tax assets before valuation
allowance (109,012) (84,796)
Valuation allowance - -
-----------------------
Total deferred tax assets, net of valuation
allowance (109,012) (84,796)
-----------------------
Net deferred tax (assets) liabilities $ (13,793) $ 31,844
=======================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $37.8 million at
December 31, 1998 and 1997. At current corporate rates, the maximum amount of
tax on such income is approximately $13.2 million. Deferred taxes on these
accumulations are not required because no distributions are expected.
F-25
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.2 TAX EXPENSE
Components of income tax (benefit) expense for the years were as follows:
1998 1997 1996
------------------------------------
(In Thousands)
Current tax expense $ 26,095 $23,695 $ 8,951
Deferred tax (benefit) expense:
Deferred policy acquisition cost 2,673 749 (5,314)
Policy reserves (12,552) 3,160 (3,027)
Basis differential of investments 132 (3,168) 595
Litigation settlement (10,272) - -
Reinsurance transaction (22,133) - -
Other, net (3,251) (1,736) 9,738
------------------------------------
Total deferred tax (benefit) expense (45,403) (995) 1,992
------------------------------------
Income tax (benefit) expense $(19,308) $22,700 $10,943
====================================
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
1998 1997 1996
------------------------------------
(In Thousands)
Income tax at statutory percentage
of GAAP pretax income $(15,666) $22,730 $11,471
Tax-exempt investment income (121) (134) (149)
Other (3,521) 104 (379)
------------------------------------
Income tax (benefit) expense $(19,308) $22,700 $10,943
====================================
F-26
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $20.5 million, $17.2 million, and
$13.8 million in 1998, 1997, and 1996, respectively.
5.4 TAX RETURN EXAMINATIONS
The Internal Revenue Service ("IRS") has completed examinations of the Company's
tax returns through 1991. The IRS is currently examining tax returns for 1992
through 1994. Although the final outcome of any issues raised in examination is
uncertain, the Company believes that the ultimate liability, including interest,
will not materially exceed amounts recorded in the financial statements.
6. TRANSACTIONS WITH AFFILIATES
American General Corporation and certain affiliated companies provide services
to the Company, principally data processing, investment management, professional
and administrative services. During 1998 and 1997 the Company incurred $25.3
million and $20.5 million, respectively, for these services. In addition, the
Company provides services to certain affiliated companies. During 1998 and 1997
the Company was reimbursed $3.5 million and $6.1 million, respectively, for
these services.
The Company periodically borrows funds from the Parent Company under an
intercompany short-term borrowing agreement entered into during 1997. These
borrowings are on demand and are unsecured. Interest is charged on the average
borrowing based on the commercial paper rate. At December 31, 1998, no amounts
were outstanding under the borrowing agreement.
Affiliated accounts receivable were $6.8 million and $1.7 million in 1998 and
1997, respectively.
Following regulatory approval from the necessary authorities, the Company
reinsured 49% of its credit life and credit accident and health business to
American General Assurance Company, an affiliate, effective January 1, 1998.
This transaction resulted in the cession of approximately 218,000 life policies
representing $379.5 million of insurance in-force and approximately 41,000 A&H
policies. Assets of approximately $10 million were transferred, which resulted
in a pretax loss of approximately $4 million.
Following regulatory approval from the necessary authorities, the Company also
reinsured 49% of its New York and 100% of its non-New York group life (excluding
permanent policies), group accident and health, and individual accident and
health business to American General Assurance Company effective October 1, 1998.
This transaction resulted in the cession of approximately 21,000 life policies
representing
F-27
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$32.6 billion of insurance in-force and approximately 24,000 A&H policies.
Assets of approximately $254 million were transferred. The Company received a
$13 million ceding commission on this transaction, which resulted in a pretax
loss of approximately $56 million.
The losses on these transactions resulted from the pricing of the business to
yield a competitive market return.
Amounts recoverable of $400 million and amounts payable of $106 million,
relating to this affiliated reinsurance, are included under the captions
"Reinsurance recoverable" and "Ceded reinsurance payable" in the balance sheets
at December 31, 1998.
7. ACCIDENT AND HEALTH RESERVES
Activity in the liability for unpaid claims and claim adjustment expenses for
the Company's accident and health coverage is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
---------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance recoverable $ 85,974 $ 72,744 $ 55,450
---------------------------------------
Reinsurance settlements (1) (43,736) - -
---------------------------------------
Add: Incurred losses (2) 179,158 263,015 278,413
---------------------------------------
Deduct: Paid losses related to:
Current year 78,575 82,470 87,119
Prior years 123,039 167,315 174,000
---------------------------------------
Total paid losses 201,614 249,785 261,119
---------------------------------------
Balance as of December 31, net of reinsurance recoverable 19,782 85,974 72,744
Reinsurance recoverable 45,419 1,413 1,094
---------------------------------------
Balance as of December 31, gross of reinsurance recoverable $ 65,201 $ 87,387 $ 73,838
=======================================
</TABLE>
(1) See Note 6.
(2) Substantially all of the Company's incurred claims and claim adjustment
expenses relate to the respective current year.
F-28
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7. ACCIDENT AND HEALTH RESERVES (CONTINUED)
The liability for unpaid claims and claim adjustment expenses relating to the
Company's accident and health business is based on the estimated amount payable
on claims reported prior to the date of the balance sheets which have not yet
been settled: claims reported subsequent to the date of the balance sheets which
have been incurred during the period than ended, and an estimate (based on past
experience) of incurred but unreported claims relating to such periods.
8. BENEFIT PLANS
8.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 56% and 30%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $52 million.
The components of pension expense and underlying assumptions were as follows:
1998 1997 1996
-----------------------------------
(In Thousands)
Service cost (benefits earned) $ 193 $ 1,065 $ 2,031
Interest cost 1,205 2,593 2,652
Expected return on plan assets (1,714) (3,331) (2,421)
Amortization (309) (418) (47)
-----------------------------------
Pension (income) expense $ (625) $ (91) $ 2,215
===================================
Discount rate on benefit obligation 7.00% 7.25% 7.60%
Rate of increase in compensation 4.25% 4.00% 6.00%
levels
Expected long-term rate of return on
plan assets 10.25% 10.00% 7.50%
F-29
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
1998 1997
--------------------
(In Thousands)
Projected benefit obligation (PBO) $18,022 $26,337
Plan assets at fair value 18,110 23,757
--------------------
Plan assets at fair value in excess of (less 88 (2,580)
than) PBO
Other unrecognized items, net (198) 3,154
--------------------
(Accrued) prepaid pension expense $ (110) $ 574
====================
The change in PBO was as follows:
1998 1997
--------------------
(In Thousands)
PBO at January 1 $26,337 $27,245
Service and interest costs 1,398 3,658
Benefits paid (915) (870)
Actuarial loss (gain) 638 (932)
Transfers and other (9,436) (2,764)
--------------------
PBO at December 31 $18,022 $26,337
====================
The change in the fair value of plan assets was as follows:
1998 1997
--------------------
(In Thousands)
Fair value of plan assets at January 1 $23,757 $22,222
Actual return on plan assets 1,175 2,405
Benefits paid (915) (870)
Transfers (5,907) -
--------------------
Fair value of plan assets at December 31 $18,110 $23,757
====================
F-30
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, with retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense (benefit) in 1998, 1997, and 1996 was $(290)
thousand, $(43) thousand, and $440 thousand, respectively. The accrued liability
for postretirement benefits was $3.7 million and $13.7 million at December 31,
1998 and 1997, respectively. These liabilities were discounted at the same rates
used for the pension plans.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
1998 1997
----------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------------------------------------------
(In Millions) (In Millions)
Assets:
Fixed maturity and
equity securities $2,048 $2,048 $2,353 $2,353
Mortgage loans on real
estate $ 91 $ 84 $ 68 $ 61
Policy loans $ 84 $ 84 $ 86 $ 88
Indebtedness from
affiliates $ 7 $ 7 $ 2 $ 2
Liabilities:
Insurance investment
contracts $ 541 $ 560 $ 737 $ 732
F-31
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable from
affiliates. Due to the short-term nature of accounts receivable, fair value
is assumed to equal carrying value.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-32
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
10. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY
The Company's statutory basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the State of New York
Insurance Department. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as a variety of
publications by the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, from company to company within a state, and may change in the
future. There were no material permitted practices utilized by the Company in
1998, 1997 or 1996.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"). Codification will likely change, to some extent, prescribed
accounting practices and may result in changes to the accounting practices that
the Company uses to prepare its statutory financial statements. Codification
will require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before Codification becomes effective for the Company, the
State of New York must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory basis results to the
Insurance Department. At this time, it is unclear whether the State of New York
will adopt Codification.
Policyholder's surplus and net income, as reported to the domiciliary state
insurance department in accordance with its prescribed or permitted statutory
accounting practices is summarized as follows:
1998 1997 1996
--------------------------------------
(In Thousands)
Statutory net income for the year $ 31,151 $ 24,961 $ 13,132
Statutory surplus at year-end $212,130 $218,111 $180,405
Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of $(6.0) million, $(6.8) million and $(8.4)
million in 1998, 1997 and 1996, respectively, with the 1998, 1997 and 1996
losses primarily a result of higher levels of sales of participating term
insurance products. Regulatory equity capital includes capital attributed to
participating policyholders of $(37.0) million, $(24.9) million and $(13.3)
million at December 31, 1998, 1997 and 1996 respectively. Capital attributed to
participating policyholders is not available for payment of dividends to
shareholders.
F-33
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
10. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY (CONTINUED)
The Company is subject to New York Business Corporation Law, which imposes
restrictions on shareholder dividends. In addition, New York State Insurance Law
requires that no dividend may be declared without prior approval of the State of
New York Insurance Department. New York Law also states that no New York
domiciled company shall declare or distribute dividends to shareholders which
exceeds the lesser of: (1) 10% of surplus as regards policyholders or (2) 100%
of adjusted net investment income, unless the superintendent approves a greater
dividend payment. The Company did not pay any dividends in 1998, 1997 or 1996.
11. LEASES
The Company has various leases, substantially all of which are for office space
and facilities. At December 31, 1998 the future minimum rental commitments under
all of the Company's noncancellable leases were as follows:
YEAR ENDED OFFICE
DECEMBER 31 SPACE EQUIPMENT TOTAL
- -------------------------------------------------------------------------
(In Thousands)
1999 $ 4,892 $452 $ 5,344
2000 4,693 183 4,876
2001 4,685 93 4,778
2002 4,517 - 4,517
2003 4,368 - 4,368
Thereafter 5,342 - 5,342
----------------------------------------
Total $28,497 $728 $29,225
========================================
Rent expense incurred in 1998, 1997 and 1996 was $4.6 million, $3.6 million and
$3.7 million, respectively.
12. COMMITMENTS AND CONTINGENCIES
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. The settlements are not final until
approved by the courts and any appeals are resolved. If court approvals are
obtained and appeals are not taken, it is expected the settlements will be final
in third quarter 1999.
F-34
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In conjunction with the proposed settlements, the Company recorded a charge of
$30.7 million ($19.9 million after-tax) in the fourth quarter of 1998. The
charge covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
The litigation liability was reduced by payments of $1.3 million, and the
remaining balance of $29.4 million was included in other liabilities on the
Company's balance sheet at December 31, 1998.
In addition to the charges recorded in 1998, the Company will incur additional
expenses for claim administration, outside counsel and actuarial services, and
regulatory expenses, related to the resolution of the litigation, which will be
recorded as incurred. Such expenses are not expected to have a material adverse
effect on the Company's financial position or results of operations.
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's results of operations and
financial position. However, it should be noted that the frequency of large
damage awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions like
Alabama and Mississippi continues to create the potential for an unpredictable
judgment in any given suit.
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1998 and 1997, the Company has accrued $876 thousand and
$1.1 million, respectively, for guaranty fund assessments, and applied $236
thousand and $293 thousand, respectively, for premium tax deductions. The
Company has recorded receivables of $352 thousand and $334 thousand at December
31, 1998 and 1997, respectively, for expected recoveries against the payment of
future premium taxes. Expenses incurred for guaranty fund assessments were $191
thousand, $358 thousand, and $557 thousand in 1998, 1997, and 1996,
respectively.
F-35
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996
were as follows:
1998 1997 1996
-----------------------------------------------
(In Thousands)
LIFE INSURANCE IN FORCE
Gross $70,948,300 $61,407,508 $52,300,927
Assumed - 11,314,869 9,773,886
Ceded 44,441,277 9,321,704 5,674,223
-----------------------------------------------
Net $26,507,023 $63,400,673 $56,400,590
===============================================
Life and Annuity Premiums
Gross $ 214,384 $ 178,251 $ 154,569
Assumed 22,020 26,171 24,468
Ceded 58,924 19,332 5,467
-----------------------------------------------
Net $ 177,480 $ 185,090 $ 173,570
===============================================
A&H PREMIUMS
Written
Gross $ 459,562 $ 422,886 $ 379,171
Assumed 170,120 1,704 2,190
Ceded 285,628 16,243 12,281
-----------------------------------------------
Net $ 344,054 $ 408,347 $ 369,080
===============================================
Earned
Gross $ 452,348 $ 403,717 $ 378,390
Assumed 168,331 1,503 2,190
Ceded 276,313 15,616 12,252
-----------------------------------------------
Net $ 344,366 $ 389,604 $ 368,328
===============================================
Reinsurance recoverable on paid losses was approximately $10.6 million, $2.4
million, and $3.7 million at December 31, 1998, 1997, and 1996, respectively.
Reinsurance recoverable on unpaid losses was approximately $81.7 million, $3.2
million, and $3.1 million at December 31, 1998, 1997, and 1996, respectively.
The effect of reinsurance on benefits to policyholders and beneficiaries was
$131 million, $13 million, and $20 million during 1998, 1997, and 1996,
respectively.
The Company terminated its participation in both the Federal Employee Government
Life Insurance (FEGLI) and State Government Life Insurance (SGLI) pools in 1998.
The assumed premiums for these pools in 1998 were $19.5 million and $2.5
million, respectively.
F-36
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
13. REINSURANCE (CONTINUED)
The Company participates in several reinsurance pools. These pools are managed
and administered by reinsurance intermediaries on behalf of the Company. The
pools involved various coverages including life, medical and disability.
14. YEAR 2000 CONTINGENCY (UNAUDITED)
INTERNAL SYSTEMS
The Company's ultimate parent, American General Corporation, (AGC) has numerous
technology systems that are managed on a decentralized basis. AGC's Year 2000
readiness efforts are therefore being undertaken by its key business units with
centralized oversight. Each business unit, including the Company, has developed
and is implementing a plan to minimize the risk of a significant negative impact
on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operations. As of December 31, 1998, these activities
had been completed for substantially all of the Company's critical systems,
making them Year 2000 ready. Vendor upgrades for a small number of systems were
either completed in the first quarter 1999 or are expected to be completed by
June 30, 1999; therefore, activities (3) through (5) are ongoing for some
systems.
The Company will continue to test its systems throughout 1999 to maintain Year
2000 readiness. In addition, the company is developing plans for the century
transition, which will restrict systems modifications from November 1999 through
January 2000, create rapid response teams to address problems and limit
vacations for key technical personnel.
THIRD PARTY RELATIONSHIPS
The Company has relationships with various third parties who must also be Year
2000 ready. These third parties provide (or receive) resources and services to
(or from) the Company and include organizations with which the Company exchanges
information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors; customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that the Company exercises less, or no, control over
F-37
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
THIRD PARTY RELATIONSHIPS (CONTINUED)
Year 2000 readiness. The Company has developed a plan to assess and attempt to
mitigate the risks associated with the potential failure of third parties to
achieve Year 2000 readiness. The plan includes the following activities (1)
identify and classify third party dependencies; (2) research, analyze, and
document Year 2000 readiness for critical third parties; and (3) test critical
hardware and software products and electronic interfaces. As of April 30, 1999,
AGC has identified and assessed its critical third party dependencies, including
those related to the Company. Of these critical dependencies, approximately 300
have been assessed to have a high probability of failure and have been covered
in the Company's contingency planning efforts. Due to the various stages of Year
2000 readiness for these critical third-party dependencies, the Company's
testing activities with critical third parties will extend throughout 1999.
CONTINGENCY PLANS
The Company has commenced contingency planning to reduce the risk of Year 2000-
related business failures. The contingency plans, which address both internal
systems and third party relationships, include the following activities: (1)
evaluate the consequences of failure of critical business processes with
significant exposure to Year 2000 risk; (2) determine the probability of a Year
2000 related failure for those critical processes that have a high consequence
of failure; (3) develop an action plan to complete contingency plans for those
critical processes that rank high in consequence and probability of failure; and
(4) complete the applicable contingency plans. These plans will be tested during
the second and third quarters of 1999.
RISKS AND UNCERTAINTIES
Based on its plans to make internal systems ready for Year 2000, to deal with
third party relationships, and to develop contingency actions, the Company
believes that it will experience at most isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a most reasonably likely worst case scenario. If Year 2000
readiness is not achieved due to the Company's failure to maintain critical
systems as Year 2000 ready, failure of critical third parties to achieve Year
2000 readiness on a timely basis, failure of contingency plans to reduce Year
2000-related business failures, or other unforeseen circumstances in completing
the Company's plans, the Year 2000 issues could have a material adverse impact
on the Company's operations following the turn of the century.
F-38
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
COSTS
Through March 31, 1999, Company has incurred, and anticipates that it will
continue to incur, costs for internal staff, third-party vendors, and other
expenses to achieve Year 2000 readiness. The cost of activities related to Year
2000 readiness has not had a material adverse effect on the Company' results of
operations or financial condition. In addition, the Company has elected to
accelerate the planned replacement of certain systems as part of the Year 2000
plans. Costs of the replacement systems are being capitalized and amortized over
their useful lives, in accordance with the Company's normal accounting policies.
F-39
<PAGE>
INDEX OF WORDS AND PHRASES
This index should help you to locate more information about some of the
terms and phrases used in this prospectus.
Page to see in
Defined Term this Prospectus
- ------------ ---------------
accumulation value 6
Administrative Center 1
amount at risk 8
automatic rebalancing 6
basis 26
beneficiary 30
cash surrender value 15
close of business 33
Code 24
cost of insurance rates 9
daily charge 8
date of issue 34
death benefit 7
declared fixed interest account option 1
division 24
dollar cost averaging 5
Fund 2
full surrender 15
grace period 13
Home Office 1
investment option 1
lapse 13
loan, loan interest 16
maturity, maturity date 17
modified endowment contract 25
monthly deduction day 34
Monthly insurance charge 8
Mutual Fund 2
Option 1, 2 7
partial surrender 15
payment option 17
planned periodic premium 12
Platinum Investor 1
Policy 1
Policy Loan 16
Policy month, year 34
preferred loan interest 17
50
<PAGE>
Page to see in this
Defined Term this Prospectus
- ------------ ---------------
premiums 5
premium payments 5
prospectus 1
reinstate, reinstatement 13
SEC 2
separate account 1
Separate Account USL VL-R 24
seven-pay test 25
specified amount 7
surrender 15
surrender charge 9
transfers 13
USL 23
valuation date 33
you 19
We have filed a registration statement relating to Separate Account USL VL-
R and the Policy with the SEC. The registration statement, which is required by
the Securities Act of 1933, includes additional information that is not required
in this prospectus. If you would like the additional information, you may obtain
it from the SEC's Website at http://www.sec.gov or main office in Washington,
D.C. You will have to pay a fee for the material.
You should rely only on the information contained in this prospectus or
sales materials we have approved. We have not authorized anyone to provide you
with information that is different. The policies are not available in all
states. This prospectus is not an offer in any state to any person if the offer
would be unlawful.
51
<PAGE>
PART II
(OTHER INFORMATION)
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The United States Life Insurance Company in the City of New York's Bylaws
provide in Article XI for indemnification of directors, officers and employees
of the Company.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") 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 the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question 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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A) OF THE INVESTMENT COMPANY ACT OF
1940
The United States Life Insurance Company in the City of New York hereby
represents that the fees and charges deducted under the Policy, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and risks assumed by The United States Life Insurance
Company in the City of New York.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
The facing sheet.
Prospectus, consisting of 51 pages of text, plus 47 financial pages of
The United States Life Insurance Company in the City of New York.
The undertaking to file reports.
The Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
The signatures.
Written Consents of the following persons:
(a) Pauletta P. Cohn, Associate General Counsel of American General Life
Companies;
(b) The United States Life Insurance Company in the City of New York's Actuary;
(c) Independent Auditors.
The following exhibits:
1. Exhibits required by Article IX, paragraph A of Form N-8B-2:
(1) The United States Life Insurance Company in the City of
New York Board of Directors resolution authorizing the
establishment of The United States Life Insurance
Company in the City of New York Separate Account USL VL-
R and among other things the marketing of variable life
products in New York. (3)
(2) Not applicable.
(3)(a) Specimen form of Selling Group Agreement by and among
The United States Life Insurance Company in the City of
New York, and American General Securities Incorporated,
and Selling Group Member. (Filed herewith)
(3)(b) Specimen form of Selling Group Agreement by and among
The United States Life Insurance Company in the City of
New York, and American General Securities Incorporated,
and The Winchester Agency, Ltd. (Filed herewith)
(3)(c) Distribution Agreement between The United States Life
Insurance Company in the City of New York and American
General Securities Incorporated. (4)
(3)(d) Schedule of Commissions (incorporated by reference from
the text included under the heading "Distribution of the
Policies" in the prospectus that is filed as part of
this Registration Statement).
II-2
<PAGE>
(4) Not applicable.
(5) Specimen form of the "Platinum Investor" Variable
Universal Life Insurance Policy (Policy Form No.
97600N). (Filed herewith)
(6)(a) Copy of the Restated Charter of The United States Life
Insurance Company in the City of New York). (1)
(6)(b) Copy of the Bylaws, as amended May 24, 1994, of The
United States Life Insurance Company in the City of New
York). (1)
(7) Not applicable.
(8)(a)(i) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, Van Kampen Life
Investment Trust, Van Kampen Asset Management, Inc., and
Van Kampen Distributors, Inc. (2 )
(8)(a)(ii) Form of Amendment No. 1 to Participation Agreement by
and among The United States Life Insurance Company in
the City of New York, American General Securities
Incorporated, Van Kampen Life Investment Trust, Van
Kampen Asset Management, Inc., and Van Kampen
Distributors, Inc. (Filed herewith)
(8)(b)(i) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, Morgan
Stanley Universal Funds, Inc., Morgan Stanley Asset
Management, Inc., and Miller Anderson & Sherrerd. (2)
(8)(b)(ii) Form of Amendment No. 1 to Participation Agreement by
and among The United States Life Insurance Company in
the City of New York, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management, Inc., and Miller
Anderson & Sherrerd. (Filed herewith)
(8)(c)(i) Form of Participation Agreement by and among A I M
Variable Insurance Funds, Inc., A I M Distributors,
Inc., The United States Life Insurance Company in the
City of New York, on behalf of itself and its separate
accounts, and American General Securities Incorporated.
(Filed herewith)
(8)(c)(ii) Form of Agreement by and among A I M Distributors Inc.,
A I M Variable Insurance Funds Inc., The United States
Life Insurance Company in the City of New York and
American General Securities Incorporated. (Filed
herewith)
(8)(d)(i) Form of Participation Agreement among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, American General Stock
Portfolio Company and Variable Annuity Life Insurance
Company. (Filed herewith)
II-3
<PAGE>
(8)(d)(ii) Form of First Amendment to Participation Agreement among
The United States Life Insurance Company in the City of
New York, American General Securities Incorporated,
American General Stock Portfolio Company and Variable
Annuity Life Insurance Company. (Filed herewith)
(8)(e) Form of Fund Participation Agreement between The United
States Life Insurance Company in the City of New York
and Dreyfus Variable Insurance Fund. (Filed herewith)
(8)(f) Form of Participation Agreement among MFS Variable
Insurance Trust, The United States Life Insurance
Company in the City of New York and Massachusetts
Financial Services. (Filed herewith)
(8)(g) Form of Participation Agreement among Putnam Variable
Trust, Putnam Mutual Funds Corp. and The United States
Life Insurance Company in the City of New York. (Filed
herewith)
(8)(h) Form of Participation Agreement among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, Safeco Resource Series
Trust and Safeco Securities, Inc. (Filed herewith)
(8)(i) Form of Administrative Services Agreement between Safeco
Asset Management Company and The United States Life
Insurance Company in the City of New York. (Filed
herewith)
(8)(j) Form of Administrative Services Agreement between Morgan
Stanley Dean Witter Investment Management Inc., Miller
Anderson & Sherred, LLP and The United States Life
Insurance Company in the City of New York. (Filed
herewith)
(8)(k) Form of Administrative Services Agreement between
Dreyfus Corporation and The United States Life Insurance
Company in the City of New York. (Filed herewith)
(8)(l) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of New
York and A I M Advisors, Inc. (Filed herewith)
(9) Not applicable.
(10)(a) Specimen form of application for life insurance issued
by USL. (3)
(10)(b) Specimen form of supplemental application for variable
life insurance issued by USL on Policy Form No. 97600N.
(3)
(10)(c) Service Request Form for Home Office. (3)
II-4
<PAGE>
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Associate
General Counsel of American General Life Companies.
(Filed herewith)
2(b) Opinion and Consent of USL's actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable.)
6 Consent of Independent Auditors. (Filed herewith)
7(a) Powers of Attorney (3)
7(b) Powers of Attorney, Donald W. Britton. (Filed herewith)
7(c) Powers of Attorney, John R. Corcoran. (Filed herewith)
7(d) Powers Attorney, John V. LaGrasse (Filed herewith)
27 Financial Data Schedule. (Inapplicable, because no
financial statements of the Separate Account are being
filed herewith)
/1/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-63673) of The United States Life
Insurance Company in the City of New York Separate Account USL VA-R on
September 18, 1998.
/2/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form N-4 Registration Statement (File No. 333-63673) of The United
States Life Insurance Company in the City of New York Separate Account USL
VA-R on May 26, 1999.
/3/ Incorporated by reference to the initial filing of Form S-6 Registration
Statement (File No. 333-79471) of the United States Life Insurance Company
in the City of New York Separate Account USL VL-R on May 27, 1999.
/4/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form N-4 Registration Statement (File No. 333-63843) of The United
States Life Insurance Company in the City of New York Separate Account USL
VA-R on May 27, 1999.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
The United States Life Insurance Company in the City of New York Separate
Account USL VL-R, has duly caused this amended 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 City of Houston, and State of
Texas, on the 4th day of November, 1999.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VL-R
(Registrant)
BY: THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ ROBERT F. HERBERT, JR.
----------------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ JULIE A. COTTON
-------------------------------------
Julie A. Cotton
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ DAVID J. DIETZ* Principal Executive Officer November 4, 1999
- --------------------------- and Director
(David J. Dietz)
/s/ ROBERT F. HERBERT, JR.* Principal Financial and November 4, 1999
- --------------------------- Accounting Officer
(Robert F. Herbert, Jr. ) and Director
II-6
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ WILLIAM A. BACAS* Director November 4, 1999
- ---------------------------
(William A. Bacas)
/s/ DONALD W. BRITTON* Director November 4, 1999
- ---------------------------
(Donald W. Britton)
/s/ JOHN R. CORCORAN* Director November 4, 1999
- ---------------------------
(John R. Corcoran)
/s/ DR. PATRICIA O. EWERS* Director November 4, 1999
- ---------------------------
(Dr. Patricia O. Ewers)
/s/ THOMAS H. FOX* Director November 4, 1999
- ---------------------------
(Thomas H. Fox)
/s/ DAVID A. FRAVEL* Director November 4, 1999
- ---------------------------
(David A. Fravel)
___________________________ Director November 4, 1999
(Rodney O. Martin, Jr.)
/s/ JOHN V. LAGRASSE* Director November 4, 1999
- ---------------------------
(John V. LaGrasse)
/s/ JAMES P. CORCORAN* Director November 4, 1999
- ---------------------------
(James P. Corcoran)
/s/ WILLIAM J. O'HARA, JR.* Director November 4, 1999
- ---------------------------
(William J. O'Hara, Jr.)
II-7
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ GARY D. REDDICK* Director November 4, 1999
- ---------------------------
(Gary D. Reddick)
/s/ GEORGE B. TROTTA* Director November 4, 1999
- ---------------------------
(George B. Trotta)
/s/ R. STEPHEN WATSON* Director November 4, 1999
- ---------------------------
(R. Stephen Watson)
* /s/ ROBERT F. HERBERT, JR.
- ---------------------------
By: Robert F. Herbert, Jr.
Attorney-in-Fact
II-8
<PAGE>
EXHIBIT INDEX
The following exhibits:
1. Exhibits required by Article IX, paragraph A of Form N-8B-2:
(1) The United States Life Insurance Company in the City of
New York Board of Directors resolution authorizing the
establishment of The United States Life Insurance
Company in the City of New York Separate Account USL VL-
R and among other things the marketing of variable life
products in New York. (3)
(2) Not applicable.
(3)(a) Specimen form of Selling Group Agreement by and among
The United States Life Insurance Company in the City of
New York, and American General Securities Incorporated,
and Selling Group Member. (Filed herewith)
(3)(b) Specimen form of Selling Group Agreement by and among
The United States Life Insurance Company in the City of
New York, and American General Securities Incorporated,
and The Winchester Agency, Ltd. (Filed herewith)
(3)(c) Distribution Agreement between The United States Life
Insurance Company in the City of New York and American
General Securities Incorporated. (4)
(3)(d) Schedule of Commissions (incorporated by reference from
the text included under the heading "Distribution of the
Policies" in the prospectus that is filed as part of
this Registration Statement).
(4) Not applicable.
(5) Specimen form of the "Platinum Investor" Variable
Universal Life Insurance Policy (Policy Form No.
97600N). (Filed herewith)
(6)(a) Copy of the Restated Charter of The United States Life
Insurance Company in the City of New York). (1)
(6)(b) Copy of the Bylaws, as amended May 24, 1994, of The
United States Life Insurance Company in the City of New
York). (1)
(7) Not applicable.
(8)(a)(i) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, Van Kampen Life
Investment Trust, Van Kampen Asset Management, Inc., and
Van Kampen Distributors, Inc. (2)
E-1
<PAGE>
(8)(a)(ii) Form of Amendment No. 1 to Participation Agreement by
and among The United States Life Insurance Company in
the City of New York, American General Securities
Incorporated, Van Kampen Life Investment Trust, Van
Kampen Asset Management, Inc., and Van Kampen
Distributors, Inc. (Filed herewith)
(8)(b)(i) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, Morgan
Stanley Universal Funds, Inc., Morgan Stanley Asset
Management, Inc., and Miller Anderson & Sherrerd. (2)
(8)(b)(ii) Form of Amendment No. 1 to Participation Agreement by
and among The United States Life Insurance Company in
the City of New York, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management, Inc., and Miller
Anderson & Sherrerd. (Filed herewith)
(8)(c)(i) Form of Participation Agreement by and among A I M
Variable Insurance Funds, Inc., A I M Distributors,
Inc., The United States Life Insurance Company in the
City of New York, on behalf of itself and its separate
accounts, and American General Securities Incorporated.
(Filed herewith)
(8)(c)(ii) Form of Agreement by and among A I M Distributors Inc.,
A I M Variable Insurance Funds Inc., The United States
Life Insurance Company in the City of New York and
American General Securities Incorporated. (Filed
herewith)
(8)(d)(i) Form of Participation Agreement among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, American General Stock
Portfolio Company and Variable Annuity Life Insurance
Company. (Filed herewith)
(8)(d)(ii) Form of First Amendment to Participation Agreement among
The United States Life Insurance Company in the City of
New York, American General Securities Incorporated,
American General Stock Portfolio Company and Variable
Annuity Life Insurance Company. (Filed herewith)
(8)(e) Form of Fund Participation Agreement between The United
States Life Insurance Company in the City of New York
and Dreyfus Variable Insurance Fund. (Filed herewith)
(8)(f) Form of Participation Agreement among MFS Variable
Insurance Trust, The United States Life Insurance
Company in the City of New York and Massachusetts
Financial Services. (Filed herewith)
(8)(g) Form of Participation Agreement among Putnam Variable
Trust, Putnam Mutual Funds Corp. and The United States
Life Insurance Company in the City of New York. (Filed
herewith)
(8)(h) Form of Participation Agreement among The United States
Life Insurance Company in the City of New York, American
General Securities
E-2
<PAGE>
Incorporated, Safeco Resource Series Trust and Safeco
Securities, Inc. (Filed herewith)
(8)(i) Form of Administrative Services Agreement between Safeco
Asset Management Company and The United States Life
Insurance Company in the City of New York. (Filed
herewith)
(8)(j) Form of Administrative Services Agreement between Morgan
Stanley Dean Witter Investment Management Inc., Miller
Anderson & Sherred, LLP and The United States Life
Insurance Company in the City of New York. (Filed
herewith)
(8)(k) Form of Administrative Services Agreement between
Dreyfus Corporation and The United States Life Insurance
Company in the City of New York. (Filed herewith)
(8)(l) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of New
York and A I M Advisors, Inc. (Filed herewith)
(9) Not applicable.
(10)(a) Specimen form of application for life insurance issued
by USL. (3)
(10)(b) Specimen form of supplemental application for variable
life insurance issued by USL on Policy Form No. 97600N.
(3)
(10)(c) Service Request Form for Home Office. (3)
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Associate
General Counsel of American General Life Companies.
(Filed herewith)
2(b) Opinion and Consent of USL's actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable.)
6 Consent of Independent Auditors. (Filed herewith)
7(a) Powers of Attorney (3)
7(b) Powers of Attorney, Donald W. Britton. (Filed herewith)
7(c) Powers of Attorney, John R. Corcoran. (Filed herewith)
7(d) Powers Attorney, John V. LaGrasse (Filed herewith)
E-3
<PAGE>
27 Financial Data Schedule. (Inapplicable, because no
financial statements of the Separate Account are being
filed herewith)
/1/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-63673) of The United States Life
Insurance Company in the City of New York Separate Account USL VA-R on
September 18, 1998.
/2/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form N-4 Registration Statement (File No. 333-63673) of The United
States Life Insurance Company in the City of New York Separate Account USL
VA-R on May 26, 1999.
/3/ Incorporated by reference to the initial filing of Form S-6 Registration
Statement (File No. 333-79471) of the United States Life Insurance Company
in the City of New York Separate Account USL VL-R on May 27, 1999.
/4/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form N-4 Registration Statement (File No. 333-63843) of The United
States Life Insurance Company in the City of New York Separate Account USL
VA-R on May 27, 1999.
E-4
<PAGE>
Exhibit 3(a)
SELLING GROUP AGREEMENT BY AND AMONG AMERICAN GENERAL
SECURITIES INCORPORATED, THE UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY OF NEW YORK,
___________________________________, AND
__________________________________________
This Selling Group Agreement ("Agreement") is made by and among AMERICAN GENERAL
SECURITIES INCORPORATED ("AGSI") a Texas corporation, THE UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New York domiciled life
insurance company, ____________________________ ("Selling Group Member"), a
___________ corporation and __________________________ ("Associated Agency"), a
__________________ corporation.
RECITALS
WHEREAS, USL is a wholly owned indirect subsidiary of AMERICAN GENERAL
CORPORATION ("AGC"), a Texas corporation;
WHEREAS, AGSI is a wholly owned indirect subsidiary of AGC;
WHEREAS, USL and AGSI are affiliates under the ultimate common control of AGC
pursuant to the insurance laws of the State of New York;
WHEREAS, USL and AGSI are parties to a Distribution Agreement whereby USL has
granted AGSI a non-exclusive right to promote the sale of USL products set forth
in Schedule A;
WHEREAS, the Distribution Agreement described herein has been non-disapproved by
the New York Insurance Department;
WHEREAS, Selling Group Member and the Associated Agency are not affiliates of
USL or AGSI;
WHEREAS, AGSI, USL, Selling Group Member and the Associated Agency wish to enter
into this Agreement for the purpose of providing for the distribution of certain
variable life insurance policies and/or annuity contracts;
NOW THEREFORE, in consideration of the premises and mutual promises set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
<PAGE>
1. PRODUCT DISTRIBUTION. Subject to the terms, conditions and limitations of
--------------------
this Agreement, the products sold under this Agreement shall be distributed
in accordance with this section.
(a) Designation of the Parties.
--------------------------
AGSI is a registered broker-dealer and distributor of the variable life
insurance policies and/or annuity contracts or certificates set forth in
Schedule A.
USL is a New York licensed life insurance company issuing the variable
products set forth on Schedule A and any successor or additional products
registered with the Securities and Exchange Commission (the "SEC") and
approved by the New York Insurance Department (as discussed in Paragraph
(c) of this section entitled "NEW PRODUCTS") and shall be collectively
referred to herein as the "Contracts."
Selling Group Member is registered with the SEC as a broker-dealer under
the Securities Exchange Act of 1934 ("1934 Act") and under any appropriate
regulatory requirements of state law and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"), unless
Selling Group Member is exempt from the broker-dealer registration
requirements of the 1934 Act.
Selling Group Member has NASD registered representatives who will
distribute the Contracts.
The Associated Agency is a New York licensed insurance agency and is
appointed by USL as an agent of USL with the New York Insurance Department.
The relationship between the Associated Agency and USL is that of an
independent contractor.
The NASD registered representatives affiliated with Selling Group Member
are also New York licensed insurance agents of the Associated Agency and
are appointed by USL as agents of USL with the New York Insurance
Department ("Sales Persons"). The relationship between the Sales Persons
and Selling Group Member and the Sales Persons and USL is that of
independent contractor.
AGSI hereby appoints Selling Group Member and the Sales Persons to solicit
and procure applications for the Contracts.
The appointment by AGSI of Selling Group Member and the Sales Persons and
the appointment by USL of the Associated Agency and the Sales Persons for
the sale of these Contracts is not to be deemed exclusive in any manner and
only extends to New York sales of the Contracts.
2
<PAGE>
(b) Responsibilities Of The Parties/Compliance.
------------------------------------------
(i) SELLING GROUP MEMBER/SALES PERSONS.
----------------------------------
Selling Group Member shall be responsible for the sales activities of
the Sales Persons and shall exercise supervisory oversight over the
Associated Agency and the Sales Persons with respect to the offer and
sale of the Contracts.
Selling Group Member shall be solely responsible for the approval of
suitability determinations for the purchase of any Contract or the
selection of any investment option thereunder, in compliance with
federal and state securities laws and shall supervise the Associated
Agency and the Sales Persons in determining client suitability.
Selling Group Member shall hold USL and AGSI harmless from any
financial claim resulting from improper suitability decisions or
failure to supervise the Associated Agency and the Sales Persons in
accordance with federal securities laws and NASD regulation.
Selling Group Member will fully comply with the requirements of the
NASD and of the 1934 Act and such other applicable federal and state
laws and will establish rules, procedures and supervisory and
inspection techniques necessary to diligently supervise the activities
of the Sales Persons in connection with offers and sales of the
Contracts. Such supervision shall include, but not be limited to
providing, or arranging for, initial and periodic training in
knowledge of the Contracts. Upon request by AGSI or USL, Selling Group
Member will furnish appropriate records as are necessary to establish
diligent supervision and client suitability.
Selling Group Member shall incur all costs associated with registering
and complying with the various rules of the SEC and the NASD relating
to broker-dealers.
Selling Group Member shall fully cooperate in any insurance or
securities regulatory examination, investigation, or proceeding or any
judicial proceeding with respect to USL, AGSI, Selling Group Member
and the Associated Agency and their respective affiliates, agents and
representatives to the extent that such examination, investigation, or
proceeding arises in connection with the Contracts. Selling Group
Member shall immediately notify AGSI if its broker-dealer registration
or the registration of any of its Sales Persons is revoked, suspended
or terminated.
3
<PAGE>
The Sales Persons shall be the only parties involved in the
solicitation, negotiation or procurement of the Contracts. All
correspondence relating to the sale of the Contracts will be
between USL, the Associated Agency, the Sales Persons and the
prospective purchaser.
The Sales Persons are authorized to collect the first purchase
payment or premium (collectively "Premiums") on the Contracts.
The Sales Persons will in turn remit the entire Premiums to USL.
The Sales Persons shall take applications for the Contracts only
on preprinted applications supplied to them and/or the Associated
Agency by USL. All completed applications and supporting
documents are the sole property of USL and shall be retained by
or on behalf of USL in accordance with New York Insurance
Regulation 152.
(ii) THE ASSOCIATED AGENCY/SALES PERSONS.
-----------------------------------
The Associated Agency is authorized to recommend Sales Persons
for appointment by USL to solicit sales of the Contracts. The
Associated Agency warrants that all such Sales Persons shall not
commence solicitation nor aid, directly or indirectly, in the
solicitation of any application for any Contract until that Sales
Person is appropriately licensed and appointed by USL to sell the
Contracts. Associated Agency shall be responsible for all fees
required to obtain and/or maintain any licenses or registrations
required by New York Insurance Law. Associated Agency will fully
comply with the requirements of New York Insurance Law and
Regulations.
Associated Agency shall fully cooperate in any insurance or
securities regulatory examination, investigation, or proceeding
or any judicial proceeding with respect to USL, AGSI, Selling
Group Member and Associated Agency and their respective
affiliates, agents and representatives to the extent that such
examination, investigation, or proceeding arises in connection
with the Contracts. Associated Agency shall immediately notify
AGSI if its insurance license or the license of any of its Sales
Persons is revoked, suspended, or terminated.
The Sales Persons shall complete a "Definition of Replacement
Form" with each application for the Contracts. The "Definition of
Replacement Form" shall be signed by the Sales Persons and each
applicant and the Sales Persons shall leave a copy of the form
with the applicant for his or her records. The Sales Persons
shall attach the completed and signed "Definition of Replacement
Form" to each application for the Contracts. Where the purchase
of one of the Contracts will result in, or is likely to result
in, a
4
<PAGE>
replacement, the Sales Persons shall comply in all respects with
New York Insurance Regulation 60.
(iii) USL.
---
USL will determine in its sole discretion whether to accept and
issue Contracts submitted to USL by the Sales Persons.
USL will return any incomplete applications to the Sales Persons.
USL will provide the Sales Persons with all policy forms, the
"Definition of Replacement Form" and any other regulatory forms
required to be completed in connection with the Contracts.
USL will inform the Associated Agency, the Sales Persons and
Selling Group Member regarding any limitations on the
availability of the Contracts in New York.
USL represents that the prospectus(es) and registration
statement(s) relating to the Contracts contain no untrue
statements of material fact or omission of a material fact, the
omission of which makes any statement contained in the prospectus
and registration statement materially false or misleading. USL
agrees to indemnify Associated Agency and Selling Group Member
from and against any claims, liabilities and expenses which may
be incurred by any of those parties under the Securities Act of
1933, the 1934 Act, the Investment Act of 1940, common law, or
otherwise, that arises out of a breach of this paragraph.
(iv) AGSI.
----
AGSI is authorized by USL to offer the Contracts to Selling Group
Member for sale by the Sales Persons through the Distribution
Agreement described herein.
(c) New Products.
------------
USL and AGSI may propose and USL may issue additional or successor
products, in which event Selling Group Member, the Associated Agency and
the Sales Persons will be informed of the product and its related
Commission schedule. If Selling Group Member and the Associated Agency do
not agree to distribute such product(s), they must notify AGSI in writing
within 10 days of receipt of the Commission Schedule for such product(s).
If Selling Group Member and the Associated Agency do not indicate
disapproval of the new product(s) or the terms contained in the related
Commission Schedule, Selling Group Member and the
5
<PAGE>
Associated Agency will be deemed to have thereby agreed to distribute such
product(s) and agreed to the related Commission Schedule which shall be
attached to and made a part of this Agreement.
(d) Sales Material/Books and Records.
--------------------------------
The Associated Agency, Selling Group Member and Sales Persons shall not
utilize, in their efforts to market the Contracts, any written brochure,
prospectus, descriptive literature, printed and published material, audio-
visual material or standard letters unless such material has been provided
preprinted by USL or unless USL has provided prior written approval for the
use of such literature. In accordance with New York Insurance Law
Regulation 152, the Associated Agency and/or Selling Group Member shall
maintain complete records indicating the manner and extent of distribution
of any such solicitation material, shall make such records and files
available to USL and/or AGSI and shall forward such records to USL and
AGSI. Additionally, Selling Group Member and/or the Associated Agency shall
make such material available to personnel of state insurance departments,
the NASD or other regulatory agencies, including the SEC, which may have
regulatory authority over USL or AGSI. The Associated Agency and Selling
Group Member jointly and severally hold USL, AGSI and their affiliates
harmless from any liability arising from the use of any material which
either (i) has not been specifically approved in writing by USL, or (ii)
although previously approved, has been disapproved by USL in writing for
further use.
Selling Group Member will reflect all sales of the Contracts by the
Associated Agency and the Sales Persons on the books and records of Selling
Group Member. Selling Group Member hereby designates the principal place of
business of the Associated Agency as an Office of Supervisory Jurisdiction
of Selling Group Member.
(e) Prospectuses.
------------
Selling Group Member warrants that solicitation for the sale of the
Contracts will be made by use of a currently effective prospectus, that a
prospectus will be delivered con-currently with each sales presentation and
that no statements shall be made to a client superseding or controverting
any statement made in the prospectus. USL and AGSI shall furnish Selling
Group Member and the Associated Agency, at no cost to Selling Group Member
or the Associated Agency, reasonable quantities of prospectuses to aid in
the solicitation of Contracts.
2. COMPENSATION.
------------
USL will remit to the Associated Agency all compensation set forth in
Schedule B annexed hereto. USL will not accept or otherwise honor any
assignment of
6
<PAGE>
compensation by the Associated Agency in connection with the sale of the
Contracts, unless such assignment complies with all applicable New York
law.
3. CUSTOMER SERVICE AND COMPLAINTS.
-------------------------------
The parties agree that USL may contact by mail or otherwise, any client,
agent, account executive, or employee of the Associated Agency or other
individual acting in a similar capacity if deemed appropriate by USL, in
the course of normal customer service for existing Contracts, in the
investigation of complaints, or as required by law. The parties agree to
cooperate fully in the investigation of any complaint. USL will handle and
process all complaints associated with the sale of the Contracts under this
Agreement.
4. INDEMNIFICATION.
---------------
Selling Group Member, Associated Agency, and Sales Persons agree to hold
harmless and indemnify AGSI and USL against any and all claims, liabilities
and expenses incurred by either AGSI or USL, and arising out of or based
upon any alleged or untrue statement of Selling Group Member, Associated
Agency or Sales Person other than statements contained in the approved
sales material for any Contract, or in the registration statement or
prospectus for any Contract.
USL hereby agrees to indemnify and hold harmless Selling Group Member and
each of its employees, controlling persons, officers or directors against
any losses, expenses (including reasonable attorneys' fees and court
costs), damages or liabilities to which Selling Group Member and the
Associated Agency or such affiliates, controlling persons, officers or
directors become subject, under the Securities Act of 1933, New York
Insurance Laws or otherwise, insofar as such losses, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
USL's performance, non-performance or breach of this Agreement, or are
based upon any untrue statement contained in, or material omission from,
the prospectus for any of the Contracts.
5. FIDELITY BOND.
-------------
The Associated Agency represents that all directors, officers, employees
and Sales Persons of the Associated Agency licensed pursuant to this
Agreement or who have access to funds of USL are and will continue to be
covered by a blanket fidelity bond including coverage for larceny,
embezzlement and other defalcation, issued by a reputable bonding company.
This bond shall be maintained at the Associated Agency's expense.
7
<PAGE>
Such bond shall be at least equivalent to the minimal coverage required
under the NASD Rules of Fair Practice, and endorsed to extend coverage to
life insurance and annuity transactions. The Associated Agency
acknowledges that USL may require evidence that such coverage is in force
and the Associated Agency shall promptly give notice to USL of any notice
of cancellation or change of coverage.
The Associated Agency assigns any proceeds received from the fidelity bond
company to USL to the extent of USL's loss due to activities covered by the
bond. If there is any deficiency, the Associated Agency will promptly pay
USL that amount on demand. The Associated Agency indemnifies and holds
harmless USL from any deficiency and from the cost of collection.
6. LIMITATIONS ON AUTHORITY.
------------------------
The Contract forms are the sole property of USL. No person other than USL
has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by USL. No party has the
right to waive any provision with respect to any Contract or policy; give
or offer to give, on behalf of USL, any tax or legal advice related to the
purchase of a Contract or policy; or make any settlement of any claim or
bind USL or any of its affiliates in any way. No person has the authority
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of USL.
7. ARBITRATION.
-----------
The parties agree that any controversy between or among them arising out of
their business or pursuant to this Agreement that cannot be settled by
agreement shall be taken to arbitration as set forth herein. Such
arbitration will be conducted according to the securities arbitration rules
then in effect, of the American Arbitration Association, NASD, or any
registered national securities exchange. Arbitration may be initiated by
serving or mailing a written notice. The notice must specify which rules
will apply to the arbitration. This specification will be binding on all
parties.
The arbitrators shall render a written opinion, specifying the factual and
legal bases for the award, with a view to effecting the intent of this
Agreement. The written opinion shall be signed by a majority of the
arbitrators. In rendering the written opinion, the arbitrators shall
determine the rights and obligations of the parties according the
substantive and procedural laws of the State of New York. Accordingly, the
written opinion of the arbitrators will be determined by the rule of law
and not by equity. The decision of the majority of the arbitrators shall
be final and binding on the parties and shall be enforced by the courts in
New York.
8
<PAGE>
8. GENERAL PROVISIONS.
------------------
(a) Waiver.
------
Failure of any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this
Agreement will not be deemed to constitute a waiver of the right to
enforce strict compliance.
(b) Independent Assignment.
----------------------
No assignment of this Agreement or of commissions or other payments
under this Agreement shall be valid without prior written consent of
USL. Furthermore, except as provided below, this Agreement and any
rights pursuant hereto shall be assignable only upon the written
consent of all of the parties hereto. Except as and to the extent
specifically provided in this Agreement, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than
the parties hereto, or their respective legal successors, any rights,
remedies, obligations, or liabilities, or to relieve any person other
than the parties hereto or their respective legal successors, from any
obligations or liabilities that would otherwise be applicable.
(c) Notice.
------
All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, via
first-class certified or registered mail, with postage pre- paid, or
when delivered by overnight courier service, telex or telecopier,
addressed as follows:
If to USL:
The United States Life Insurance Company in
the City of New York
125 Maiden Lane
New York, NY 10038-4992
Attention: General Counsel
If to Selling Group Member:
_____________________
_____________________
_____________________
Attention: _____________________
9
<PAGE>
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
If to the Associated Agency:
_____________________
_____________________
_____________________
Attention: _____________________
or to such other persons or places as each party may from time to time
designate by written notice.
(d) Severability.
------------
To the extent this Agreement may be in conflict with any applicable
law or regulation, this Agreement shall be construed in a manner
consistent with such law or regulation. The invalidity or illegality
of any provision of this Agreement shall not be deemed to affect the
validity or legality of any other provision of this Agreement.
(e) Amendment.
---------
This Agreement may be amended only in writing and signed by all
parties. No amendment will impair the right to receive commissions
accrued with respect to Contracts issued and applications procured
prior to the amendment.
(f) Entire Agreement.
----------------
This Agreement together with such amendments as may from time to time
be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof.
10
<PAGE>
(g) Termination.
-----------
This Agreement may be terminated by any party upon 30 days' prior
written notice. It may be terminated, for cause, defined as a
material breach of this Agreement, by any party immediately.
Termination of this Agreement shall not impair the right to receive
commissions accrued to applications procured prior to the termination
except for a termination due to cause, or as otherwise specifically
provided in Schedule B.
(h) Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York applicable
to contracts made and to be performed in that state, without regard to
principles of conflict of laws.
By signing below, the undersigned agree to have read and be bound by the terms
and conditions of this Agreement.
Date: ______________________________________
Selling Group Member
Address: _______________________________________________
_______________________________________________
11
<PAGE>
Signed By: _________________________________________________________
Name & Title: _________________________________________________________
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, NY 10038
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
The Associated Agency
Address: __________________________________________________________
__________________________________________________________
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
American General Securities Incorporated
2727 Allen Parkway
Houston, TX 77019
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
12
<PAGE>
Schedule A
Control Date - ________________, 1999
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
Registration Forms Separate
Contract Name and Numbers Account
- ------------- --------------------------------
Platinum Investor Form S-6 USL VL-R
Variable Life Insurance Nos. 811-09359
333-79471
13
<PAGE>
Schedule B - Platinum Investor Variable Life
Control Date-_________, 1999
AMERICAN GENERAL SECURITIES INCORPORATED
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK ([]USL[]) AND
THE ASSOCIATED AGENCY
This Schedule B is made a part of the Selling Group Agreement ("Agreement") to
which it is attached. It is subject to the terms and conditions of the
Agreement. In no event shall USL be liable for the payment of any commission
with respect to any solicitation made, in whole or in part, by any person not
appropriately licensed and appointed prior to the commencement of such
solicitation.
Platinum Investor Variable Life:
- -------------------------------
1. Commissions to Be Paid to The Associated Agency
-----------------------------------------------
. 90% of premiums paid in the first Policy year up to the Target Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in
any of Policy years 2 through 10;
. 2.5% of premiums which are in excess of the Target Premium, paid in any
of Policy years 1 through 10; and
. Beginning with the 2nd Policy year, an asset based commission of 6.25
basis points will be paid each quarter on the unloaned accumulation
value as of the end of the prior policy quarter.
2. Discretionary Expense Allowance Payment
---------------------------------------
At its sole discretion, USL may pay the Associated Agency an additional
expense allowance payment of up to 5% of first year target premium. In the
event that the Associated Agency personally produces any particular policy,
and USL determines that the Associated Agency qualifies in the aggregate
for some additional expense allowance payment, the Associated Agency will
only be eligible to receive an additional expense allowance payment of up
to 1% of first year Target Premium as to that policy.
i
<PAGE>
Whether or not the Associated Agency may be eligible to receive this
discretionary payment will, at a minimum, depend upon the ratio of the
Associated Agency total production offset by USL's expenses relative to
such production. In the event that USL determines, in it sole discretion,
that the Associated Agency is eligible for an additional expense allowance
payment, the Associated Agency will ensure that none of the additional
expense allowance payment is passed onto a Sales Person.
3. Target Premium
--------------
The Target Premium is the maximum amount of premium to which the first year
commission rate applies. Commissions paid on premiums received in excess of
the Target Premium are paid at the excess rate. The Target Premium is an
amount calculated in accordance with the method of calculation and rates
from the USL Target Premium schedules. USL may change the Target Premium
schedules from time to time. The Target Premium applicable to a particular
coverage shall be determined from the schedule in force when the first
premium for such coverage is entered as paid in accounting records of USL.
4. Trail Commissions; When Paid
----------------------------
The 0.25% annual trail is calculated on a quarterly basis as 0.0625%, and
is applied to the entire unloaned accumulation value on each quarterly
Policy anniversary. Payment will be made at the end of the calendar quarter
immediately following the corresponding quarterly Policy anniversary. For
example, for Policies issued February 1, the trail is based on the unloaned
accumulation value as of February 1, but is not payable until the calendar
quarter ended March 31.
5. Commissions on Increases in Specified Amount
--------------------------------------------
First year commissions will be paid on a portion of the premiums received
during the first year following the increase.
(a) A portion of the premium received is allocated to the increase segment
by multiplying the premium received by the ratio of:
1) the Target Premium for the increase segment, to
2) the total Target Premium.
(b) First year commissions are paid on the premium allocated to the
increase segment up to the Target Premium for the increase.
ii
<PAGE>
(c) Renewal commissions are paid on the portion of the premium allocated
to the increase segment in excess of the Target Premium for the
increased segment.
(d) Renewal commissions are paid on the premium received that is not
allocated to the increase segment (unless the Policy is still in its
first Policy year and the Target Premium for the original Specified
Amount has not yet been received).
6. Commissions on Death Benefit Option Switches
--------------------------------------------
No commissions are paid on changes in Death Benefit Options, either from
increasing to level, or from level to increasing.
7. Commissions on Riders
---------------------
Commissions paid on Riders for Platinum Investor are:
. 90% of premiums paid in the first Policy year up to the Target Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in
any of Policy years 2 through 10; and
. 2.5% of premiums which are in excess of the Target Premium, paid in any
of Policy years 1 through 10.
8. Commissions on Substandard Ratings
----------------------------------
The Substandard Target Premium is equal to the Minimum Annual Premium (MAP)
for substandard ratings up to Table 6 plus permanent and temporary flat
extra premiums of more than seven years. Aviation extra premiums are
excluded from the Substandard Target Premium. Commissions paid on
substandard rating are:
. 90% of premiums paid for substandard ratings in the first Policy year up
to the Target Premium;
. 4% of premiums paid for substandard ratings, which are not in excess of
the Target Premium, in any of Policy years 2 through 10; and
. 2.5% of premiums paid for substandard ratings, which are in excess of
the Target Premium, paid in any of Policy years 1 through 10.
iii
<PAGE>
9. Change of The Associated Agency
--------------------------------
A Policy owner may elect to change representation from the Associated
Agency to another agency subsequent to the sale of the Policy, solely in
the Policy owner's discretion. After such change, further compensation
paid for the Policy will be paid to the new agency.
10. Guidelines and Commissions on Internal Exchanges
------------------------------------------------
(a) USL Interest-Sensitive Products to USL Variable Universal Life
Products
USL Interest-Sensitive products may be exchanged for USL Variable
Universal Life products under the following guidelines:
(1) No exchanges are allowed during the first 5 Policy years of the
USL Interest-Sensitive product proposed for exchange;
(2) Surrender charges will be waived for exchanges to a new Platinum
Investor VUL policy as long as the new policy's surrender charges
are equal to or greater than the existing policy's surrender
charges;
(3) No commission will be earned on the initial exchange of any USL
Interest-Sensitive policy for an USL VUL policy; however, the
cash value may be applied against first year premiums up to the
Target Premium on a no commission basis; and
(4) All subsequent premiums will receive commissions calculated as
described in Sections 1, 4, 5, and 6 of this Schedule B.
(b) USL Traditional Products to USL Variable Universal Life Products
No exchanges are allowed between Traditional products and Variable
Universal Life products unless specifically stated in the traditional
product policy form.
(c) USL Term Insurance Products to USL Variable Universal Life Products
USL Term Insurance products may be exchanged for USL Variable
Universal Life products under the following guidelines:
iv
<PAGE>
(1) If the current USL Term Insurance policy contains a conversion
option, the policy may be exchanged for a Platinum Investor
policy without evidence of insurability;
(2) If the current Term Insurance policy is exchanged for a Platinum
Investor policy, the policy owner will receive a conversion
credit on the base policy only by multiplying the premium paid in
year 1, up to the Target Premium, by .333. No commission is
earned on the conversion;
(3) All subsequent premiums will receive commissions calculated as
described in Sections 1, 4, 5, and 6 of this Schedule B.
v
<PAGE>
Exhibit 3(b)
SELLING GROUP AGREEMENT BY AND AMONG
THE UNITED STATES LIFEINSURANCE COMPANY
IN THE CITY OF NEW YORK, AMERICAN
GENERAL SECURITIES INCORPORATED, AND
THE WINCHESTER AGENCY, LTD.
This Selling Group Agreement ("Agreement") is made by and among THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ("USL"), a New York
domiciled life insurance company, AMERICAN GENERAL SECURITIES INCORPORATED (as
"Selling Group Member" and as "Distributor"), a Texas corporation and THE
WINCHESTER AGENCY, LTD. ("Associated Agency"), a New York corporation.
RECITALS
WHEREAS, USL is a wholly owned indirect subsidiary of AMERICAN GENERAL
CORPORATION ("AGC"), a Texas corporation;
WHEREAS, Selling Group Member/Distributor is a wholly owned indirect subsidiary
of AGC;
WHEREAS, the Associated Agency is a wholly owned indirect subsidiary of AGC;
WHEREAS, USL, Selling Group Member/Distributor and the Associated Agency are
affiliates under the ultimate common control of AGC pursuant to the insurance
laws of the State of New York;
WHEREAS, USL and Distributor are parties to a Distribution Agreement whereby USL
has granted Distributor a non-exclusive right to promote the sale of USL
products set forth in Schedule A;
WHEREAS, the Distribution Agreement described herein has been non-disapproved by
the New York Insurance Department;
WHEREAS, USL, Selling Group Member/Distributor and the Associated Agency wish to
enter into this Agreement for the purpose of providing for the distribution of
certain variable life insurance policies and/or annuity contracts;
NOW THEREFORE, in consideration of the premises and mutual promises set forth
herein, and intending to be legally bound hereby, the parties agree as follows:
<PAGE>
1. PRODUCT DISTRIBUTION. Subject to the terms, conditions and limitations of
--------------------
this Agreement, the products sold under this Agreement shall be distributed
in accordance with this section.
(a) Designation of the Parties.
--------------------------
Distributor is a registered broker-dealer and distributor of the variable
life insurance policies and/or annuity contracts or certificates set forth
in Schedule A.
USL is a New York licensed life insurance company issuing the variable
products set forth on Schedule A and any successor or additional products
registered with the Securities and Exchange Commission (the "SEC") and
approved by the New York Insurance Department (as discussed in Paragraph
(c) of this section entitled "NEW PRODUCTS") and shall be collectively
referred to herein as the "Contracts."
Selling Group Member is registered with the SEC as a broker-dealer under
the Securities Exchange Act of 1934 ("1934 Act") and under any appropriate
regulatory requirements of state law and is a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD").
Selling Group Member has NASD registered representatives who will
distribute the Contracts.
The Associated Agency is a New York licensed insurance agency and is
appointed by USL as an agent of USL with the New York Insurance Department.
The relationship between the Associated Agency and USL is that of an
independent contractor.
The NASD registered representatives affiliated with Selling Group Member
are also New York licensed insurance agents of the Associated Agency and
are appointed by USL as agents of USL with the New York Insurance
Department ("Sales Persons"). The relationship between the Sales Persons
and Selling Group Member and the Sales Persons and USL is that of
independent contractor.
Distributor hereby appoints Selling Group Member and the Sales Persons to
solicit and procure applications for the Contracts.
The appointment by Distributor of Selling Group Member and the Sales
Persons and the appointment by USL of the Associated Agency and the Sales
Persons for the sale of these Contracts is not to be deemed exclusive in
any manner and only extends to New York sales of the Contracts.
2
<PAGE>
(b) Responsibilities Of The Parties/Compliance.
------------------------------- ----------
(i) SELLING GROUP MEMBER/SALES PERSONS.
----------------------------------
Selling Group Member shall be responsible for the sales activities of
the Sales Persons and shall exercise supervisory oversight over the
Associated Agency and the Sales Persons with respect to the offer and
sale of the Contracts.
Selling Group Member shall be solely responsible for the approval of
suitability determinations for the purchase of any Contract or the
selection of any investment option thereunder, in compliance with
federal and state securities laws and shall supervise the Associated
Agency and the Sales Persons in determining client suitability.
Selling Group Member shall hold USL and Distributor harmless from any
financial claim resulting from improper suitability decisions or
failure to supervise the Associated Agency and the Sales Persons in
accordance with federal securities laws and NASD regulation.
Selling Group Member will fully comply with the requirements of the
NASD and of the 1934 Act and such other applicable federal and state
laws and will establish rules, procedures and supervisory and
inspection techniques necessary to diligently supervise the activities
of the Sales Persons in connection with offers and sales of the
Contracts. Such supervision shall include, but not be limited to
providing, or arranging for, initial and periodic training in
knowledge of the Contracts. Upon request by Distributor or USL,
Selling Group Member will furnish appropriate records as are necessary
to establish diligent supervision and client suitability.
Selling Group Member shall incur all costs associated with registering
and complying with the various rules of the SEC and the NASD relating
to broker-dealers.
Selling Group Member shall fully cooperate in any insurance or
securities regulatory examination, investigation, or proceeding or any
judicial proceeding with respect to USL, Distributor, Selling Group
Member and the Associated Agency and their respective affiliates,
agents and representatives to the extent that such examination,
investigation, or proceeding arises in connection with the Contracts.
Selling Group Member shall immediately notify Distributor if its
broker-dealer registration or the registration of any of its Sales
Persons is revoked, suspended or terminated.
The Sales Persons shall be the only parties involved in the
solicitation, negotiation or procurement of the Contracts. All
correspondence relating to
3
<PAGE>
the sale of the Contracts will be between USL, the Associated Agency,
the Sales Persons and the prospective purchaser.
The Sales Persons are authorized to collect the first purchase payment
or premium (collectively "Premiums") on the Contracts. The Sales
Persons will in turn remit the entire Premiums to USL.
The Sales Persons shall take applications for the Contracts only on
preprinted applications supplied to them and/or the Associated Agency
by USL. All completed applications and supporting documents are the
sole property of USL and shall be retained by or on behalf of USL in
accordance with New York Insurance Regulation 152.
(ii) THE ASSOCIATED AGENCY/SALES PERSONS.
-----------------------------------
The Associated Agency is authorized to recommend Sales Persons for
appointment by USL to solicit sales of the Contracts. The Associated
Agency warrants that all such Sales Persons shall not commence
solicitation nor aid, directly or indirectly, in the solicitation of
any application for any Contract until that Sales Person is
appropriately licensed and appointed by USL to sell the Contracts.
USL shall be responsible for all fees required to obtain and/or
maintain any licenses or registrations required by New York Insurance
Law. Associated Agency will fully comply with the requirements of New
York Insurance Law and Regulations.
Associated Agency shall fully cooperate in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial
proceeding with respect to USL, Distributor, Selling Group Member and
Associated Agency and their respective affiliates, agents and
representatives to the extent that such examination, investigation, or
proceeding arises in connection with the Contracts. Associated Agency
shall immediately notify Distributor if its insurance license or the
license of any of its Sales Persons is revoked, suspended, or
terminated.
The Sales Persons shall complete a "Definition of Replacement Form"
with each application for the Contracts. The "Definition of
Replacement Form" shall be signed by the Sales Persons and each
applicant and the Sales Persons shall leave a copy of the form with
the applicant for his or her records. The Sales Persons shall attach
the completed and signed "Definition of Replacement Form" to each
application for the Contracts. Where the purchase of one of the
Contracts will result in, or is likely to result in, a replacement,
the Sales Persons shall comply in all respects with New York Insurance
Regulation 60.
4
<PAGE>
(iii) USL.
---
USL will determine in its sole discretion whether to accept and
issue Contracts submitted to USL by the Sales Persons.
USL will return any incomplete applications to the Sales Persons.
USL will provide the Sales Persons with all policy forms, the
"Definition of Replacement Form" and any other regulatory forms
required to be completed in connection with the Contracts.
USL will inform the Associated Agency, the Sales Persons and Selling
Group Member regarding any limitations on the availability of the
Contracts in New York.
USL represents that the prospectus(es) and registration statement(s)
relating to the Contracts contain no untrue statements of material
fact or omission of a material fact, the omission of which makes any
statement contained in the prospectus and registration statement
materially false or misleading. USL agrees to indemnify Associated
Agency and Selling Group Member from and against any claims,
liabilities and expenses which may be incurred by any of those
parties under the Securities Act of 1933, the 1934 Act, the
Investment Act of 1940, common law, or otherwise, that arises out of
a breach of this paragraph.
(iv) DISTRIBUTOR.
-----------
Distributor is authorized by USL to offer the Contracts to Selling
Group Member for sale by the Sales Persons through the Distribution
Agreement described herein.
(c) New Products.
------------
USL and Distributor may propose and USL may issue additional or successor
products, in which event Selling Group Member, the Associated Agency and
the Sales Persons will be informed of the product and its related
Commission schedule. If Selling Group Member and the Associated Agency do
not agree to distribute such product(s), they must notify Distributor in
writing within 10 days of receipt of the Commission Schedule for such
product(s). If Selling Group Member and the Associated Agency do not
indicate disapproval of the new product(s) or the terms contained in the
related Commission Schedule, Selling Group Member and the Associated Agency
will be deemed to have thereby agreed to distribute such product(s) and
agreed to the related Commission Schedule which shall be attached to and
made a part of this Agreement.
5
<PAGE>
(d) Sales Material/Books and Records.
--------------------------------
The Associated Agency, Selling Group Member and Sales Persons shall not
utilize, in their efforts to market the Contracts, any written brochure,
prospectus, descriptive literature, printed and published material, audio-
visual material or standard letters unless such material has been provided
preprinted by USL or unless USL has provided prior written approval for the
use of such literature. In accordance with New York Insurance Law
Regulation 152, the Associated Agency and/or Selling Group Member shall
maintain complete records indicating the manner and extent of distribution
of any such solicitation material, shall make such records and files
available to USL and/or Distributor and shall forward such records to USL
and Distributor. Additionally, Selling Group Member and/or the Associated
Agency shall make such material available to personnel of state insurance
departments, the NASD or other regulatory agencies, including the SEC,
which may have regulatory authority over USL or Distributor. The
Associated Agency and Selling Group Member jointly and severally hold USL,
Distributor and their affiliates harmless from any liability arising from
the use of any material which either (i) has not been specifically approved
in writing by USL, or (ii) although previously approved, has been
disapproved by USL in writing for further use.
Selling Group Member will reflect all sales of the Contracts by the
Associated Agency and the Sales Persons on the books and records of Selling
Group Member. Selling Group Member hereby designates the principal place of
business of the Associated Agency as an Office of Supervisory Jurisdiction
of Selling Group Member.
(e) Prospectuses.
------------
Selling Group Member warrants that solicitation for the sale of the
Contracts will be made by use of a currently effective prospectus, that a
prospectus will be delivered con-currently with each sales presentation and
that no statements shall be made to a client superseding or controverting
any statement made in the prospectus. USL and Distributor shall furnish
Selling Group Member and the Associated Agency, at no cost to Selling Group
Member or the Associated Agency, reasonable quantities of prospectuses to
aid in the solicitation of Contracts.
2. COMPENSATION.
------------
USL will remit to the Associated Agency all compensation set forth in
Schedule B annexed hereto. USL will not accept or otherwise honor any
assignment of compensation by the Associated Agency in connection with the
sale of the Contracts
6
<PAGE>
except as specifically set forth in this Agreement.
The Associated Agency may reimburse Selling Group Member through an
assignment, that portion of its compensation which is commensurate with the
value of the supervisory oversight activities of Selling Group Member
performed by Selling Group Member on behalf of the Associated Agency and
the Sales Persons. Such an assignment, paid pursuant to this Agreement,
shall be at cost, consistent with generally accepted accounting principles
consistently applied. The value of supervisory oversight includes the cost
to Selling Group Member of (i) registering with the SEC and the NASD and
(ii) complying with the rules and regulations of the SEC and the NASD. The
Associated Agency may also assign to Selling Group Member that portion of
its compensation which is commensurate with the value of any non-insurance
services performed by Selling Group Member on behalf of the Associated
Agency. No services rendered by Selling Group Member under this Agreement
shall be duplicative of any services performed by the Associated Agency,
USL or Distributor.
The Associated Agency may not assign to Selling Group Member any
compensation in excess of the value of the supervisory oversight and
non-insurance services that Selling Group Member performs on behalf of the
Associated Agency, as stated herein. The Associated Agency may, from
time-to-time, pay American General Life Insurance Company of New York
("AGNY"), the parent company of the Associated Agency, in the form of a
dividend, any compensation in excess of the value of the supervisory
oversight and non-insurance services that Selling Group Member performs on
behalf of the Associated Agency.
3. CUSTOMER SERVICE AND COMPLAINTS.
-------------------------------
The parties agree that USL may contact by mail or otherwise, any client,
agent, account executive, or employee of the Associated Agency or other
individual acting in a similar capacity if deemed appropriate by USL, in
the course of normal customer service for existing Contracts, in the
investigation of complaints, or as required by law. The parties agree to
cooperate fully in the investigation of any complaint. USL will handle and
process all complaints associated with the sale of the Contracts under this
Agreement.
4. INDEMNIFICATION.
---------------
Selling Group Member, Associated Agency, and Sales Persons agree to hold
harmless and indemnify Distributor and USL against any and all claims,
liabilities and expenses incurred by either Distributor or USL, and
arising out of or based upon any alleged or untrue statement of Selling
Group Member, Associated Agency or
7
<PAGE>
Sales Person other than statements contained in the approved sales material
for any Contract, or in the registration statement or prospectus for any
Contract.
USL hereby agrees to indemnify and hold harmless Selling Group Member and
each of its employees, controlling persons, officers or directors against
any losses, expenses (including reasonable attorneys' fees and court
costs), damages or liabilities to which Selling Group Member and the
Associated Agency or such affiliates, controlling persons, officers or
directors become subject, under the Securities Act of 1933, New York
Insurance Laws or otherwise, insofar as such losses, expenses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
USL's performance, non-performance or breach of this Agreement, or are
based upon any untrue statement contained in, or material omission from,
the prospectus for any of the Contracts.
5. LIMITATIONS ON AUTHORITY.
------------------------
The Contract forms are the sole property of USL. No person other than USL
has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by USL. No party has the
right to waive any provision with respect to any Contract or policy; give
or offer to give, on behalf of USL, any tax or legal advice related to the
purchase of a Contract or policy; or make any settlement of any claim or
bind USL or any of its affiliates in any way. No person has the authority
to enter into any proceeding in a court of law or before a regulatory
agency in the name of or on behalf of USL.
6. ARBITRATION.
-----------
The parties agree that any controversy between or among them arising out of
their business or pursuant to this Agreement that cannot be settled by
agreement shall be taken to arbitration as set forth herein. Such
arbitration will be conducted according to the securities arbitration rules
then in effect, of the American Arbitration Association, NASD, or any
registered national securities exchange. Arbitration may be initiated by
serving or mailing a written notice. The notice must specify which rules
will apply to the arbitration. This specification will be binding on all
parties.
The arbitrators shall render a written opinion, specifying the factual and
legal bases for the award, with a view to effecting the intent of this
Agreement. The written opinion shall be signed by a majority of the
arbitrators. In rendering the written opinion, the arbitrators shall
determine the rights and obligations of the parties according the
substantive and procedural laws of the State of New York. Accordingly, the
written opinion of the arbitrators will be determined by the rule of law
and not by equity. The decision of the majority of the arbitrators shall
be final and binding on the parties and shall be enforced by the courts in
New York.
8
<PAGE>
7. GENERAL PROVISIONS.
------------------
(a) Waiver.
------
Failure of any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this
Agreement will not be deemed to constitute a waiver of the right to
enforce strict compliance.
(b) Independent Assignment.
----------------------
No assignment of this Agreement or of commissions or other payments
under this Agreement shall be valid without prior written consent of
USL. Furthermore, except as provided below, this Agreement and any
rights pursuant hereto shall be assignable only upon the written
consent of the New York State Insurance Department and all of the
parties hereto. Except as and to the extent specifically provided in
this Agreement, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto, or
their respective legal successors, any rights, remedies, obligations,
or liabilities, or to relieve any person other than the parties hereto
or their respective legal successors, from any obligations or
liabilities that would otherwise be applicable.
(c) Notice.
------
All notices, statements or requests provided for hereunder shall be
deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, via
first-class certified or registered mail, with postage pre-paid, or
when delivered by overnight courier service, telex or telecopier,
addressed as follows:
If to USL:
The United States Life Insurance Company in
the City of New York
125 Maiden Lane
New York, NY 10038-4992
Attention: General Counsel
9
<PAGE>
If to Selling Group Member/Distributor:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
If to the Associated Agency:
Winchester Agency, Ltd.
_____________________
_____________________
Attention: _____________________
or to such other persons or places as each party may from time to time
designate by written notice.
(d) Severability.
------------
To the extent this Agreement may be in conflict with any applicable
law or regulation, this Agreement shall be construed in a manner
consistent with such law or regulation. The invalidity or illegality
of any provision of this Agreement shall not be deemed to affect the
validity or legality of any other provision of this Agreement.
(e) Amendment.
---------
This Agreement may be amended only in writing and signed by all
parties. No amendment will impair the right to receive commissions
accrued with respect to Contracts issued and applications procured
prior to the amendment.
(f) Entire Agreement.
----------------
This Agreement together with such amendments as may from time to time
be executed in writing by the parties, constitutes the entire
agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof.
10
<PAGE>
(g) Termination.
-----------
This Agreement may be terminated by any party upon 30 days' prior
written notice. It may be terminated, for cause, defined as a
material breach of this Agreement, by any party immediately.
Termination of this Agreement shall not impair the right to receive
commissions accrued to applications procured prior to the termination
except for a termination due to cause, or as otherwise specifically
provided in Schedule B.
(h) Governing Law.
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York applicable
to contracts made and to be performed in that state, without regard to
principles of conflict of laws.
By signing below, the undersigned agree to have read and be bound by the terms
and conditions of this Agreement.
Date: ___________________________
11
<PAGE>
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, NY 10038
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
Winchester Agency, Ltd.
Address: __________________________________________________________
__________________________________________________________
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
American General Securities Incorporated
2727 Allen Parkway
Houston, TX 77019
Signed By: __________________________________________________________
Name & Title: __________________________________________________________
12
<PAGE>
Schedule A
Control Date-_________, 1999
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
Registration Forms Separate
Contract Name and Numbers Account
- ------------------------- ------------------------------------
Platinum Investor Form S-6 USL VL-R
Variable Life Insurance Nos. 811-09359
333-79471
<PAGE>
Schedule B - Platinum Investor Variable Life
Control Date-___________, 1999
AMERICAN GENERAL SECURITIES INCORPORATED
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK (USL) AND
THE ASSOCIATED AGENCY
This Schedule B is made a part of the Selling Group Agreement ("Agreement") to
which it is attached. It is subject to the terms and conditions of the
Agreement. In no event shall USL be liable for the payment of any commission
with respect to any solicitation made, in whole or in part, by any person not
appropriately licensed and appointed prior to the commencement of such
solicitation.
Platinum Investor Variable Life:
- -------------------------------
1. Commissions to Be Paid to The Associated Agency
-----------------------------------------------
. 90% of premiums paid in the first Policy year up to the Target
Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in
any of Policy years 2 through 10;
. 2.5% of premiums which are in excess of the Target Premium, paid in
any of Policy years 1 through 10; and
. Beginning with the 2nd Policy year, an asset based commission of 6.25
basis points will be paid each quarter on the unloaned accumulation
value as of the end of the prior policy quarter.
2. Discretionary Expense Allowance Payment
---------------------------------------
At its sole discretion, USL may pay the Associated Agency an additional
expense allowance payment of up to 5% of first year target premium. In the
event that the Associated Agency personally produces any particular policy,
and USL determines that the Associated Agency qualifies in the aggregate
for some additional expense allowance payment, the Associated Agency will
only be eligible to receive an additional expense allowance payment of up
to 1% of first year Target Premium as to that policy.
i
<PAGE>
Whether or not the Associated Agency may be eligible to receive this
discretionary payment will, at a minimum, depend upon the ratio of the
Associated Agency total
production offset by USL's expenses relative to such production. In the
event that USL determines, in it sole discretion, that the Associated
Agency is eligible for an additional expense allowance payment, the
Associated Agency will ensure that none of the additional expense allowance
payment is passed onto a Sales Person.
3. Target Premium
--------------
The Target Premium is the maximum amount of premium to which the first year
commission rate applies. Commissions paid on premiums received in excess
of the Target Premium are paid at the excess rate. The Target Premium is
an amount calculated in accordance with the method of calculation and rates
from the USL Target Premium schedules. USL may change the Target Premium
schedules from time to time. The Target Premium applicable to a particular
coverage shall be determined from the schedule in force when the first
premium for such coverage is entered as paid in accounting records of USL.
4. Trail Commissions; When Paid
----------------------------
The 0.25% annual trail is calculated on a quarterly basis as 0.0625%, and
is applied to the entire unloaned accumulation value on each quarterly
Policy anniversary. Payment will be made at the end of the calendar
quarter immediately following the corresponding quarterly Policy
anniversary. For example, for Policies issued February 1, the trail is
based on the unloaned accumulation value as of February 1, but is not
payable until the calendar quarter ended March 31.
5. Commissions on Increases in Specified Amount
--------------------------------------------
First year commissions will be paid on a portion of the premiums received
during the first year following the increase.
(a) A portion of the premium received is allocated to the increase segment
by multiplying the premium received by the ratio of:
1) the Target Premium for the increase segment, to
2) the total Target Premium.
(b) First year commissions are paid on the premium allocated to the
increase segment up to the Target Premium for the increase.
ii
<PAGE>
(c) Renewal commissions are paid on the portion of the premium allocated
to the increase segment in excess of the Target Premium for the
increased segment.
(d) Renewal commissions are paid on the premium received that is not
allocated to the increase segment (unless the Policy is still in its
first Policy year and the Target Premium for the original Specified
Amount has not yet been received).
6. Commissions on Death Benefit Option Switches
--------------------------------------------
No commissions are paid on changes in Death Benefit Options, either from
increasing to level, or from level to increasing.
7. Commissions on Riders
---------------------
Commissions paid on Riders for Platinum Investor are:
. 90% of premiums paid in the first Policy year up to the Target
Premium;
. 4% of premiums which are not in excess of the Target Premium, paid in
any of Policy years 2 through 10; and
. 2.5% of premiums which are in excess of the Target Premium, paid in
any of Policy years 1 through 10.
8. Commissions on Substandard Ratings
----------------------------------
The Substandard Target Premium is equal to the Minimum Annual Premium (MAP)
for substandard ratings up to Table 6 plus permanent and temporary flat
extra premiums of more than seven years. Aviation extra premiums are
excluded from the Substandard Target Premium. Commissions paid on
substandard rating are:
. 90% of premiums paid for substandard ratings in the first Policy year
up to the Target Premium;
. 4% of premiums paid for substandard ratings, which are not in excess
of the Target Premium, in any of Policy years 2 through 10; and
. 2.5% of premiums paid for substandard ratings, which are in excess of
the Target Premium, paid in any of Policy years 1 through 10.
iii
<PAGE>
9. Change of The Associated Agency
-------------------------------
A Policy owner may elect to change representation from the Associated
Agency to another agency subsequent to the sale of the Policy, solely in
the Policy owner's discretion. After such change, further compensation
paid for the Policy will be paid to the new agency.
10. Guidelines and Commissions on Internal Exchanges
------------------------------------------------
(a) USL Interest-Sensitive Products to USL Variable Universal Life
Products
USL Interest-Sensitive products may be exchanged for USL Variable
Universal Life products under the following guidelines:
(1) No exchanges are allowed during the first 5 Policy years of the
USL Interest-Sensitive product proposed for exchange;
(2) Surrender charges will be waived for exchanges to a new Platinum
Investor VUL policy as long as the new policy's surrender charges
are equal to or greater than the existing policy's surrender
charges;
(3) No commission will be earned on the initial exchange of any USL
Interest-Sensitive policy for an USL VUL policy; however, the
cash value may be applied against first year premiums up to the
Target Premium on a no commission basis; and
(4) All subsequent premiums will receive commissions calculated as
described in Sections 1, 4, 5, and 6 of this Schedule B.
(b) USL Traditional Products to USL Variable Universal Life Products
No exchanges are allowed between Traditional products and Variable
Universal Life products unless specifically stated in the traditional
product policy form.
(c) USL Term Insurance Products to USL Variable Universal Life Products
USL Term Insurance products may be exchanged for USL Variable
Universal Life products under the following guidelines:
iv
<PAGE>
(1) If the current USL Term Insurance policy contains a conversion
option, the policy may be exchanged for a Platinum Investor
policy without evidence of insurability;
(2) If the current Term Insurance policy is exchanged for a Platinum
Investor policy, the policy owner will receive a conversion
credit on the base policy only by multiplying the premium paid in
year 1, up to the Target Premium, by .333. No commission is
earned on the conversion;
(3) All subsequent premiums will receive commissions calculated as
described in Sections 1, 4, 5, and 6 of this Schedule B.
v
<PAGE>
EXHIBIT 5
THE UNITED STATES LIFE Insurance Company
In the City of New York
Home Office:
New York, New York
125 Maiden Lane JOHN DOE
New York, NY 10038-4992 POLICY NUMBER: Al 0000000L
1-800-251-3720
WE WILL PAY THE DEATH BENEFIT PROCEEDS to the Beneficiary if the Insured dies
prior to the Maturity Date and while this policy is in force. Payment will be
made after We receive due proof of the Insured's death, and will be subject to
the terms of this policy.
WE WILL PAY THE CASH SURRENDER VALUE of this policy to the Owner on the Maturity
Date if the Insured is living on that date.
The Death Benefit will be determined in accordance with the Death Benefit and
Death Benefit Options provision. The amount or duration of the Death Benefit
Proceeds and the Cash Values provided by this policy when based on the
investment experience of a Separate Account, are variable, may increase or
decrease, and are not guaranteed as to fixed dollar amount.
The consideration for this policy is the application and payment of the first
premium. The first premium must be paid on or before delivery of this policy.
This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An adjustable Death
Benefit is payable upon the Insured's death prior to the Maturity Date.
Investment results are reflected in policy benefits. ACCUMULATION VALUES and
CASH VALUES are flexible and will be based on the amount and frequency of
premiums paid and the investment results of the Separate Account.
NONPARTICIPATING-NOT ELIGIBLE FOR DIVIDENDS.
Notice of Ten Day Right to Examine Policy
You may return this policy within 10 days after delivery if You are not
satisfied with it for any reason. The policy may be returned to Us or to the
registered representative through whom it was purchased. Upon surrender of this
policy within the 10 day period, it will be deemed void from the Date of Issue,
and We will refund the greater of: (1) the Accumulation Value on the date of
surrender plus any taxes or charges that may have been deducted; or (2) the sum
of all premiums received by the Company.
SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
READ YOUR POLICY CAREFULLY
<PAGE>
<TABLE>
<CAPTION>
INDEX
<S> <C> <S> <C>
Allocation of Policy Deductions 3B General Account 9
Allocation of Net Premiums 3B General Provisions 18
Annual Report 19 Grace Period 12
Automatic Rebalancing 14 Incontestability 18
Beneficiary and Proceeds 16 Investment Advisor, Change of 9
Cash Surrender Value 10 Investments of the Separate Account 8
Cash Value 10 Maturity Date 3
Changing Your Insurance Policy 7 Owner 5
Change of Ownership or Beneficiary 16 Payment Options 17
Changing the Death Benefit Option 7 Policy Loans 15
Changing the Specified Amount 7 Policy Values 9
Contract 5 Premium Class 2
Cost of Insurance Rate Table 21 Premium Payment 5
Date of Issue 3,5 Separate Account 7
Death Benefit and Death Benefit Options 6 Surrender, Full and Partial 12
Dollar Cost Averaging 14 Transfer Provision 13
Expense Charges Valuation of Assets 8
Monthly Administration Fee 3A,11 Valuation Dates 8
Premium Expense Charge 3A Valuation Units 8
Premium Tax 3A
</TABLE>
DEFINITIONS
Company Reference. We, Our, Us, or Company means The United States Life
Insurance Company In the City of New York.
You, Your. The words You or Your mean the Owner of this policy.
Home Office. Our office at 125 Maiden Lane, New York, N.Y. 10038-4992.
Administrative Center. Our service center to which you should direct all
requests, instructions and other communications. Our Administrative Center is
located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The mailing address
for services is P.O. Box 4880, Houston, Texas 77210-4880. The mailing address
for any premium payments not accompanied by a billing statement is P.O. Box
4728, Dept. L, Houston, TX 77210-4728.
Written, In Writing. A written request or notice in acceptable form and content,
which is signed and dated, and received at Our Administration Center.
Premium Class. The Premium Class of this policy is shown on Page 3 as one or a
combination of the following terms:
Select. The term "Select" means the Insured qualifies as a better than average
mortality risk.
Preferred. The term "Preferred" means the cost of insurance is based on the
Insured being a non-user of tobacco.
Standard. The term "Standard" means the cost of insurance is based on the
Insured being a tobacco user.
Juvenile. All policies issued to Insureds at issue age 17 or less are designated
as "Juvenile". This means that cost of insurance rates stated in the policy for
insurance ages 18 and above are Standard rates. (Rates are not classified on the
basis of the Insured being a user or non-user of tobacco at ages 0 through 17.)
Special. The term "Special" means an extra premium is being charged due to the
Insured's health, occupation or avocation.
Page 2
<PAGE>
DEFINITIONS (Cont'd)
Rates on Policy anniversary Nearest Insured's 18th Birthday (For Insured's age
17 or Less on Date of Issue). If the Insured's age, nearest birthday, is 17 or
less on the Date of Issue of this policy, Standard rates will be used starting
on the policy anniversary nearest the Insured's 18th birthday, except as
follows. Prior to the anniversary nearest the Insured's 18th birthday, a written
statement, signed by the Insured, may be submitted to the Company requesting
that Preferred rates be made effective. The statement must include the date the
Insured last used tobacco, or state that the Insured as never used tobacco,
whichever applies. If the request is approved, Preferred rates will be made
effective on the policy anniversary nearest the Insured's 18th birthday.
Otherwise, Standard rates will apply. We will send a notice to the Owner at
least 30 days prior to the policy anniversary nearest the Insured's 18th
birthday that an application for Preferred rates may be submitted.
NOTICE
This Policy Is A Legal Contract Between
The Policy Owner And The Company.
Page 2A
<PAGE>
POLICY SCHEDULE
BASIC POLICY MONTHLY COST YEARS PAYABLE
VARIABLE LIFE SEE PAGE 21 65
ADDITIONAL BENEFITS PROVIDED BY RIDERS
NONE
<TABLE>
<CAPTION>
PREMIUM CLASS: PREFERRED
<S> <C>
INITIAL PREMIUM: $1,504.60
PLANNED PERIODIC PREMIUM: $1,504.60 PAYABLE ANNUALLY
MONTHLY DEDUCTION DAY: 1ST DAY OF EACH MONTH
MINIMUM DEATH BENEFIT AMOUNT (AFTER
A DECREASE IN SPECIFIED AMOUNT) $ 100,000
MINIMUM PARTIAL SURRENDER $ 500.00
MINIMUM VALUE THAT MAY BE RETAINED IN A
DIVISION AFTER A PARTIAL SURRENDER $ 500.00
</TABLE>
ANY CHANGES IN THE AMOUNT, TIMING OR FREQUENCY OF PREMIUM PAYMENTS, ADJUSTMENTS
IN THE CREDITING OF ADDITIONAL INTEREST, ADJUSTMENTS IN MORTALITY OR EXPENSE
CHARGES, LOANS OR PARTIAL SURRENDERS TAKEN, COST OF SUPPLEMENTARY RIDERS, OR
ADJUSTMENTS TO THE DEATH BENEFIT MAY VARY THE ACCUMULATION OF CASH VALUES AND
MAY REQUIRE MORE PREMIUM TO BE PAID THAN WAS ILLUSTRATED OR MAY CAUSE THE POLICY
TO LAPSE PRIOR TO THE MATURITY DATE.
INSURED: JOHN DOE POLICY NUMBER: 0000000000
INSURANCE AGE: 35 DATE OF ISSUE: JANUARY 1, 1998
INITIAL SPECIFIED AMOUNT: $100,000 MATURITY DATE: JANUARY 1, 2063
DEATH BENEFIT OPTION: 1 THIS IS A (SEX DISTINCT) POLICY
THIS IS A (STATE NAME) POLICY
PAGE 3
<PAGE>
POLICY SCHEDULE CONTINUED - POLICY NUMBER 0000000000
INTEREST RATE
CURRENT GUARANTEED
GENERAL ACCOUNT [4.0%] 4.0%
CHARGES DEDUCTED FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE CHARGE. DEDUCTIONS FROM THE SEPARATE ACCOUNT WILL BE
MADE AT AN ANNUAL RATE NOT TO EXCEED 0.75%. AFTER THE 10TH POLICY
ANNIVERSARY, THE ANNUAL RATE WILL NOT EXCEED 0.50%. AFTER THE 20TH POLICY
ANNIVERSARY, THE ANNUAL RATE WILL NOT EXCEED 0.25%. THE CURRENT RATE ON THE
DATE OF ISSUE IS [0.75%]. THE ACTUAL DEDUCTION WILL BE MADE ON A DAILY BASIS.
THE CURRENT RATE ON A DAILY BASIS IS [.002055%].
EXPENSE CHARGES
PREMIUM EXPENSE CHARGE: CURRENT GUARANTEED
ADJUSTABLE PREMIUM EXPENSE CHARGE
PERCENTAGE: [2.5%] 5.0%
PREMIUM TAX (IF APPLICABLE). DEPENDING ON THE LAWS OF THE JURISDICTION IN
WHICH THIS POLICY WAS ISSUED, A PERCENTAGE OF EACH PREMIUM MAY BE DEDUCTED
FOR PREMIUM TAX. THE PREMIUM TAX RATE FOR THIS POLICY IS [0%].
MONTHLY ADMINISTRATION FEE: CURRENT GUARANTEED
[$6.00] $12.00
BASIC POLICY CHARGES AND FEES
COST OF INSURANCE CHARGES. GUARANTEED MAXIMUM COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK ARE SHOWN ON PAGE 21.
SURRENDER CHARGES. A SURRENDER CHARGE WILL BE SUBTRACTED FROM YOUR
ACCUMULATION VALUE IF THIS POLICY IS SURRENDERED OR THE INITIAL SPECIFIED
AMOUNT IS REDUCED DURING THE FIRST TEN POLICY YEARS, OR DURING THE FIRST TEN
YEARS FOLLOWING AN INCREASE IN SPECIFIED AMOUNT. THE TABLE OF SURRENDER
CHARGES WILL BE FOUND ON PAGES 23 AND 24. MAXIMUM CHARGE FOR EACH PARTIAL
SURRENDER WILL BE THE LESSER OF 5% OF THE AMOUNT WITHDRAWN OR $25.00.
PAGE 3A
<PAGE>
POLICY SCHEDULE CONTINUED - POLICY NUMBER 0000000000
INITIAL ALLOCATION OF NET PREMIUMS AND POLICY DEDUCTIONS
INVESTMENT OPTIONS INITIAL ALLOCATION INITIAL ALLOCATIONS
OF NET PREMIUMS OF POLICY DEDUCTIONS
<TABLE>
<CAPTION>
GENERAL ACCOUNT:
<S> <C> <C>
[(125) USL Declared Fixed Interest Account 100% 100%]
SEPARATE ACCOUNT: [USL VL-R]
[(126) AIM V.I. International Equity 0% 0%
(127) AIM V.I. Value 0% 0%
(128) International Equities 0% 0%
(129) MidCap Index 0% 0%
(130) Money Market 0% 0%
(131) Stock Index 0% 0%
(132) Quality Bond 0% 0%
(133) Small Cap 0% 0%
(134) MFS Emerging Growth 0% 0%
(135) Equity Growth 0% 0%
(136) High Yield 0% 0%
(137) Putnam VT Diversified Income 0% 0%
(138) Putnam VT Growth and Income 0% 0%
(139) Putnam VT International Growth and Income 0% 0%
(140) Equity 0% 0%
(141) Growth 0% 0%
(142) Strategic Stock 0% 0%]
</TABLE>
Page 3B
<PAGE>
INVESTMENT OBJECTIVES OF THE SEPARATE ACCOUNT PORTFOLIOS
A brief description of each Separate Account Portfolio's investment objective
follows. However, no investment allocation should be made without referring to
the appropriate prospectus which describes each Portfolio in detail.
AIM VARIABLE INSURANCE FUNDS, INC.
The AIM fund is an open-end diversified investment management investment company
which will offer shares in two separate funds.
1. AIM V.I. International Equity Fund. The Fund seeks to provide long-term
growth of capital by investing in a diversified portfolio of international
equity securities, the issuers of which are considered by the Adviser to have
strong earnings momentum.
2. AIM V.I. Value Fund. The Fund seeks to achieve long-term growth of capital
by investing primarily in equity securities judged by the Adviser 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 market generally.
AMERICAN GENERAL SERIES PORTFOLIO COMPANY (AGSPC)
The AGSPC Fund is an open-end diversified investment management company which
will offer shares in four separate funds.
1. International Equities Fund. The Fund seeks to provide long-term growth of
capital through investments primarily in a diversified portfolio of equity
and equity related securities of foreign issuers that, as a group, are
expected to provide investment results closely corresponding to the
performance of the Morgan Stanley Capital International, Europe,
Australasia and the Far East Index (the "EAFE Index").
2. MidCap Index Fund. The Fund seeks to provide growth of capital through
investments primarily in a diversified portfolio of common stocks that, as
a group, are expected to provide investment results closely corresponding
to the performance of the Standard & Poor's MidCap 400 Index (the "S&P
MidCap 400 Index").
3. Money Market Fund. The Fund seeks liquidity, protection of capital and
current income through investments in short term money market securities.
The Fund uses 95% of its assets to buy short-term securities that are rated
within the highest rating category for short-term debt obligations by at
least two nationally recognized rating services or unrated securities of
comparable investment quality.
4. Stock Index. The Fund seeks long-term capital growth through investment in
common stocks. That, as a group, are expected to provide investment results
closely corresponding to the performance of the Standard & Poor's 500 Stock
Index (the "S&P 500 Index").
Page 3C
<PAGE>
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Fund is an open-end diversified investment management company which
will offer shares in two separate Funds. The Dreyfus Corporation serves as the
investment adviser for each of the two funds.
1. Quality Bond Portfolio. The Fund seeks to provide maximum amount current
income to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Fund invests primarily in debt obligations of
corporations, the U.S. government and its agencies and instrumentalities,
and major U.S. banking institutions.
2. Small Cap Portfolio. The Fund seeks to maximize capital appreciation. The
Fund seeks out companies that the Adviser believes have the potential for
significant growth. During periods the Adviser judges to be of market
strength, the Fund will act aggressively to increase shareholders' capital
by investing principally in common stocks of domestic and foreign issuers.
MASSACHUSETTS FINANCIAL SERVICES (MFS) VARIABLE INSURANCE TRUST
The MFS Trust is an open-end diversified investment management company which
will offer shares in one separate Fund. Massachusetts Financial Services Company
serves as the investment adviser for the Fund.
MFS Emerging Growth Series. The fund seeks to provide long-term growth of
capital. The Fund's policy is to invest at least 80 percent of its net assets
under normal circumstances in common stocks of companies that the Adviser
believes are early in their life cycle but which have the potential to become
major enterprises (emerging growth companies).
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
The Morgan Stanley Dean Witter Fund is an open-end diversified investment
management company which will offer shares in two separate Funds. Morgan Stanley
Dean Witter Investment Management Inc. is the investment adviser for the Equity
Growth Fund. Miller Anderson & Sherrerd is the investment adviser for the High
Yield Portfolio.
1. Equity Growth Portfolio. The Fund seeks long-term capital appreciation by
investing primarily in common and preferred stocks, convertible securities,
rights and warrants to purchase common stocks, depository receipts and
other equity securities. Under normal circumstances, the Fund will invest
at least 65 percent of its total assets in equity securities.
2. High Yield Portfolio. The Fund seeks above average return over a market
cycle of three to five years by investing at least 65 percent of its total
assets in high yield securities of U.S. and foreign issuers including
corporate bonds and other fixed income securities.
Page 3D
<PAGE>
PUTNAM VARIABLE TRUST
The Putnam Trust is an open-end diversified investment management company which
will offer shares in three separate Funds. Putnam Investment Management, Inc.
Serves as the investment adviser for each of the three funds.
1. Putnam VT Diversified Income Fund. The Fund seeks high current income
consistent with capital preservation. The Fund pursues its investment
objective by allocating its investments among the following three sectors
of the fixed income securities markets: (a) a U.S. Government Sector
consisting primarily of debt obligations of the U.S. Government; (b) a High
Yield Sector consisting of high-yielding, lower-rated, higher-risk U.S. and
foreign fixed-income securities; and (c) an International Sector,
consisting of obligations of foreign governments.
2. Putnam VT Growth and Income Fund. The Fund seeks capital growth and current
income as its investment objectives. It invests primarily in common stocks
that offer potential for capital growth, current income or both.
3. Putnam VT International Growth and Income Fund. The Fund seeks capital
growth. Current income is a secondary objective. The Fund will invest
primarily in common stocks that offer potential for capital growth, and may
invest in stocks that offer potential for current income.
SAFECO RESOURCES SERIES TRUST
The SAFECO Trust is an open-end diversified investment management company which
will offer shares in two separate Funds. SAFECO Asset Management Company serves
as the investment adviser for each of the two funds.
1. Equity Portfolio. The Fund seeks long term growth of capital and reasonable
current income. The Fund does not seek to achieve both growth and income
with every portfolio security investment. It attempts to achieve a
reasonable balance between growth and income on an overall basis.
2. Growth Portfolio. The Fund seeks growth of capital and the increased income
that ordinarily follows from such growth. The Fund ordinarily invests most
of its assets in common stock selected for potential appreciation.
VAN KAMPEN LIFE INVESTMENT TRUST
The Van Kampen Trust is an open-end diversified investment management company
which will offer shares in one separate Fund. Van Kampen Asset Management, Inc.
serves as the investment adviser for the Fund.
Strategic Stock Portfolio. The Fund seeks an above average total return through
a combination of potential capital appreciation and dividend income, consistent
with the preservation of invested capital. The Fund invests primarily in
dividend paying equity securities of companies included in the Dow Jones
Industrial Average or in the Morgan Stanley Capital International Index.
Page 3E
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
Page 4
<PAGE>
Contract. Your policy is a legal contract that You have entered into with Us.
You have paid the first premium and have submitted an application, a copy of
which is attached. In return, We promise to provide the insurance coverage
described in this policy.
The entire contract consists of:
1. The basic policy;
2. The riders that add benefits to the basic policy, if any;
3. Endorsements, if any; and
4. The attached copy of Your application, and any amendments or supplemental
applications.
Date of Issue. The Date of Issue of this policy is the date from which the first
policy charges are due. The Date of Issue is also the date from which all policy
years, anniversaries, and monthly deduction dates are determined.
Owner. The Owner is as stated in the application unless later changed. During
the Insured's lifetime, the Owner may exercise every right the policy confers or
we allow subject to the rights of any assignee of record, and to any endorsement
on this policy limiting such rights. You can have Joint Owners of the policy. In
that case, the authorization of both Joint Owners is required for all policy
changes except for transfers, premium allocations and deduction allocations. We
will accept the authorization of either Joint Owner for transfers and changes in
premium and deduction allocations. The Owner and the Insured can be the same
person but do not have to be. If the Owner dies while the policy is in force and
the Insured is living, ownership rights pass on to a successor owner, if any, or
to the estate of the Owner.
PREMIUM PAYMENTS
All premiums after the first are payable in advance. Premium payments are
flexible. This means You may choose the amount and frequency of payments.
The actual amount and frequency of premium payments will affect the Cash Values
and the amount and duration of insurance. Please refer to the Policy Values
Provision for a detailed explanation.
Planned Periodic Premiums. The amount and frequency of the Planned Periodic
Premiums You selected are shown on page 3. You may request a change in the
amount and frequency. We may limit the amount of any increase. (See Maximum
Premium).
Unscheduled Additional Premiums. You may pay additional premiums at any time
before the Maturity Date shown on page 3. We may limit the number and amount of
additional premiums. (See Maximum Premium).
Additional premiums that cause the Death Benefit to increase more than the
Accumulation Value will require a supplemental application and insurability
satisfactory to Us. Any unscheduled payments will be applied as an Unscheduled
Additional Premium unless you specifically state otherwise.
Maximum Premium. The sum of the premiums paid under this policy may not exceed
the guideline premium limitation as defined by Section 7702, Internal Revenue
Code of 1986 (or as later amended). Any portion of any premium paid which is
determined to be in excess of the limit will be refunded.
Premium Expense Charge. The Premium Expense Charge is calculated by multiplying
the premium paid, after the deduction of any state premium tax, or other
applicable tax charges, by the Premium Expense Charge Percentage. The Premium
Expense Charge Percentage is adjustable, but will never be more than the
guaranteed Premium Expense Charge Percentage shown on the Policy Schedule.
Page 5
<PAGE>
Net Premium. The Net Premium is the premium paid, less any applicable state
premium tax, or other applicable tax charges, and the Premium Expense Charge.
Any changes to the Premium Tax Charges must be approved by the insurance
official of the state in which this policy is delivered.
Allocation of Premiums. The initial allocation of Net Premiums is shown on the
Policy Schedule and will remain in effect until changed by Written notice from
the Owner. The percentage allocation for future Net Premiums may be changed at
any time by Written notice.
The initial Net Premium will be allocated to the Money Market Division on the
later of the following dates:
1. The Date of Issue; or
2. The date all requirements needed to place the policy in force have been
satisfied, including underwriting approval and receipt in Our
Administration Center of the necessary premium.
The initial Net Premium will remain in the Money Market Division until the first
Valuation Date following the 15th day after it was applied. Any additional Net
Premiums received prior to the first Valuation date which follows the 15th day
after the initial Net Premium was applied will be allocated to the Money Market
Division until such Valuation Date. At that time, We will transfer the
Accumulation Value to the selected Investment Option(s). Each premium received
after such Valuation date will be reduced by any applicable state premium tax or
other applicable tax charges and the Premium Expense Charge and applied directly
to the selected Investment Option(s) as of the Business Day received.
Changes in the allocation will be effective on the date we receive the Owner's
notice. The allocation may be 100% to any available Division or may be divided
among these options in whole percentage points totaling 100%. We reserve the
right to limit the number of Divisions which you may select.
Where to Pay. You may make your Planned Periodic Pemium payments to Us at the
address on the billing statement or to an authorized agent. The mailing address
for any premium payments not accompanied by a billing statement is shown in the
definition for Administrative Center. A receipt signed by an officer of the
Company will be furnished upon request.
DEATH BENEFIT AND DEATH BENEFIT OPTIONS
Death Benefit Proceeds. If the Insured dies prior to the Maturity Date and while
this policy is in force, We will pay the Death Benefit Proceeds to the
Beneficiary. The Death Benefit Proceeds will be subject to:
1. The Death Benefit Option in effect on the date of death; and
2. Any increases or decreases made to the Specified Amount. The Initial
Specified Amount is shown on page 3.
Guidelines for changing the Death Benefit Option or the Specified Amount will be
found in the section entitled "Changing Your Insurance Policy."
The Death Benefit Proceeds will be the Death Benefit Amount reduced by any
outstanding policy loan and will be subject to the other provisions of the
"Beneficiary and Proceeds" section.
Death Benefit Option. The Death Benefit Option which You have chosen is shown on
page 3 as either Option 1 or Option 2.
Page 6
<PAGE>
Option 1. If you have chosen Option 1 the Death Benefit Amount will be the
greater of:
1. The Specified Amount on the date of death; or
2. The Accumulation Value on the date of death multiplied by the Death Benefit
Percentage Factor for the Insured's age nearest birthday as shown in the
table that follows.
Option 2. If you have chosen Option 2, the Death Benefit Amount will be the
greater of:
1. The Specified Amount plus the Accumulation Value on the date of death; or
2. The Accumulation Value on the date of death multiplied by the Death Benefit
Percentage Factor for the Insured's age nearest birthday as shown in the
table that follows.
Table of Death Benefit Percentage Factors
<TABLE>
<CAPTION>
Att'd Percentage Att'd Percentage Att'd Percentage Att'd Percentage
Age Factor Age Factor Age Factor Age Factor
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
</TABLE>
Page 6 continued
<PAGE>
CHANGING YOUR INSURANCE POLICY
You may request a change in the Specified Amount or Death Benefit Option at any
time except that a decrease in the Specified Amount may not become effective
prior to the end of the first policy year. Your request must be submitted to Our
Administration Center in writing in a form acceptable to Us.
Increasing The Specified Amount. We will require a supplemental application and
evidence of insurability satisfactory to Us for any increase in the Specified
Amount. An increase will be effective on the monthly deduction day on or next
following the date the application for increase is approved by Us. The effective
date will appear in an endorsement to this policy.
Decreasing the Specified Amount. Any decrease will go into effect on the monthly
deduction day following the day We receive the request. The Death Benefit Amount
remaining in effect after any decrease cannot be less than the greater of:
1. The Minimum Death Benefit Amount shown on page 3; or
2. Any Death Benefit Amount which, upon comparing such amount to the sum of
premiums already paid, would result in an excess of premium payments. (See
the "Maximum Premium" provision.)
Any such decrease will be applied in the following order:
1. Against the Specified Amount provided by the most recent increase;
2. Against the next most recent increases successively;
3. Against the Specified Amount provided under the original application.
Any reduction in Specified Amount will be subject to any applicable Surrender
Charges on a pro-rata basis, and the remaining Surrender Charge will be reduced
proportionately.
Surrender Charges will apply to each $1,000 of decrease in Specified Amount. The
Accumulation Value will be reduced by the amount of any Surrender Charge.
However, if such charge would result in a negative Cash Value, the Specified
Amount decrease will not be allowed.
Changing the Death Benefit Option. You may request a change in the Death Benefit
Option you have chosen.
1. If You request a change from Option 1 to Option 2: The new Specified Amount
will be the Specified Amount, prior to change, less the Accumulation Value
as of the effective date of the change, but not less than zero.
2. If You request a change from Option 2 to Option 1: The new Specified Amount
will be the Death Benefit Amount as of the effective date of the change.
We will not require evidence of insurability for a change in the Death Benefit
Option. The change will go into effect on the monthly deduction day following
the date We receive Your request for change.
Changing the Terms of Your Policy. Any change in Your policy must be approved by
one of Our officers. No agent has the authority to make any changes or waive any
of the terms of Your policy.
Page 7
<PAGE>
SEPARATE ACCOUNT PROVISIONS
Separate Account. Separate Account USL VL-R is a segregated investment account
established by the Company under New York law to separate the assets funding the
variable benefits for the class of policies to which this policy belongs from
the other assets of the Company. That portion of the assets of the Separate
Account equal to the reserves and other policy liabilities with respect to the
Separate Account shall not be chargeable with liabilities arising out of any
other business We may conduct . Income, gains and losses, whether or not
realized from assets allocable to the Separate Account, are credited to or
charged against such Account without regard to Our other income, gains or
losses.
Investments of the Separate Account. The Separate Account is segmented into
Divisions. Each Division invests in a single Investment Option. Net Premiums
will be applied to the Separate Account and allocated to one or more Divisions.
A brief description of each Division will be found starting on page 3C. The
assets of the Separate Account are invested in the Investment Options listed on
the Policy Schedule Pages. From time to time, We may add additional Divisions to
those shown on the Policy Schedule pages. We may also discontinue offering one
or more Divisions. Any change in Divisions available or selected are shown on
the Policy Schedule or on an amended Policy Schedule. Any change in investment
selection shall be pursuant to a duly executed change form filed with Our
Administration Center. Transfers may be made to the additional Divisions subject
to the rules stated in the Transfer Provision and any new rules or limitations
tied to such additional Divisions.
If shares of any of the Investment Options become unavailable for investment by
the Separate Account, or the Company's Board of Directors deems further
investment in these shares inappropriate, the Company may limit further
investment in the shares or may substitute shares of another Investment Option
for shares already purchased under this policy.
Valuation of Assets. The assets of the Separate Account are valued as of each
Valuation Date at their fair market value in accordance with Our established
procedures. The Separate Account Value as of any Valuation Date prior to the
Maturity Date is the sum of Your account values in each Division of the Separate
Account as of that date.
Valuation Units. In order to determine policy values in the Divisions We use
Valuation Units which are calculated separately for each Division. The Valuation
Unit value for each Division will vary to reflect the investment experience of
the applicable Investment Option. The Valuation Unit for a Division will be
determined on each Valuation Date for the Division by multiplying the Valuation
Unit value for the Division on the preceding Valuation Date by the Net
Investment Factor for that Division for the current Valuation Date.
The Net Investment Factor for each Division is determined by dividing (1) by (2)
and subtracting (3), where:
(1) is the net asset value per share of the applicable Investment Option as of
the current Valuation Date plus any per share amount of any dividend or
capital gains distribution paid by the Investment Option since the last
Valuation Date; and
(2) is the net asset value per share of the shares held in the Division as
determined at the end of the previous valuation period; and
(3) is a factor representing the Mortality and Expense Charge.
The net asset value of an investment company's shares held in each investment
division shall be the value reported by Us by that investment company.
Valuation Dates. Valuation of the various Divisions will occur on each Business
Day during each month. If the underlying Investment Option is unable to value or
determine the Divisions investment in an Investment Option due to any of the
reasons stated in the "Suspension and Deferral of Payments Provision", the
Valuation Date for the Division with respect to the unvalued portion shall be
the first Business Day that the assets can be valued or determined.
Page 8
<PAGE>
Business Day. A business day is each day that the New York Stock Exchange and
the Company are open for business. A business day immediately preceded by one or
more non-business calendar days will include those non-business days as part of
that business day. For example, a business day which falls on a Monday will
consist of a Monday and the immediately preceding Saturday and Sunday.
Minimum Balance. If a partial surrender causes the balance in any Division to
drop below $500, the Company reserves the right to transfer the remaining
balance to the Money Market Division. If a transfer causes the balance in any
Division to drop below $500, the Company reserves the right to transfer the
remaining balance in proportion to the transfer request.
Change of Investment Advisor or Investment Policy. Unless otherwise required by
law or regulation, the investment advisor or any investment policy may not be
changed without Our consent. If required, approval of or change of any
investment objective will be filed with the Insurance Department of the state
where this policy is being is delivered.
Rights Reserved by Us. Upon notice to You, this policy may be modified by Us,
but only if such modification is necessary to:
1. Operate the Separate Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by law;
2. Transfer any assets in any Division to another Division, or to one or more
other separate accounts;
3. Add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
4. Make any new Division available to You on a basis to be determined by Us;
5. Substitute for the shares held in any Division the shares of another
Division or the shares of another investment company or any other
investment permitted by law;
6. Make any changes as required by the Internal Revenue Code, or by any other
applicable law, regulation or interpretation in order to continue treatment
of this policy as life insurance; or
7. Make any changes required to comply with rules of any Division.
When required by law, We will obtain Your approval of changes and We will gain
approval from any appropriate regulatory authority.
Right to Convert In the Event of a Material Change in Investment Policy. In the
event there is a material change in the investment policy of the Separate
Account which has been approved by the Superintendent of the New York Department
of Insurance, and You object to such change, You shall have the option to
convert, without evidence of insurability, to a general account fixed benefit
life insurance policy within 60 days after the later of: (1) the effective date
of such change in investment policy; or (2) the receipt of the notice of the
options available.
General Account. The General Account is a fixed account within Our general
assets which We have established for:
1. Any amounts transferred from the Divisions as a result of a loan; or
2. Any amounts allocated by the Owner to such Account.
The General Account is credited with interest at an annual rate of not less than
4%, and is not based on the investment experience of any Division of the
Separate Account. Interest applied to that portion of the General Account equal
to a policy loan will be at an annual effective rate of not less than 4% nor
more than 4.75%.
Page 9
<PAGE>
POLICY VALUES PROVISION
Accumulation Value. The Accumulation Value of Your policy is the total of all
values in the General Account and in the Divisions of the Separate Account. The
Accumulation Value reflects:
1. Premiums paid;
2. Deductions for Premium Expense Charges and all applicable taxes;
3. Monthly deductions;
4. The investment experience of the Divisions selected;
5. The value of amounts allocated to the General Account, including interest
earned on amounts allocated to the General Account;
6. Deductions due to partial withdrawals; and
7. Deductions, if any, resulting from decreases in Specified Amount.
Net Premiums are allocated, in accordance with your instructions, to the General
Account or allocated to the selected Divisions of the Separate Account and
converted to Valuation Units.
On each Monthly Deduction day, a Monthly Deduction will be made by reducing the
unloaned portion of the General Account or redeeming Valuation Units from each
applicable Division in the same ratio as the Allocation of Policy Deductions in
effect on the Monthly Deduction day. If the number of Valuation Units in any
Division, or in the unloaned portion of the General Account is insufficient to
make a Monthly Deduction in this manner, We will cancel Valuation Units from
each applicable Division and reduce the unloaned portion of the General Account
in the same ratio the Monthly Deduction bears to the unloaned Accumulation Value
of your policy.
The Accumulation Value in any Division is determined by multiplying the value of
a Valuation Unit by the number of Valuation Units held under the policy in that
Division.
The value of Valuation Units equal to the amount being borrowed from the
Separate Account will be transferred to the General Account as of the Business
Day that the loan request is received In Writing.
Valuation Units are surrendered to reflect a partial surrender as of the
Business Day that the Written request for partial surrender is received.
On the Date of Issue. The Accumulation Value on the Date of Issue will be
determined as follows:
1. The Net Premium received; less
2. The Monthly Deduction for the first policy month; (See "How We Calculate a
Monthly Deduction.")
The first deduction day is the Date of Issue. The Monthly Deduction day is shown
on page 3.
On Each Deduction Day. On each deduction day after the Date of Issue, we will
determine the Accumulation Value as follows:
1. First, we will take the Accumulation Value as of the last deduction day;
and
2. Add the interest earned for the month on the excess of the General Account
value on the last deduction day over any withdrawals and transfers made
from the General Account since the last deduction day; and
3. Add any investment gain or subtract any investment loss on the Divisions of
the Separate Account since the last deduction day as measured by the change
in the value of the Valuation Units; and
4. Add all Net Premiums received since the last deduction day; and
5. Subtract any partial surrender made since the last deduction day; and
6. Subtract the Monthly Deduction for the policy month following the monthly
deduction day. (See "How We Calculate a Monthly Deduction.")
Page 10
<PAGE>
On Any Valuation Date Other Than a Deduction Day. The Accumulation Value on any
Valuation Date other than a deduction day will be the sum of:
1. The value of the General Account as of the last deduction day; less
2. Any withdrawals since the last deduction day; plus
3. All Net Premiums received since the last deduction day; plus
4. The sum of the values of the Divisions of the Separate Account as of the
last deduction day, plus
5. The amount of any investment gain, or minus any investment loss, on the
Divisions since the last deduction day as measured by the change in the
value of the Valuation Units.
Cash Value. The Cash Value of this policy will be equal to the Accumulation
Value less the Surrender Charge, if any.
Cash Surrender Value. The Cash Surrender Value of this policy will be equal to
the Cash Value less any indebtedness.
Surrender Charge. Surrender Charges for the Initial Specified Amount will apply
if You surrender this policy or if the Initial Specified Amount is decreased
during the first 10 policy years. Surrender Charges for any increases in
Specified Amount will apply if such increases are surrendered or reduced during
the first 10 years of each increase. The table on pages 23 and 24 lists the
Surrender Charge rates per $1,000 of Specified Amount at all issue ages.
You may make a request for surrender or decrease in the Specified amount at any
time during the Insured's lifetime before the Maturity Date except that a
decrease in the Specified Amount may not become effective prior to the end of
the first policy year. The surrender or decrease will take effect on the
Valuation Date on or next following the date We receive the request for
surrender or decrease.
Monthly Deductions May Be Made Only if There Is Sufficient Accumulation Value
Less Any Indebtedness. A Monthly Deduction from the Accumulation Value may be
made only if the Accumulation Value less any indebtedness is equal to or greater
than the Monthly Deduction. The Accumulation Value will be reduced by the amount
of each Monthly Deduction which will cause an equal reduction in the Cash
Surrender Value. If the Accumulation Value less any indebtedness on a deduction
day is not sufficient to meet the Monthly Deduction for the current month, this
policy will be subject to the "Grace Period" provision.
How We Calculate a Monthly Deduction. Each Monthly Deduction includes:
1. The cost of insurance provided by the basic policy; and
2. The cost of insurance for benefits provided by riders; and
3. The Monthly Administration Fee.
How We Calculate the Cost of Insurance for the Basic Policy. We calculate the
cost of insurance at the beginning of each policy month on the deduction day.
The cost of insurance is determined as follows:
1. Reduce the Death Benefit Amount by the amount of Accumulation Value on the
deduction day before the cost of insurance deduction is taken, and after
the Monthly Administration Fee and Cost of Insurance for riders are
deducted;
2. Multiply the difference by the cost of insurance rate per $1,000 of net
risk amount as provided in the Cost of Insurance Rate provision; and
3. Divide the result by 1000.
If Option 1 is in effect, and there have been increases in the Specified Amount,
the Accumulation Value will first be considered part of the Initial Specified
Amount. If the Accumulation Value exceeds the Initial Specified Amount, the
excess will be considered part of prior Specified Amount increases in the order
of the increases.
Page 11
<PAGE>
Cost of Insurance for Benefits Provided by Riders. The cost of insurance for
benefits provided by riders will be as stated on the Policy Schedule or in an
endorsement to this policy.
Monthly Administration Fee. An administration fee will be deducted monthly. The
amount of the monthly fee may be adjusted, but will never be greater than the
guaranteed Monthly Administration Fee.
Cost of Insurance Rate. The cost of insurance rate for the Initial Specified
Amount, and for each Specified Amount increase, is based on the Insured's:
1. Sex (if issued on a Sex Distinct basis);
2. Age nearest birthday on each policy anniversary; and
3. Premium class shown on the Policy Schedule, associated with the Initial
Specified Amount and each increase in the Specified Amount.
A portion of the cost of insurance rate is used to recover acquisition costs
associated with issuing the policy. Such charges are higher in the early policy
years.
The guaranteed monthly cost of insurance rates are shown in the table on page
21. We can use cost of insurance rates that are lower than the guaranteed rates.
Any change in rates will apply to all policies in the same rate class as this
policy. The rate class of this policy is determined on its Date of Issue
according to:
1. The calendar year of issue and policy year;
2. The plan of insurance;
3. The amount of insurance; and
4. The age, sex and premium class of the Insured if issued on a Sex Distinct
basis. The age and premium class if issued on a Unisex basis.
Changes in Rates, Charges and Fees. This policy does not participate in Our
profits or surplus. Any redetermination of the cost of insurance rates, interest
rates, mortality and expense charges, percentage of premium charges or the
Monthly Administration Fee will be based on Our expectations as to investment
earnings, mortality, persistency and expenses (including, but not limited to,
reinsurance costs and applicable tax charges.) Such changes in policy cost
factors will be determined in accordance with procedures and standards on file
with the Insurance Department and will be determined at least every five years.
We will not change these charges in order to recoup any prior losses.
Tax Charge. We reserve the right to impose additional charges or to establish
reserves for any federal or local taxes that may be incurred by Us, and that may
be deemed attributable to this policy. Any increase in the Tax Charge must be
approved by the Superintendent of Insurance.
Interest Rate. The guaranteed interest rate used in calculating Accumulation
Values of amounts allocated to the General Account is .3274% per month
compounded monthly. This is equivalent to 4.0% per year, compounded annually. We
can use interest rates greater than the guaranteed rates to calculate
Accumulation Values. Once interest greater than 4.0% has been credited to the
Accumulation Value, it becomes non-forfeitable. We may apply a different rate of
interest to that portion of the Accumulation Value which equals the amount of
the policy loan. However, the annual rate applied will never be less than 4.0%
Grace Period. If the Accumulation Value less any indebtedness on a deduction day
is not enough to meet the Monthly Deduction for the current month, this policy
will remain in force during the 61-day period that follows. If the Cash
Surrender Value on a policy anniversary is not enough to pay any loan interest
due, this policy will remain in force during the 61-day period that follows.
Such 61-day period is referred to in this policy as the "Grace Period." There is
no Grace Period for the initial Monthly Deduction.
Page 12
<PAGE>
If the required premium is not paid by the end of the Grace Period, this policy
will terminate without value. However, we will give you at least 31 days notice
prior to termination that your policy is in the Grace Period and advise you of
the amount of premium required to keep your policy in force. Such notice will be
sent to you at your last known address, and to the assignee of record, if any.
If death occurs during the Grace Period, Monthly Deductions through the policy
month in which death occurred will be deducted from the proceeds.
If a surrender request is received within 31 days after the Grace Period
commences, the Cash Surrender Value payable will not be less than the Cash
Surrender Value on the Monthly Deduction day the Grace Period commenced. The
Monthly Deduction for the policy month following such Monthly Deduction day will
not be subtracted in the calculation of such Cash Surrender Value.
Full Surrender. Subject to the Beneficiary and Proceeds section, You may return
Your policy to Us and request its Cash Surrender Value at any time during the
Insured's lifetime before the Maturity Date. The Cash Surrender Value will be
determined as of the Business Day the policy and the signed request for
surrender are received In Writing in Our Administrative Center. If surrender
takes place within 31 days after a policy anniversary, the Cash Values will not
be less than on that anniversary. The Company may delay payment if the
Suspension and Deferral of Payments Provision is in effect.
Partial Surrender. At any time after the first policy year, you may request
withdrawal of a portion of the Cash Surrender Value of the policy. Your request
must be made in writing prior to the Maturity Date during the Insured's
lifetime. The minimum partial surrender is $500.00.
Valuation Units are surrendered to reflect a partial surrender as of the
Business Day the request for partial surrender is received In Writing in Our
Administration Center.
A partial surrender will result in a reduction of the Accumulation Value, Cash
Value and the Death Benefit Amount. The Accumulation and Cash Values will be
reduced by the amount of partial surrender benefit. The reduced Death Benefit
Amount will be determined in accordance with the Death Benefit Option provision.
If your Death Benefit Option is Option 1, the Specified Amount will be reduced
by the amount of the partial surrender. The reduced amount will not be less than
zero. The Death Benefit Amount remaining after this reduction must be no less
than the Minimum Death Benefit Amount shown on page 3.
A partial surrender will result in the cancellation of Valuation Units from each
applicable Division and reduction of the unloaned portion of the General Account
in the same ratio as the Allocation of Policy Deductions in effect on the date
of each partial surrender.
If the number of Valuation Units in any Division or in the unloaned portion of
the General Account is insufficient to make a partial surrender in this manner,
We will cancel Valuation Units from each applicable Division and reduce the
unloaned portion of the General Account in the ratio the partial surrender
request bears to the unloaned Accumulation Value of your policy. You must state
In Writing in advance how partial surrenders should be made if other than this
method is to be used.
There will be a charge for each partial surrender in addition to the amounts
shown in the Table of Surrender Charges. The maximum charge is shown on page 3A.
Any partial surrender that causes a reduction in Specified Amount will be
subject to any applicable surrender charges on a pro-rata basis, and the
remaining surrender charge will be reduced proportionately.
The Company may delay payment if the Suspension and Deferral of Payments
Provision is in effect.
Page 13
<PAGE>
Period of Insurance Coverage if Amount or Frequency of Premium Payments Is
Reduced or if Premium Payments Are Discontinued. If You reduce the amount or
frequency of premium payments, or if You discontinue payment of premiums and do
not surrender this policy, We will continue making Monthly Deductions as long as
the Accumulation Value less any indebtedness is sufficient to make such
deductions. This policy will remain in force until the earlier of the following
dates:
1. The Maturity Date if the Accumulation Values less any indebtedness is
sufficient to make Monthly Deductions to that date; or
2. The end of the Grace Period.
TRANSFER PROVISION
Transfer of Accumulation Value. You may transfer all or part of Your interest in
a Division of the Separate Account or the General Account subject to the
following:
1. Transfers will be made as of the Business Day that the transfer request is
received in good order.
2. The minimum which may be transferred is $500.00.
3. A transfer from the General Account to a Separate Account Division may only
be made during the 60 day period that begins on a policy anniversary. The
total amount transferred during the 60 day period is limited in any policy
year to 25% of the unloaned portion of the General Account as of the policy
anniversary.
4. We may not unilaterally terminate or discontinue the transfer privilege.
However, We reserve the right to suspend such privilege for a reasonable
period of time. We also reserve the right to charge a fee of $25.00 for
each transfer in excess of 12 during a policy year. Any such suspension or
charge will be administered in a nondiscriminatory manner. The $25.00
charge will not apply to transfers made under the Dollar Cost Averaging or
Automatic Rebalancing provisions.
If You elect to use the transfer privilege, We will not be liable for a transfer
made in accordance with Your instructions.
Transfers between Separate Account Divisions result in the redemption of
Valuation Units in one Division and the purchase of Valuation Units in the
Division to which the transfer is made.
Dollar Cost Averaging. Dollar Cost Averaging is an automatic transfer of funds
made periodically prior to the Maturity Date in accordance with the Transfers
provision, except as provided below, and instructions from the Owner. Dollar
Cost Averaging (DCA) is subject to the following guidelines:
1. DCA transfers may be made:
(a) On any day of the month except the 29th, 30th or 31st;
(b) On a monthly, quarterly, semi-annual or annual basis;
(c) From the Money Market Division to one or more of the other Separate
Account Divisions. (The General Account is not eligible for DCA)
2. DCA may be elected only if the Accumulation Value at the time of election
is $5,000, or more.
3. The minimum amount of each DCA transfer is $100, or the remaining amount in
the Money Market Division, if less.
4. DCA may not begin prior to the first Valuation Date following the 15th day
after the initial Net Premium is applied.
5. DCA will end when there is no longer any value in the Money Market
Division, or when You request that DCA end. You will be notified if the
value of Your Money Market Division reaches zero.
6. Amounts applied to the Money Market Division while DCA is active will be
available for future DCA in accordance with the current DCA request.
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<PAGE>
7. There is no charge for DCA.
8. DCA is not available if Automatic Rebalancing is active.
Automatic Rebalancing. Automatic Rebalancing occurs when funds are transferred
by the Company between the Separate Account Divisions so that the values in each
Division match the premium allocation percentages then in effect. You may choose
Automatic Rebalancing on a quarterly, semi-annual or annual basis if your
Accumulation Value is $5,000 or more. The date Automatic Rebalancing occurs will
be based on the Date of Issue of Your policy. For example, if Your policy is
dated January 17, and You have requested Automatic Rebalancing on a quarterly
basis, Automatic Rebalancing will start on April 17, and will occur quarterly
thereafter. After Automatic Rebalancing is elected, it will continue until We
are notified In Writing that it is to be discontinued. There is no charge for
Automatic Rebalancing. Automatic Rebalancing is not available if Dollar Cost
Averaging is active.
SUSPENSION AND DEFERRAL OF PAYMENTS PROVISION
We may suspend the calculation and payment of the policy's Cash Surrender Value
in the following circumstances if:
1. The New York Stock Exchange is closed or trading on the exchange is
restricted as determined by the Securities and Exchange Commission ("SEC");
2. The SEC determines than an emergency exists that would make the disposal of
securities held in the Division or the determination of the value of the
Division's net assets not reasonably practicable.
SUSPENSION AND DEFERRAL OF PAYMENTS PROVISION (Cont'd)
As to amounts allocated to the General Account, We may defer payment of any Cash
Surrender Value withdrawal or loan amount for up to six months after We receive
a request for it. If payment is deferred for more than 30 days, We will pay
interest at an annual effective rate of not less than 3% per year from the date
of the request.
Written notice of both the imposition and termination of any such suspension
will be given to the Owners, assignees of record and any irrevocable
Beneficiaries.
Payments which were due to have been made and which were deferred following the
suspension of the calculation of the Cash Surrender Value will be made within
thirty (30) days of the lifting of the suspension, and will be calculated based
on the Valuation Date which immediately follows termination of the suspension.
POLICY LOANS
You should consult your tax advisor before you obtain a Policy Loan.
You may borrow from Us at any time while this policy is in force, an amount
which is equal to or less than the policy's loan value. The loan value will be
the Cash Surrender Value less an amount equal to 3 Monthly Deductions, and less
interest on the amount to be borrowed to the next policy anniversary.
The value of Valuation Units equal to the amount being borrowed from the
Separate Account will be transferred to the General Account as of the Business
Day that the loan request is received in good order.
Page 15
<PAGE>
Loan Interest. Loan interest will accrue daily at an annual effective rate of
4.54% payable in advance. This is equivalent to an annual effective rate of
4.75% paid in arrears. On each policy anniversary, loan interest for the next
year is due in advance. Unpaid loan interest will be deducted from the various
accounts according to the deduction percentages then in effect, and added to the
loaned portion of the General Account. If the number of Valuation Units in any
Division, or in the unloaned portion of the General Account is insufficient to
deduct unpaid loan interest in this manner, We will cancel Valuation Units from
each applicable division and reduce the unloaned portion of the General Account
in the same ratio the unpaid loan interest bears to the unloaned Accumulation
Value of your policy.
How You May Repay a Policy Loan. You may repay all or part of a policy loan at
any time, except that:
1. Repayment may be made only while this policy is in force and prior to the
death of the Insured; and,
2. A partial repayment must be at least $100.00.
At any time Your policy loan exceeds the Cash Surrender Value, this policy will
lapse. However, at least 31 days prior notice must be mailed by Us to Your last
known address and to the assignee of record, if any.
We Can Delay Payment. We can delay lending You money for up to 6 months, or the
period allowed by law, whichever is less. However, We cannot delay lending You
money if the amount is to be used to pay a premium to Us.
Obtaining a Loan. You may obtain a policy loan by Written request and assignment
of the policy as sole security for the loan. The Company may delay a loan if the
Suspension and Deferral of Payments Provision is in effect.
Effect of a Loan. When a loan is made, an amount equal to the amount being
borrowed from the Separate Account will be transferred to the General Account. A
loan will result in the cancellation of Units from each applicable Division and
reduction of the unloaned portion of the General Account in the ratio that the
loan bears to the unloaned Accumulation Value of Your policy. You must state In
Writing in advance which Division units are to be canceled if a different method
is to be used.
Repayment of a loan will first be allocated to the General Account until you
have repaid any loaned amounts that were allocated to the General Account. You
may tell Us how to allocate repayments above that amount. If you do not tell us,
an amount equal to the loan repayment will be transferred from the General
Account to the Divisions in the same ratio currently in effect for the
allocation of Net Premiums.
A loan, whether or not repaid, will have a permanent effect on the Cash
Surrender Values and on the death benefits. If not repaid, any indebtedness will
reduce the amount of Death Benefit Proceeds and the amount available upon
surrender of this policy.
Preferred Loans. A "Preferred Loan" is a policy loan that is made at a net cost
to the Owner that is less than the net cost of other policy loans. Starting on
the tenth policy anniversary, this policy will be eligible for "Preferred Loans"
subject to the following guidelines:
1. The maximum amount eligible for Preferred Loans during a policy year is
restricted to the lesser of the following values on the first day of such
policy year:
a. The policy loan value; or
b. 10% of the Accumulation Value.
2. When a Preferred Loan is made, interest to the next policy anniversary will
be charged at the rate shown in the Loan Interest provision.
3. Interest credited to the amount of the Accumulation Value offset by a
Preferred Loan:
a. Will be at an annual effective rate that is equal to or less than the
Policy Loan annual effective interest rate; and
b. Will be at a higher rate than the rate used to credit interest to
values offset by any other policy loan and will never be less than
4.5%.
Page 16
<PAGE>
BENEFICIARY AND PROCEEDS
Beneficiary. The Beneficiary as named in the application, or later changed by
You, will receive the proceeds upon the death of the Insured. Unless You have
stated otherwise, proceeds will be paid as follows:
1. If any Beneficiary dies before the Insured, that Beneficiary's interest
will pass to any other Beneficiaries according to their respective
interests.
2. If no Beneficiary survives the Insured, proceeds will be paid to You, as
Owner, if You are then living; otherwise proceeds will be paid to Your
estate.
Change of Ownership or Beneficiary. You may change the Owner or the Beneficiary
at any time during the lifetime of the Insured unless the previous designation
provides otherwise. To do so, send a Written request to Our Administration
Center in a form acceptable to Us. The change will go into effect when We have
recorded the change. However, after the change is recorded, it will be deemed
effective as of the date of Your Written request for change. The change will be
subject to any payment made or action taken by Us before the request is
recorded.
Common Disaster. If We cannot determine whether a Beneficiary or the Insured
died first in a common disaster, We will assume that the Beneficiary died first.
Proceeds will be paid on this basis unless an endorsement to this policy
provides otherwise.
Proceeds. Proceeds means the amount payable on:
1. The Maturity Date;
2. Exercise of the full surrender benefit; or
3. The Insured's death.
The proceeds on the Maturity Date will be the Cash Surrender Value. The proceeds
on the Insured's death will be the Death Benefit Amount less any outstanding
policy loan.
All proceeds and partial surrender benefits are subject to the provisions of the
Payment Options section and the other provisions of this policy.
PAYMENT OPTIONS
Instead of being paid in one sum, all or part of the proceeds may be applied
under any of the Payment Options described below. In addition to these options,
other methods of payment may be chosen with Our consent.
Payment Contract. When proceeds become payable under a Payment Option, a Payment
Contract will be issued to each payee. The Payment Contract will state the
rights and benefits of the payee. It will also name those who are to receive any
balance unpaid at the death of the payee.
Election of Options. The Owner may elect or change any Payment Option while the
Insured is living, subject to the provisions of this policy. This election or
change must be In Writing. Within 60 days after the Insured's death, a payee
entitled to proceeds in one sum may elect to receive proceeds under any option.
Option 1. Payments for a Specified Period: Equal monthly payments will be made
for a specified period. The Option 1 Table in this policy shows the monthly
income for each $1,000 of proceeds applied.
Option 2. Payments of a Specified Amount: Equal monthly payments of a specified
amount will be made. Each payment must be at least $60 a year for each $ 1,000
of proceeds applied. Payments will continue until the amount applied, with
interest, has been paid in full.
Page 17
<PAGE>
Option 3. Monthly Payments for Life: Equal monthly payments will be made for a
specified period, and will continue after that period for as long as the payee
lives. The specified period may be 10, 15 or 20 years. The Option 3 Table in
this policy shows the monthly income for each $1,000 of proceeds applied. If
issued on a Sex Distinct basis, tables are based on the 1983a Male or Female
Tables adjusted by projection scale G for 9 years, interest at the rate of 3%
per year, and a 2% load. If issued on a Unisex basis, tables are based on the
1983a Male or Female Tables, adjusted by projection scale G for 9 years, with
unisex rates based on 60% female and 40% male, and interest at the rate of 3%
per year, and a 2% load.
At the time payments are to begin under this option, the payee may choose one of
the following:
1. Monthly payments based on the Option 3 Table; or
2. Monthly payments equal to a monthly annuity based on our single premium
immediate annuity rates then in use.
Option 4. Proceeds Left at Interest: Proceeds may be left on deposit with us for
any period up to 30 years. Interest earned on the proceeds may be:
1. Left on deposit to accumulate at the rate of 3% compounded annually; or
2. Paid in installments at the rate for each $1,000 of proceeds of $30
annually, $14.89 semiannually, $7.42 quarterly or $2.47 monthly.
Upon the death of the payee, or at the end of the specified period, any balance
left on deposit will be paid in a lump sum or under Options 1, 2 or 3.
Interest Rates. The guaranteed rate of interest for proceeds held under Payment
Options 1, 2, 3 and 4 is 3% compounded annually. We may credit interest at a
higher rate. The amount of any increase will be determined by Us.
Payments. The first payment under Options 1, 2 and 3 will be made when the claim
for settlement has been approved. Payments after the first will be made
according to the manner of payment chosen. Interest under Option 4 will be
credited from the date of death and paid or added to the proceeds as provided in
the Payment Contract.
Availability of Options. If the proposed payee is not a natural person, payment
options may be chosen only with Our consent.
If this policy is assigned, We will have the right to pay the assignee in one
sum the amount to which the assignee is entitled. Any balance will be applied
according to the option chosen.
The amount to be applied under any one option must be at least $2,000. The
payment elected under any one option must be at least $25.
Evidence That Payee is Alive. Before making any payment under a Payment Option,
We may ask for proof that the payee is alive. If proof is requested, no payment
will be made or considered due until We receive proof.
Death of a Payee. If a payee dies, any unpaid balance will be paid as stated in
the Payment Contract. If there is no surviving payee named in the Payment
Contract, We will pay the estate of the payee as follows:
1. Under Options 1 and 3, the value as of the date of death of the remaining
payments for the specified period, discounted at the rate of interest,
compounded annually, that was used in determining the amount of the monthly
payment;
2. Under Options 2 and 4, the balance of any proceeds remaining unpaid with
accrued interest, if any.
Page 18
<PAGE>
Withdrawal of Proceeds Under Options 1 or 2. If provided in the Payment
Contract, a payee will have the right to withdraw the entire unpaid balance
under Options 1 or 2. Under Option 1, the amount will be the value of the
remaining payments for the specified period discounted at the rate of interest
used in determining monthly income. Under Option 2, the amount will be the
entire unpaid balance.
Withdrawal of Proceeds Under Option 4. A payee will have the right to withdraw
proceeds left under Option 4 subject to the following rules:
1. The amount to be withdrawn must be $500 or more; and
2. A partial withdrawal must leave a balance on deposit of $1,000 or more.
Withdrawals May Be Deferred. We may defer payment of any withdrawal for up to 6
months from the date We receive a withdrawal request.
Assignment. Payment Contracts may not be assigned.
Change in Payment. The right to make any change in payment is available only if
it is provided in the Payment Contract.
Claims of Creditors. To the extent permitted by law, proceeds will not be
subject to any claims of a Beneficiary's creditors.
GENERAL PROVISIONS
Assigning Your Policy. During the lifetime of the Insured, You may assign this
policy as security of an obligation. We will not be bound by an assignment
unless it is received In Writing at Our Administration Center. Two copies of the
assignment must be submitted. We will retain one copy and return the other. We
will not be responsible for the validity of any assignment.
Incontestability. We rely on the statements made in the application for this
policy and applications for any reinstatements or increases in Specified Amount.
These statements, in the absence of fraud, are considered representations and
not warranties. No statement may be used in defense of a claim under the policy
unless it is in such an application.
Except as stated below, We cannot contest this policy after it has been in force
during the Insured's lifetime for 2 years from the Date of Issue.
Exceptions: We cannot contest any claim related to an increase in Specified
Amount after such increase has been in effect during the Insured's lifetime for
2 years.
If this policy is reinstated, We cannot contest this policy after it has been in
force during the Insured's lifetime for 2 years from the date of reinstatement.
We can contest a reinstatement or an increase in Specified Amount only on the
basis of the information furnished in the application for such reinstatement or
increase.
This 2-year limitation does not apply to any Disability or Accidental Death
Benefit, or to the nonpayment of premium.
Suicide Exclusion. If the Insured takes his or her own life, within 2 years from
the Date of Issue, We will limit the Death Benefit Proceeds to the premiums paid
less any policy loans and less any partial cash surrenders paid.
If there are any increases in the Specified Amount that results from an
application by You subsequent to the Date of Issue (See the section entitled
"Changing Your Insurance Policy"), a new 2 year period shall apply to each
increase beginning on the date of each increase. The Death Benefit Proceeds will
be the costs of insurance associated with each increase.
Page 19
<PAGE>
When the laws of the state in which this policy is delivered require less than
this 2 year period, the period will be as stated in such laws.
Age or Sex Incorrectly Stated (Age Incorrectly Stated if Issued on a Unisex
Basis). If the (1) age or sex of the Insured (if this policy was issued on a Sex
Distinct Basis) or (2) age of the Insured (if this policy was issued on a Unisex
basis) has been misstated to Us, We will adjust the excess of the Death Benefit
Amount over the Accumulation Value on the date of death to that which would have
been purchased by the Monthly Deduction for the policy month of death at the
correct cost of insurance rate. By age We mean age nearest birthday as of the
Date of Issue.
Statutory Basis of Policy Values. The Cash Values of the policy are not less
than the minimum values required by the law of the state where this policy is
delivered. The calculation of the Cash Values includes a charge for the cost of
insurance, as shown in the Table of Guaranteed Monthly Cost of Insurance Rates.
Calculation of minimum Cash Values, nonforfeiture benefits and Guaranteed Cost
of Insurance Rates are based on the Composite 1980 Commissioners Standard
Ordinary Male/Female/Unisex (Table B) Mortality Table for the appropriate sex
and age nearest birthday. A detailed statement of the method of computing values
has been filed with the state insurance department where required.
No Dividends. This policy will not pay dividends. It will not participate in any
of our surplus or earnings.
Annual Report. We will send You at least once a year an annual report which will
show a summary of all transactions since the last report, including:
1. Premiums paid since the last report;
2. Transfers since the last report;
3. Expense charges deducted since the last report;
4. The cost of insurance deducted since the last report;
5. Partial surrender benefits paid to You since the last report;
6. The amount of any outstanding policy loan;
7. Separate Account Unit Values;
8. The current Cash Surrender and Accumulation Values;
9. The Death Benefit Amount; and
10. Any other information required by the Superintendent of Insurance
When This Policy Terminates. This policy will terminate if:
1. You request that this policy be terminated;
2. The Insured dies;
3. The policy matures; or
4. The Grace Period ends and the Accumulation Value less any indebtedness is
sufficient to cover a Monthly Deduction.
Reinstatement. "Reinstating" means placing Your policy in force after it has
terminated at the end of the Grace Period. We will reinstate this policy if We
receive:
1. Your Written request within five years after the end of the Grace Period
and before the Maturity Date;
2. Evidence of insurability satisfactory to Us;
3. Payment of enough premium to keep the policy in force for two months; and
4. Payment or reinstatement of any indebtedness.
The reinstated policy will be in force from the Monthly Deduction day on or
following the date We approve the reinstatement application.
Page 20
<PAGE>
The original surrender charge schedule will apply to a reinstated policy. The
Accumulation Value at the time of reinstatement will be:
1. The Surrender Charge deducted at the time of lapse (such charge not being
greater than the Accumulation Value at the time of lapse before the
Surrender Charge was applied); plus
2. The Net Premium allocated in accordance with the premium allocation
percentages at time of lapse unless the reinstatement application provides
otherwise, using Unit Values as of the date of reinstatement; plus
3. Any loan repaid or reinstated; less
4. The monthly deduction for one month.
The dollar amount of any Surrender Charge reinstated will be the same as the
dollar amount of Surrender Charge at the time of lapse, and will be reinstated
into the funds from which they were deducted at the time of lapse using Unit
Values as of the date of reinstatement.
If a person other than the Insured is covered by a rider attached to this
policy, coverage will be reinstated according to that rider.
Option to Exchange Policy during First 18 Months. At any time during the first
18 months from the Date of Issue of this policy, and while this policy is in
force on a premium paying basis, it may be exchanged for any general account
fixed benefit plan of life insurance offered by the Company for exchange on the
Date of Issue of this policy, subject to the following conditions:
1. The new policy will be issued with the same Date of Issue, insurance age,
and risk classification as this policy;
2. The amount of insurance will be the same as the initial amount of insurance
under this policy;
3. The new policy may include any additional benefit provided by rider
included in this policy if available for issue with the new policy;
4. The exchange will be subject to an equitable premium or cash value
adjustment that takes appropriate account of the premiums and cash values
under the original and new policies;
5. Evidence of insurability will not be required for the exchange.
Page 21
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED AGE MALE ATTAINED AGE MALE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<S> <C> <S> <C>
0 $0.35 50 $0.56
1 0.09 51 0.61
2 0.08 52 0.67
3 0.08 53 0.73
4 0.08 54 0.80
5 0.08 55 0.88
6 0.07 56 0.96
7 0.07 57 1.05
8 0.06 58 1.14
9 0.06 59 1.24
10 0.06 60 1.35
11 0.06 61 1.48
12 0.07 62 1.62
13 0.08 63 1.78
14 0.10 64 1.95
15 0.11 65 2.15
16 0.13 66 2.36
17 0.14 67 2.58
18 0.15 68 2.82
19 0.16 69 3.07
20 0.16 70 3.36
21 0.16 71 3.70
22 0.16 72 4.08
23 0.16 73 4.52
24 0.15 74 5.01
25 0.15 75 5.54
26 0.14 76 6.11
27 0.14 77 6.71
28 0.14 78 7.33
29 0.14 79 7.99
30 0.14 80 8.71
31 0.15 81 9.52
32 0.15 82 10.45
33 0.16 83 11.50
34 0.17 84 12.67
35 0.18 85 13.93
36 0.19 86 15.25
37 0.20 87 16.63
38 0.22 88 18.06
39 0.23 89 19.55
40 0.25 90 21.11
41 0.27 91 22.80
42 0.30 92 24.66
43 0.32 93 26.82
44 0.35 94 29.67
45 0.38
46 0.41
47 0.44
48 0.48
49 0.52
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
Page 22
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- ------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Male 10 Years 15 Years 20 Years Male 10 Years 15 Years 20 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20* 2.95 $2.94 $2.94 50 $4.05 $4.00 $3.93
21 2.97 2.96 2.96 51 4.11 4.06 3.99
22 2.98 2.98 2.98 52 4.18 4.13 4.04
23 3.00 3.00 3.00 53 4.26 4.19 4.10
24 3.02 3.02 3.02 54 4.34 4.27 4.16
25 3.05 3.04 3.04 55 4.42 4.34 4.22
26 3.07 3.06 3.06 56 4.51 4.42 4.28
27 3.09 3.09 3.08 57 4.60 4.50 4.35
28 3.12 3.11 3.11 58 4.69 4.58 4.41
29 3.14 3.14 3.13 59 4.79 4.66 4.47
30 3.17 3.16 3.16 60 4.90 4.75 4.54
31 3.20 3.19 3.18 61 5.01 4.84 4.60
32 3.22 3.22 3.21 62 5.13 4.94 4.67
33 3.25 3.25 3.24 63 5.26 5.03 4.73
34 3.29 3.28 3.27 64 5.39 5.13 4.79
35 3.32 3.31 3.00 65 5.52 5.23 4.85
36 3.35 3.35 3.33 66 5.66 5.33 4.91
37 3.39 3.38 3.36 67 5.81 5.43 4.97
38 3.43 3.42 3.40 68 5.96 5.53 5.02
39 3.47 3.46 3.44 69 6.12 5.63 5.07
40 3.51 3.50 3.47 70 6.28 5.73 5.11
41 3.55 3.54 3.51 71 6.44 5.82 5.15
42 3.60 3.58 3.55 72 6.61 5.91 5.19
43 3.65 3.63 3.59 73 6.78 6.00 5.23
44 3.70 3.67 3.64 74 6.96 6.08 5.26
45 3.75 3.72 3.68 75 7.13 6.16 5.28
46 3.80 3.77 3.73 76 7.30 6.24 5.31
47 3.86 3.83 3.78 77 7.47 6.31 5.33
48 3.92 3.88 3.83 78 7.64 6.37 5.34
49 3.98 3.94 3.88 79 7.81 6.42 5.36
80** 7.97 6.48 5.37
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Payments are based upon the age, nearest birthday, of the Payee on the date the
first payment is due. If monthly installments for two or more specified periods
for a given age are the same, the specified period of longer duration will
apply.
*Also applies to younger ages. **Also applies to older ages.
- --------------------------------------------------------------------------------
Page 23
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,0000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED AGE FEMALE ATTAINED AGE FEMALE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<S> <C> <C> <C>
0 0.24 50 0.41
1 0.07 51 0.44
2 0.07 52 0.48
3 0.07 53 0.51
4 0.06 54 0.55
5 0.06 55 0.59
6 0.06 56 0.63
7 0.06 57 0.67
8 0.06 58 0.71
9 0.06 59 0.75
10 0.06 60 0.79
11 0.06 61 0.85
12 0.06 62 0.92
13 0.06 63 1.01
14 0.07 64 1.11
15 0.07 65 1.23
16 0.08 66 1.35
17 0.08 67 1.47
18 0.08 68 1.59
19 0.09 69 1.72
20 0.09 70 1.86
21 0.09 71 2.05
22 0.09 72 2.27
23 0.09 73 2.55
24 0.10 74 2.88
25 0.10 75 3.25
26 0.10 76 3.67
27 0.10 77 4.11
28 0.11 78 4.59
29 0.11 79 5.11
30 0.11 80 5.71
31 0.12 81 6.39
32 0.12 82 7.19
33 0.13 83 8.12
34 0.13 84 9.18
35 0.14 85 10.34
36 0.15 86 11.60
37 0.16 87 12.97
38 0.17 88 14.45
39 0.19 89 16.05
40 0.20 90 17.79
41 0.22 91 19.72
42 0.24 92 21.89
43 0.26 93 24.44
44 0.28 94 27.67
45 0.30
46 0.32
47 0.34
48 0.36
49 0.39
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
Page 21
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- ------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE GUARANTEED PERIOD AGE OF PAYEE GUARANTEED PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Female 10 Years 15 Years 20 Years Female 10 Years 15 Years 20 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
20* $2.85 $2.85 $2.85 50 $3.75 $3.73 $3.69
21 2.87 2.87 2.87 51 3.80 3.78 3.74
22 2.89 2.88 2.88 52 3.86 3.84 3.79
23 2.90 2.90 2.90 53 3.92 3.89 3.85
24 2.92 2.92 2.91 54 3.99 3.96 3.90
25 2.94 2.93 2.93 55 4.06 4.02 3.96
26 2.95 2.95 2.95 56 4.13 4.09 4.02
27 2.97 2.97 2.97 57 4.21 4.16 4.08
28 2.99 2.99 2.99 58 4.29 4.23 4.15
29 3.01 3.01 3.01 59 4.37 4.31 4.21
30 3.03 3.03 3.03 60 4.46 4.39 4.28
31 3.06 3.05 3.05 61 4.56 4.47 4.35
32 3.08 3.08 3.07 62 4.66 4.56 4.42
33 3.10 3.10 3.10 63 4.76 4.65 4.49
34 3.13 3.13 3.12 64 4.88 4.75 4.56
35 3.16 3.15 3.15 65 4.99 4.85 4.63
36 3.19 3.18 3.17 66 5.12 4.95 4.70
37 3.21 3.21 3.20 67 5.25 5.05 4.77
38 3.24 3.24 3.23 68 5.39 5.16 4.83
39 3.28 3.27 3.26 69 5.53 5.27 4.90
40 3.31 3.30 3.29 70 5.69 5.38 4.96
41 3.35 3.34 3.33 71 5.85 5.49 5.02
42 3.38 3.37 3.36 72 6.02 5.60 5.08
43 3.42 3.41 3.40 73 6.19 5.71 5.13
44 3.46 3.45 3.43 74 6.37 5.82 5.17
45 3.50 3.49 3.47 75 6.56 5.92 5.21
46 3.55 3.53 3.51 76 6.75 6.02 5.25
47 3.59 3.58 3.56 77 6.95 6.11 5.28
48 3.64 3.63 3.60 78 7.14 6.20 5.30
49 3.69 3.67 3.65 79 7.34 6.28 5.32
80** 7.54 6.35 5.34
- ------------------------------------------------------------------------------------------------------------------------------------
Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for
two or more specified periods for a given age are the same, the specified period of longer duration will apply.
*Also applies to younger ages. **Also applies to older ages.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 22
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED AGE RATE ATTAINED AGE RATE
Nearest Birthday Nearest Birthday
(On Each Policy (On Each Policy
Anniversary) Anniversary)
<S> <C> <S> <C>
0 0.33 50 0.53
1 0.09 51 0.58
2 0.08 52 0.63
3 0.08 53 0.69
4 0.08 54 0.75
5 0.07 55 0.82
6 0.07 56 0.89
7 0.07 57 0.97
8 0.06 58 1.05
9 0.06 59 1.14
10 0.06 60 1.24
11 0.06 61 1.35
12 0.07 62 1.47
13 0.08 63 1.61
14 0.09 64 1.77
15 0.10 65 1.95
16 0.12 66 2.14
17 0.13 67 2.34
18 0.14 68 2.54
19 0.14 69 2.77
20 0.15 70 3.02
21 0.15 71 3.32
22 0.14 72 3.66
23 0.14 73 4.05
24 0.14 74 4.49
25 0.14 75 4.98
26 0.14 76 5.50
27 0.13 77 6.04
28 0.13 78 6.60
29 0.14 79 7.21
30 0.14 80 7.87
31 0.14 81 8.63
32 0.15 82 9.49
33 0.15 83 10.49
34 0.16 84 11.59
35 0.17 85 12.78
36 0.18 86 14.05
37 0.19 87 15.39
38 0.21 88 16.80
39 0.22 89 18.30
40 0.24 90 19.89
41 0.26 91 21.63
42 0.29 92 23.60
43 0.31 93 25.88
44 0.33 94 28.87
45 0.36
46 0.39
47 0.42
48 0.46
49 0.49
</TABLE>
The rates shown above represent the guaranteed (maximum) monthly cost of
insurance for each $1,000 of net amount at risk. If this policy has been issued
in a special (rated) premium class, the guaranteed monthly cost will be
calculated as shown on page 3.
Page 21
<PAGE>
TABLES OF MONTHLY INSTALLMENTS FOR EACH $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPTION 1 TABLE
INSTALLMENTS FOR A SPECIFIED PERIOD
- ------------------------------------------------------------------------------------------------
Number Amount of Number Amount of Number Amount of Number Amount of
of Years Monthly of Years Monthly of Years Monthly of Years Monthly
Payable Installments Payable Installments Payable Installments Payable Installments
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5 $17.91 15 $6.87 25 $4.71 35 $3.82
6 15.14 16 6.53 26 4.59 36 3.76
7 13.16 17 6.23 27 4.47 37 3.70
8 11.68 18 5.96 28 4.37 38 3.65
9 10.53 19 5.73 29 4.27 39 3.60
10 9.61 20 5.51 30 4.18 40 3.55
11 8.86 21 5.32 31 4.10
12 8.24 22 5.15 32 4.02
13 7.71 23 4.99 33 3.95
14 7.26 24 4.84 34 3.88
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 3 TABLE
INSTALLMENTS FOR LIFE WITH SPECIFIED MINIMUM PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
GUARANTEED PERIOD GUARANTEED PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE 10 Years 15 Years 20 Years AGE OF PAYEE 10 Years 15 Years 20 Years
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20* $2.89 $2.89 $2.89 50 $3.87 $3.84 $3.79
21 2.91 2.91 2.90 51 3.93 3.90 3.85
22 2.93 2.92 2.92 52 3.99 3.96 3.90
23 2.94 2.94 2.94 53 4.06 4.02 3.95
24 2.96 2.96 2.96 54 4.13 4.08 4.01
25 2.98 2.98 2.98 55 4.21 4.15 4.07
26 3.00 3.00 3.00 56 4.28 4.22 4.13
27 3.02 3.02 3.02 57 4.37 4.30 4.19
28 3.04 3.04 3.04 58 4.45 4.38 4.26
29 3.07 3.06 3.06 59 4.55 4.46 4.32
30 3.09 3.09 3.08 60 4.64 4.54 4.39
31 3.11 3.11 3.11 61 4.74 4.63 4.46
32 3.14 3.14 3.13 62 4.85 4.72 4.52
33 3.17 3.16 3.16 63 4.97 4.81 4.59
34 3.20 3.19 3.18 64 5.08 4.91 4.66
35 3.22 3.22 3.21 65 5.21 5.01 4.73
36 3.26 3.25 3.24 66 5.34 5.11 4.79
37 3.29 3.28 3.27 67 5.48 5.21 4.85
38 3.32 3.31 3.30 68 5.62 5.32 4.92
39 3.36 3.35 3.33 69 5.77 5.42 4.97
40 3.39 3.38 3.37 70 5.93 5.53 5.03
41 3.43 3.42 3.40 71 6.09 5.63 5.08
42 3.47 3.46 3.44 72 6.26 5.73 5.13
43 3.51 3.50 3.48 73 6.44 5.84 5.17
44 3.56 3.54 3.52 74 6.62 5.93 5.21
45 3.60 3.59 3.56 75 6.80 6.03 5.24
46 3.65 3.63 3.60 76 6.98 6.12 5.27
47 3.70 3.68 3.65 77 7.17 6.20 5.30
48 3.76 3.73 3.70 78 7.35 6.27 5.32
49 3.81 3.78 3.74 79 7.54 6.34 5.34
80** 7.72 6.41 5.35
- ------------------------------------------------------------------------------------------------------------------------------------
Payments are based upon the age, nearest birthday, of the Payee on the date the first payment is due. If monthly installments for
two or more specified periods for a given age are the same, the specified period of longer duration will apply.
*Also applies to younger ages. **Also applies to older ages.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 22
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrendered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE
AGE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
MALE 1 2 3 4 5 6 7 8 9 10 11
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2.28 2.28 2.28 2.00 1.71 1.43 1.14 0.86 0.57 0.29 0.00
1 2.28 2.28 2.28 2.00 1.71 1.43 1.14 0.86 0.57 0.29 0.00
2 2.40 2.40 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 0.00
3 2.40 2.40 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 0.00
4 2.52 2.52 2.52 2.21 1.89 1.58 1.26 0.95 0.63 0.32 0.00
5 2.64 2.64 2.64 2.31 1.98 1.65 1.32 0.99 0.66 0.33 0.00
6 2.76 2.76 2.76 2.42 2.07 1.73 1.38 1.04 0.69 0.35 0.00
7 2.88 2.88 2.88 2.52 2.16 1.80 1.44 1.08 0.72 0.36 0.00
8 2.88 2.88 2.88 2.52 2.16 1.80 1.44 1.08 0.72 0.36 0.00
9 3.00 3.00 3.00 2.63 2.25 1.88 1.50 1.13 0.75 0.38 0.00
10 3.12 3.12 3.12 2.73 2.34 1.95 1.56 1.17 0.78 0.39 0.00
11 3.24 3.24 3.24 2.84 2.43 2.03 1.62 1.22 0.81 0.41 0.00
12 3.36 3.36 3.36 2.94 2.52 2.10 1.68 1.26 0.84 0.42 0.00
13 3.60 3.60 3.60 3.15 2.70 2.25 1.80 1.35 0.90 0.45 0.00
14 3.72 3.72 3.72 3.26 2.79 2.33 1.86 1.40 0.93 0.47 0.00
15 3.84 3.84 3.84 3.36 2.88 2.40 1.92 1.44 0.96 0.48 0.00
16 3.96 3.96 3.96 3.47 2.97 2.48 1.98 1.49 0.99 0.50 0.00
17 4.08 4.08 4.08 3.57 3.06 2.55 2.04 1.53 1.02 0.51 0.00
18 4.20 4.20 4.20 3.68 3.15 2.63 2.10 1.58 1.05 0.53 0.00
19 4.44 4.44 4.44 3.89 3.33 2.78 2.22 1.67 1.11 0.56 0.00
20 4.56 4.56 4.56 3.99 3.42 2.85 2.28 1.71 1.14 0.57 0.00
21 4.68 4.68 4.68 4.10 3.51 2.93 2.34 1.76 1.17 0.59 0.00
22 4.92 4.92 4.92 4.31 3.69 3.08 2.46 1.85 1.23 0.62 0.00
23 5.04 5.04 5.04 4.41 3.78 3.15 2.52 1.89 1.26 0.63 0.00
24 5.28 5.28 5.28 4.62 3.96 3.30 2.64 1.98 1.32 0.66 0.00
25 5.52 5.52 5.52 4.83 4.14 3.45 2.76 2.07 1.38 0.69 0.00
26 5.76 5.76 5.76 5.04 4.32 3.60 2.88 2.16 1.44 0.72 0.00
27 6.00 6.00 6.00 5.25 4.50 3.75 3.00 2.25 1.50 0.75 0.00
28 6.24 6.24 6.24 5.46 4.68 3.90 3.12 2.34 1.56 0.78 0.00
29 6.48 6.48 6.48 5.67 4.86 4.05 3.24 2.43 1.62 0.81 0.00
30 6.72 6.72 6.72 5.88 5.04 4.20 3.36 2.52 1.68 0.84 0.00
31 7.20 7.20 7.20 6.30 5.40 4.50 3.60 2.70 1.80 0.90 0.00
32 7.44 7.44 7.44 6.51 5.58 4.65 3.72 2.79 1.86 0.93 0.00
33 7.80 7.80 7.80 6.83 5.85 4.88 3.90 2.93 1.95 0.98 0.00
34 8.16 8.16 8.16 7.14 6.12 5.10 4.08 3.06 2.04 1.02 0.00
35 8.52 8.52 8.52 7.46 6.39 5.33 4.26 3.20 2.13 1.07 0.00
36 8.88 8.88 8.88 7.77 6.66 5.55 4.44 3.33 2.22 1.11 0.00
37 9.36 9.36 9.36 8.19 7.02 5.85 4.68 3.51 2.34 1.17 0.00
38 9.72 9.72 9.72 8.51 7.29 6.08 4.86 3.65 2.43 1.22 0.00
39 10.20 10.20 10.20 8.93 7.65 6.38 5.10 3.83 2.55 1.28 0.00
</TABLE>
Page 23
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrendered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE
AGE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
MALE 1 2 3 4 5 6 7 8 9 10 11
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 10.68 10.68 10.68 9.35 8.01 6.68 5.34 4.01 2.67 1.34 0.00
41 11.28 11.28 11.28 9.87 8.46 7.05 5.64 4.23 2.82 1.41 0.00
42 11.88 11.88 11.88 10.40 8.91 7.43 5.94 4.46 2.97 1.49 0.00
43 12.36 12.36 12.36 10.82 9.27 7.73 6.18 4.64 3.09 1.55 0.00
44 13.08 13.08 13.08 11.45 9.81 8.18 6.54 4.91 3.27 1.64 0.00
45 13.68 13.68 13.68 11.97 10.26 8.55 6.84 5.13 3.42 1.71 0.00
46 14.40 14.40 14.40 12.60 10.80 9.00 7.20 5.40 3.60 1.80 0.00
47 15.12 15.12 15.12 13.23 11.34 9.45 7.56 5.67 3.78 1.89 0.00
48 15.84 15.84 15.84 13.86 11.88 9.90 7.92 5.94 3.96 1.98 0.00
49 16.68 16.68 16.68 14.60 12.51 10.43 8.34 6.26 4.17 2.09 0.00
50 17.52 17.52 17.52 15.33 13.14 10.95 8.76 6.57 4.38 2.19 0.00
51 18.48 18.48 18.48 16.17 13.88 11.55 9.24 6.93 4.62 2.31 0.00
52 19.44 19.44 19.44 17.01 14.58 12.15 9.72 7.29 4.86 2.43 0.00
53 20.40 20.40 20.40 17.85 15.30 12.75 10.20 7.65 5.10 2.55 0.00
54 21.48 21.48 21.48 18.80 16.11 13.43 10.74 8.06 5.37 2.69 0.00
55 22.68 22.68 22.68 19.85 17.01 14.18 11.34 8.51 5.67 2.84 0.00
56 23.88 23.88 23.88 20.90 17.91 14.93 11.94 8.96 5.97 2.99 0.00
57 25.20 25.20 25.20 22.05 18.90 15.75 12.60 9.45 6.30 3.15 0.00
58 26.64 26.64 26.64 23.31 19.98 16.65 13.32 9.99 6.66 3.33 0.00
59 27.96 27.96 27.96 24.47 20.97 17.48 13.98 10.49 6.99 3.50 0.00
60 29.64 29.64 29.64 25.94 22.23 18.53 14.82 11.12 7.41 3.71 0.00
61 31.32 31.32 31.32 27.41 23.49 19.58 15.66 11.75 7.83 3.92 0.00
62 33.12 33.12 33.12 28.98 24.84 20.70 16.56 12.42 8.28 4.14 0.00
63 34.92 34.92 34.92 30.56 26.19 21.83 17.46 13.10 8.73 4.37 0.00
64 36.96 36.96 36.96 32.34 27.72 23.10 18.48 13.86 9.24 4.62 0.00
65 39.12 39.12 39.12 34.23 29.34 24.45 19.56 14.67 9.78 4.89 0.00
66 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
67 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
68 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
69 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
70 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
71 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
72 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
73 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
74 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
75 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
76 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
77 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
78 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
79 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
80 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
</TABLE>
Page 24
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrenered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE
AGE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
FEMALE 1 2 3 4 5 6 7 8 9 10 11
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 1.80 1.80 1.80 1.58 1.35 1.13 0.90 0.68 0.45 0.23 0.00
1 1.92 1.92 1.92 1.68 1.44 1.20 0.96 0.72 0.48 0.24 0.00
2 1.92 1.92 1.92 1.68 1.44 1.20 0.96 0.72 0.48 0.24 0.00
3 1.92 1.92 1.92 1.68 1.44 1.20 0.96 0.72 0.48 0.24 0.00
4 2.04 2.04 2.04 1.79 1.53 1.28 1.02 0.77 0.51 0.26 0.00
5 2.04 2.04 2.04 1.79 1.53 1.28 1.02 0.77 0.51 0.26 0.00
6 2.16 2.16 2.16 1.89 1.62 1.35 1.08 0.81 0.54 0.27 0.00
7 2.28 2.28 2.28 2.00 1.71 1.43 1.14 0.86 0.57 0.29 0.00
8 2.40 2.40 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 0.00
9 2.40 2.40 2.40 2.10 1.80 1.50 1.20 0.90 0.60 0.30 0.00
10 2.52 2.52 2.52 2.21 1.89 1.58 1.26 0.95 0.63 0.32 0.00
11 2.64 2.64 2.64 2.31 1.98 1.65 1.32 0.99 0.66 0.33 0.00
12 2.76 2.76 2.76 2.42 2.07 1.73 1.38 1.04 0.69 0.35 0.00
13 2.88 2.88 2.88 2.52 2.16 1.80 1.44 1.08 0.72 0.36 0.00
14 2.88 2.88 2.88 2.52 2.16 1.80 1.44 1.08 0.72 0.36 0.00
15 3.00 3.00 3.00 2.63 2.25 1.88 1.50 1.13 0.75 0.38 0.00
16 3.24 3.24 3.24 2.84 2.43 2.03 1.62 1.22 0.81 0.41 0.00
17 3.24 3.24 3.24 2.84 2.43 2.03 1.62 1.22 0.81 0.41 0.00
18 3.36 3.36 3.36 2.94 2.52 2.10 1.68 1.26 0.84 0.42 0.00
19 3.60 3.60 3.60 3.15 2.70 2.25 1.80 1.35 0.90 0.45 0.00
20 3.72 3.72 3.72 3.26 2.79 2.33 1.86 1.40 0.93 0.47 0.00
21 3.84 3.84 3.84 3.36 2.88 2.40 1.92 1.44 0.96 0.48 0.00
22 3.96 3.96 3.96 3.47 2.97 2.48 1.98 1.49 0.99 0.50 0.00
23 4.08 4.08 4.08 3.57 3.06 2.55 2.04 1.53 1.02 0.51 0.00
24 4.32 4.32 4.32 3.78 3.24 2.70 2.16 1.62 1.08 0.54 0.00
25 4.56 4.56 4.56 3.09 3.42 2.85 2.28 1.71 1.14 0.57 0.00
26 4.68 4.68 4.68 4.10 3.51 2.93 2.34 1.76 1.17 0.59 0.00
27 4.92 4.92 4.92 4.31 3.69 3.08 2.46 1.85 1.23 0.62 0.00
28 5.04 5.04 5.04 4.41 3.78 3.15 2.52 1.89 1.26 0.63 0.00
29 5.28 5.28 5.28 4.62 3.96 3.30 2.64 1.98 1.32 0.66 0.00
30 5.52 5.52 5.52 4.83 4.14 3.45 2.76 2.07 1.38 0.69 0.00
31 5.88 5.88 5.88 5.15 4.41 3.68 2.94 2.21 1.47 0.74 0.00
32 6.00 6.00 6.00 5.25 4.50 3.75 3.00 2.25 1.50 0.75 0.00
33 6.24 6.24 6.24 5.46 4.68 3.90 3.12 2.34 1.56 0.78 0.00
34 6.60 6.60 6.60 5.78 4.95 4.13 3.30 2.48 1.65 0.83 0.00
35 6.84 6.84 6.84 5.99 5.13 4.28 3.42 2.57 1.71 0.86 0.00
36 7.20 7.20 7.20 6.30 5.40 4.50 3.60 2.70 1.80 0.90 0.00
37 7.56 7.56 7.56 6.62 5.67 4.73 3.78 2.84 1.89 0.95 0.00
38 7.92 7.92 7.92 6.93 5.94 4.95 3.96 2.97 1.98 0.99 0.00
39 8.28 8.28 8.28 7.25 6.21 5.18 4.14 3.11 2.07 1.04 0.00
</TABLE>
Page 23
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrendered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE
AGE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
FEMALE 1 2 3 4 5 6 7 8 9 10 11
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 8.64 8.64 8.64 7.56 6.48 5.40 4.32 3.24 2.16 1.08 0.00
41 9.00 9.00 9.00 7.88 6.75 5.63 4.50 3.38 2.25 1.13 0.00
42 9.36 9.36 9.36 8.19 7.02 5.85 4.68 3.51 2.34 1.17 0.00
43 9.84 9.84 9.84 8.61 7.38 6.15 4.92 3.69 2.46 1.23 0.00
44 10.32 10.32 10.32 9.03 7.74 6.45 5.16 3.87 2.58 1.29 0.00
45 10.80 10.80 10.80 9.45 8.10 6.75 5.40 4.05 2.70 1.35 0.00
46 11.28 11.28 11.28 9.87 8.46 7.05 5.64 4.23 2.82 1.41 0.00
47 11.88 11.88 11.88 10.40 8.91 7.43 5.94 4.46 2.97 1.49 0.00
48 12.36 12.36 12.36 10.82 9.27 7.73 6.18 4.64 3.09 1.55 0.00
49 12.96 12.96 12.96 11.34 9.72 8.10 6.48 4.86 3.24 1.62 0.00
50 13.66 13.68 13.68 11.97 10.26 8.55 6.84 5.13 3.42 1.71 0.00
51 14.28 14.28 14.28 12.50 10.71 8.93 7.14 5.36 3.57 1.79 0.00
52 15.00 15.00 15.00 13.13 11.25 9.38 7.50 5.63 3.75 1.88 0.00
53 15.72 15.72 15.72 13.76 11.79 9.83 7.86 5.90 3.93 1.97 0.00
54 16.56 16.56 16.56 14.49 12.42 10.35 8.28 6.21 4.14 2.07 0.00
55 17.28 17.28 17.28 15.12 12.96 10.80 8.64 6.48 4.32 2.16 0.00
56 18.24 18.24 18.24 15.96 13.68 11.40 9.12 6.84 4.56 2.28 0.00
57 19.20 19.20 19.20 16.80 14.40 12.00 9.60 7.20 4.80 2.40 0.00
58 20.16 20.16 20.16 17.64 15.12 12.60 10.08 7.56 5.04 2.52 0.00
59 21.24 21.24 21.24 18.59 15.93 13.28 10.62 7.97 5.31 2.66 0.00
60 22.32 22.32 22.32 19.53 16.74 13.95 11.16 8.37 5.58 2.79 0.00
61 23.64 23.64 23.64 20.69 17.73 14.78 11.82 8.87 5.91 2.96 0.00
62 24.96 24.96 24.96 21.84 18.72 15.60 12.48 9.36 6.24 3.12 0.00
63 26.52 26.52 26.52 23.21 19.89 16.58 13.26 9.95 6.63 3.32 0.00
64 27.96 27.96 27.96 24.47 20.97 17.48 13.98 10.49 6.99 3.50 0.00
65 29.64 29.64 29.64 25.94 22.23 18.53 14.82 11.12 7.41 3.71 0.00
66 30.72 30.72 30.72 26.88 23.04 19.20 15.36 11.52 7.68 3.84 0.00
67 31.92 31.92 31.92 27.93 23.94 19.95 15.96 11.97 7.98 3.99 0.00
68 33.24 33.24 33.24 29.09 24.93 20.78 16.62 12.47 8.31 4.16 0.00
69 34.56 34.56 34.56 30.24 25.92 21.60 17.28 12.96 8.64 4.32 0.00
70 36.00 36.00 36.00 31.50 27.00 22.50 18.00 13.50 9.00 4.50 0.00
71 37.56 37.56 37.56 32.87 28.17 23.48 18.78 14.09 9.39 4.70 0.00
72 38.00 38.00 38.00 33.25 28.50 23.75 19.00 14.25 9.50 4.75 0.00
73 38.50 38.50 38.50 33.69 28.88 24.06 19.25 14.44 9.63 4.81 0.00
74 39.00 39.00 39.00 34.13 29.25 24.38 19.50 14.63 9.75 4.88 0.00
75 39.50 39.50 39.50 34.56 29.63 24.69 19.75 14.81 9.88 4.94 0.00
76 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
77 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
78 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
79 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
80 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
</TABLE>
Page 24
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrendered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
AGE 1 2 3 4 5 6 7 8 9 10 11
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 2.23 2.23 2.23 1.95 1.67 1.39 1.12 0.84 0.56 0.28 0.00
1 2.24 2.24 2.24 1.96 1.68 1.40 1.12 0.84 0.56 0.28 0.00
2 2.35 2.35 2.35 2.06 1.76 1.47 1.18 0.88 0.59 0.29 0.00
3 2.35 2.35 2.35 2.06 1.76 1.47 1.18 0.88 0.59 0.29 0.00
4 2.47 2.47 2.47 2.16 1.85 1.54 1.24 0.93 0.62 0.31 0.00
5 2.58 2.58 2.58 2.26 1.94 1.61 1.29 0.97 0.65 0.32 0.00
6 2.70 2.70 2.70 2.36 2.03 1.69 1.35 1.01 0.68 0.34 0.00
7 2.82 2.82 2.82 2.47 2.12 1.76 1.41 1.06 0.71 0.35 0.00
8 2.83 2.83 2.83 2.48 2.12 1.77 1.42 1.06 0.71 0.35 0.00
9 2.94 2.94 2.94 2.57 2.21 1.84 1.47 1.10 0.74 0.37 0.00
10 3.06 3.06 3.06 2.68 2.30 1.91 1.53 1.15 0.77 0.38 0.00
11 3.18 3.18 3.18 2.78 2.39 1.99 1.59 1.19 0.80 0.40 0.00
12 3.30 3.30 3.30 2.89 2.48 2.06 1.65 1.24 0.83 0.41 0.00
13 3.53 3.53 3.53 3.09 2.65 2.21 1.77 1.32 0.88 0.44 0.00
14 3.64 3.64 3.64 3.19 2.73 2.28 1.82 1.37 0.91 0.46 0.00
15 3.76 3.76 3.76 3.29 2.82 2.35 1.88 1.41 0.94 0.47 0.00
16 3.89 3.89 3.89 3.40 2.92 2.43 1.95 1.46 0.97 0.49 0.00
17 4.00 4.00 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
18 4.12 4.12 4.12 3.61 3.09 2.58 2.06 1.55 1.03 0.52 0.00
19 4.36 4.36 4.36 3.82 3.27 2.73 2.18 1.64 1.09 0.55 0.00
20 4.48 4.48 4.48 3.92 3.36 2.80 2.24 1.68 1.12 0.56 0.00
21 4.60 4.60 4.60 4.03 3.45 2.88 2.30 1.73 1.15 0.58 0.00
22 4.82 4.82 4.82 4.22 3.62 3.01 2.41 1.81 1.21 0.60 0.00
23 4.94 4.94 4.94 4.32 3.71 3.09 2.47 1.85 1.24 0.62 0.00
24 5.18 5.18 5.18 4.53 3.89 3.24 2.59 1.94 1.30 0.65 0.00
25 5.42 5.42 5.42 4.74 4.07 3.39 2.71 2.03 1.36 0.68 0.00
26 5.65 5.65 5.65 4.94 4.24 3.53 2.83 2.12 1.41 0.71 0.00
27 5.89 5.89 5.89 5.15 4.42 3.68 2.95 2.21 1.47 0.74 0.00
28 6.12 6.12 6.12 5.36 4.59 3.83 3.06 2.30 1.53 0.77 0.00
29 6.36 6.36 6.36 5.57 4.77 3.98 3.18 2.39 1.59 0.80 0.00
30 6.60 6.60 6.60 5.78 4.95 4.13 3.30 2.48 1.65 0.83 0.00
31 7.07 7.07 7.07 6.19 5.30 4.42 3.54 2.65 1.77 0.88 0.00
32 7.30 7.30 7.30 6.39 5.48 4.56 3.65 2.74 1.83 0.91 0.00
33 7.64 7.64 7.64 6.69 5.73 4.78 3.82 2.87 1.91 0.96 0.00
34 8.00 8.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
35 8.35 8.35 8.35 7.31 6.26 5.22 4.18 3.13 2.09 1.04 0.00
36 8.71 8.71 8.71 7.62 6.53 5.44 4.36 3.27 2.18 1.09 0.00
37 9.18 9.18 9.18 8.03 6.89 5.74 4.59 3.44 2.30 1.15 0.00
38 9.54 9.54 9.54 8.35 7.16 5.96 4.77 3.58 2.39 1.19 0.00
39 10.01 10.01 10.01 8.76 7.51 6.26 5.01 3.75 2.50 1.25 0.00
</TABLE>
Page 23
<PAGE>
TABLE OF SURRENDER CHARGES PER $1,000 OF SPECIFIED AMOUNT
The following charges apply to each $1,000 of Initial Specified Amount
surrendered during the first 10 policy years. The charges also apply to each
$1,000 of increase in Specified Amount surrendered during the first 10 years of
such increase. The word "surrender" as used in this provision means Full
Surrender, or a reduction in Specified Amount at the request of the Owner, or
due to a Partial Surrender. The charge for the surrender of all or any portion
of the Initial Specified Amount will be equal to the rate shown below for the
age at issue and the year of surrender, multiplied by the number of thousands of
Initial Specified Amount being surrendered. The charges for surrender of all or
any portion of an increase in Specified Amount will be equal to the rates shown
below for the age at issue of such increase and year of surrender, multiplied by
the number of thousands of such increase being surrendered. The maximum charge
for each partial surrender will be the lesser of 5% of the amount withdrawn or
$25.00.
<TABLE>
<CAPTION>
ISSUE YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
AGE 1 2 3 4 5 6 7 8 9 10 11
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 10.48 10.48 10.48 9.17 7.86 6.55 5.24 3.93 2.62 1.31 0.00
41 11.05 11.05 11.05 9.67 8.29 6.91 5.53 4.14 2.76 1.38 0.00
42 11.63 11.63 11.63 10.18 8.72 7.27 5.82 4.36 2.91 1.45 0.00
43 12.11 12.11 12.11 10.60 9.08 7.57 6.06 4.54 3.03 1.51 0.00
44 12.80 12.80 12.80 11.20 9.60 8.00 6.40 4.80 3.20 1.60 0.00
45 13.39 13.39 13.39 11.72 10.04 8.37 6.70 5.02 3.35 1.67 0.00
46 14.09 14.09 14.09 12.33 10.57 8.81 7.05 5.28 3.52 1.76 0.00
47 14.80 14.80 14.80 12.95 11.10 9.25 7.40 5.55 3.70 1.85 0.00
48 15.49 15.49 15.49 13.55 11.62 9.68 7.75 5.81 3.87 1.94 0.00
49 16.31 16.31 16.31 14.27 12.23 10.19 8.16 6.12 4.08 2.04 0.00
50 17.14 17.14 17.14 15.00 12.86 10.71 8.57 6.43 4.29 2.14 0.00
51 18.06 18.06 18.06 15.80 13.55 11.29 9.03 6.77 4.52 2.26 0.00
52 19.00 19.00 19.00 16.63 14.25 11.88 9.50 7.13 4.75 2.38 0.00
53 19.93 19.93 19.93 17.44 14.95 12.46 9.97 7.47 4.98 2.49 0.00
54 20.99 20.99 20.99 18.37 15.74 13.12 10.50 7.87 5.25 2.62 0.00
55 22.14 22.14 22.14 19.37 16.61 13.84 11.07 8.30 5.54 2.77 0.00
56 23.32 23.32 23.32 20.41 17.49 14.58 11.66 8.75 5.83 2.92 0.00
57 24.60 24.60 24.60 21.53 18.45 15.38 12.30 9.23 6.15 3.08 0.00
58 25.99 25.99 25.99 22.74 19.49 16.24 13.00 9.75 6.50 3.25 0.00
59 27.29 27.29 27.29 23.88 20.47 17.06 13.65 10.23 6.82 3.41 0.00
60 28.91 28.91 28.91 25.30 21.68 18.07 14.46 10.84 7.23 3.61 0.00
61 30.55 30.55 30.55 26.73 22.91 19.09 15.28 11.46 7.64 3.82 0.00
62 32.30 32.30 32.30 28.26 24.23 20.19 16.15 12.11 8.08 4.04 0.00
63 34.08 34.08 34.08 29.82 25.56 21.30 17.04 12.78 8.52 4.26 0.00
64 36.06 36.06 36.06 31.55 27.05 22.54 18.03 13.52 9.02 4.51 0.00
65 38.17 38.17 38.17 33.40 28.63 23.86 19.09 14.31 9.54 4.77 0.00
66 39.07 39.07 39.07 34.19 29.30 24.42 19.54 14.65 9.77 4.88 0.00
67 39.19 39.19 39.19 34.29 29.39 24.49 19.60 14.70 9.80 4.90 0.00
68 39.32 39.32 39.32 34.41 29.49 24.58 19.66 14.75 9.83 4.92 0.00
69 39.46 39.46 39.46 34.53 29.60 24.66 19.73 14.80 9.87 4.93 0.00
70 39.60 39.60 39.60 34.65 29.70 24.75 19.80 14.85 9.90 4.95 0.00
71 39.76 39.76 39.76 34.79 29.82 24.85 19.88 14.91 9.94 4.97 0.00
72 39.80 39.80 39.80 34.83 29.85 24.88 19.90 14.93 9.95 4.98 0.00
73 39.85 39.85 39.85 34.87 29.89 24.91 19.93 14.94 9.96 4.98 0.00
74 39.90 39.90 39.90 34.91 29.93 24.94 19.95 14.96 9.98 4.99 0.00
75 39.95 39.95 39.95 34.96 29.96 24.97 19.98 14.98 9.99 4.99 0.00
76 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
77 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
78 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
79 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
80 40.00 40.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
</TABLE>
Page 24
<PAGE>
THE UNITED STATES LIFE Insurance Company
In the City of New York
This is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. An Adjustable Death
Benefit is payable upon the Insured's death prior to the Maturity Date.
Investment results are reflected in policy benefits. ACCUMULATION VALUES and
CASH VALUES are flexible and will be based on the amount and frequency of
premiums paid and the investment results of the Separate Account.
NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS.
For Information, Service or to make a Complaint
Contact your Registered Representative, or our Administrative Center
THE UNITED STATES LIFE Insurance Company In the City of New York
P.O. Box 4880
Houston, Texas 77210-4880
1-800-251-3720
<PAGE>
Exhibit (8)(a)(ii)
AMENDMENT NUMBER 1 TO
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
THE UNITED STATES LIFE INSURANCE COMPANY IN THE
CITY OF NEW YORK, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 1 ("Amendment No. 1") executed as of the ___ day of
__________, 1999 to the Participation Agreement dated as of March 3, 1999, (the
"Agreement"), among Van Kampen Life Investment Trust (the "Fund"), Van Kampen
Funds Inc., Van Kampen Asset Management Inc., The United States Life Insurance
Company in the City of New York (the "Company"), and American General Securities
Incorporated.
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Company's Platinum
Investor Variable Life Insurance policies, Form No. 97600N ("Platinum Investor")
and (ii) solely to the extent the Agreement relates to the Platinum Investor,
amend the provisions of Article III of the Agreement as described below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule A to the Agreement, a revised copy of which is attached
hereto, is hereby amended to add the Platinum Investor.
2. Solely to the extent the Agreement relates to the Platinum
Investor, Article III of the Agreement is hereby deleted and replaced
with the following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
-----------------------------------------------
Statements; Voting
------------------
3.1. The Fund shall provide the Company with as many printed
copies of the Fund's current prospectus and statement of
additional information as the Company may reasonably request. If
requested by the Company in lieu of providing printed copies the
Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if
the prospectus and/or statement of additional information for the
Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one
document or separately. The Company may elect to print the Fund's
prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and
statements of additional information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and
distributing Fund prospectuses and statements of additional
information shall be the expense of the
<PAGE>
Company. For prospectuses and statements of additional
information provided by the Company to its existing owners of
Contracts in order to update disclosure as required by the 1933
Act and/or the 1940 Act, the cost of setting in type, printing
and distributing shall be borne by the Fund. If the Company
chooses to receive camera-ready film or computer diskettes in
lieu of receiving printed copies of the Fund's prospectus and/or
statement of additional information, the Fund shall bear the cost
of typesetting to provide the Fund's prospectus and/or statement
of additional information to the Company in the format in which
the Fund is accustomed to formatting prospectuses and statements
of additional information, respectively, and the Company shall
bear the expense of adjusting or changing the format to conform
with any of its prospectuses and/or statements of additional
information. In such event, the Fund will reimburse the Company
in an amount equal to the product of x and y where x is the
number of such prospectuses distributed to owners of the
Contracts, and y is the Fund's per unit cost of printing the
Fund's prospectuses. The same procedures shall be followed with
respect to the Fund's statement of additional information. The
Fund shall not pay any costs of typesetting, printing and
distributing the Fund's prospectus and/or statement of additional
information to prospective Contract owners.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and
other communications (except for prospectuses and statements of
additional information, which are covered in Section 3.2(a)
above) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners. The Fund
shall not pay any costs of distributing such proxy-related
material, reports to shareholders, and other communications to
prospective Contract owners.
3.2(c). The Company agrees to provide the Fund or its designee
with such information as may be reasonably requested by the Fund
to assure that the Fund's expenses do not include the cost of
typesetting, printing or distributing any of the foregoing
documents other than those actually distributed to existing
Contract owners.
3.2(d) The Fund shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make
payments to the Company or to the underwriter for the Contracts
if and in amounts agreed to by the Underwriter in writing.
3.2(e) All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by the
Fund under this Agreement shall be paid by the Fund. The Fund
shall see to it that all its shares are registered and authorized
for issuance in accordance with applicable federal law and, if
and to the extent deemed advisable by the Fund, in accordance
with applicable state laws prior to their sale. The Fund shall
bear the expenses for the cost of registration and qualification
of the Fund's shares.
3.3. The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or such
other person as the Fund may designate.
<PAGE>
3.4. If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to Contract
Owners to whom voting privileges are required to be extended and
shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the Securities and
Exchange Commission continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract
owners. The Company reserves the right to vote Fund shares held
in any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall follow the
procedures, and shall have the corresponding responsibilities,
for the handling of proxy and voting instruction solicitations,
as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate accounts
participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C,
which standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings (except insofar as the
Securities and Exchange Commission may interpret Section 16 not
to require such meetings) or comply with Section 16(c) of the
1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if
and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect
to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto."
3. Except as amended hereby, the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 3 as of
the date first written above.
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
on behalf of itself and each of its Accounts
named in Schedule A to the Agreement,
as amended from time to time
By: __________________________________
AMERICAN GENERAL SECURITIES INCORPORATED
By: __________________________________
F. Paul Kovach, Jr.
President
VAN KAMPEN LIFE INVESTMENT TRUST
By: __________________________________
Dennis J. McDonnell
President
VAN KAMPEN FUNDS INC.
By: __________________________________
Patrick J. Woelfel
First Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By: __________________________________
Dennis J. McDonnell
President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
Name of Separate Account and Form Numbers and Names of
Date Established by Board of Directors Contracts Funded by Separate Account
- -------------------------------------- -------------------------------------
The United States Life Insurance Company Contract Form Numbers:
in the City of New York ----------------------
Separate Account USL VA-R 98033N
Established: August 8, 1997
Name of Contract:
-----------------
Generations Combination Fixed and
Variable Deferred Annuity Certificate
The United States Life Insurance Company
in the City of New York
Separate Account USL VL-R Contract Form Numbers:
----------------------
Established: August 8, 1997 97600N
Name of Contract:
-----------------
Platinum InvestorFlexible Payment
Variable Life Insurance Policied
<PAGE>
Exhibit (8)(b)(ii)
AMENDMENT NUMBER 1 TO
PARTICIPATION AGREEMENT
AMONG MORGAN STANLEY UNIVERSAL FUNDS, INC.,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.,
MILLER ANDERSON & SHERRERD, LLP,
THE UNITED STATES LIFE INSURANCE COMPNAY
IN THE CITY OF NEW YORK, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 1 ("Amendment") executed as of ________________, 1999 to
the Participation Agreement (the "USL Agreement") dated as of December 1, 1998,
as amended, among Morgan Stanley Universal Funds, Inc. (the "Fund"), Van Kampen
Funds, Inc. ("VK Funds") (formerly Van Kampen American Capital Distributors,
Inc.), Morgan Stanley Dean Witter Investment Management Inc. ("MSDW Investment
Management") (formerly Morgan Stanley Asset Management Inc.), Miller Anderson &
Sherrerd, LLP ("MAS"), The United States Life Insurance Company in the City of
New York (the "Company"), and American General Securities Incorporated ("AGSI").
WHEREAS, the parties desire to amend the Agreement to (i) add to Schedule A
of the Agreement the Contracts of the Company relating to the Platinum Investor
Variable Life Insurance Policies ("Platinum Inverstor"), and (ii) solely to the
extent the Agreement relates to Platinum Inverstor, amend the provisions of
Article III of the Agreement as described below.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants herein contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Schedule B to the Agreement, a revised copy of which is attached hereto, is
hereby amended and restated to add Platinum Inverstor.
2. Solely to the extent the Agreement relates to Platinum Inverstor, Article
III of the Agreement is hereby deleted and replaced with the following:
"ARTICLE III. Prospectuses, Reports to Shareholders and Proxy
-----------------------------------------------
Statements; Voting
------------------
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of
additional information as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies
the
<PAGE>
Fund shall provide camera-ready film or computer diskettes
containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably
necessary in order for the Company once each year (or more
frequently if the prospectus and/or statement of additional
information for the Fund is amended during the year) to have
the prospectus for the Contracts and the Fund's prospectus
printed together in one document or separately. The Company
may elect to print the Fund's prospectus and/or its statement
of additional information in combination with other fund
companies' prospectuses and statements of additional
information.
3.2(a). Except as otherwise provided in this Section 3.2., all
expenses of preparing, setting in type and printing and
distributing Fund prospectuses and statements of additional
information shall be the expense of the Company. For
prospectuses and statements of additional information
provided by the Company to its existing owners of Contracts
who own shares of the Fund in order to update disclosure as
required by the 1933 Act and/or the 1940 Act, the cost of
setting in type, printing and distributing shall be borne by
the Fund. If the Company chooses to receive camera-ready film
or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus and/or statement of additional
information, the Fund shall bear the cost of typesetting to
provide the Fund's prospectus and/or statement of additional
information to the Company in the format in which the Fund is
accustomed to formatting prospectuses and statements of
additional information, respectively, and the Company shall
bear the expense of adjusting or changing the format to
conform with any of its prospectuses and/or statements of
additional information. In such event, the Fund will
reimburse the Company in an amount equal to the product of x
and y where x is the number of such prospectuses distributed
to Participants who own shares of the Fund, and y is the
Fund's per unit cost of printing the Fund's prospectuses. The
same procedures shall be followed with respect to the Fund's
statement of additional information. The Fund shall not pay
any costs of typesetting, printing and distributing the
Fund's prospectus and/or statement of additional information
to prospective Participants.
3.2(b). The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and
other communications (except for prospectuses and statements
of additional information, which are covered in Section
3.2(a) above) to shareholders in such quantity as the Company
shall reasonably require for distributing to Participants.
The Fund shall not pay any costs of distributing such proxy-
related material, reports to
<PAGE>
shareholders, and other communications to prospective
Participants.
3.2(c). The Company agrees to provide the Fund or its designee with
such information as may be reasonably requested by the Fund
to assure that the Fund's expenses do not include the cost of
typesetting, printing or distributing any of the foregoing
documents other than those actually distributed to existing
Participants.
3.2(d). The Fund shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1
to finance distribution expenses, then the Underwriter may
make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in
writing.
3.2(e). All expenses, including expenses to be borne by the Fund
pursuant to Section 3.2 hereof, incident to performance by
the Fund under this Agreement shall be paid by the Fund. The
Fund shall see to it that all its shares are registered and
authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund,
in accordance with applicable state laws prior to their sale.
The Fund shall bear the expenses for the cost of registration
and qualification of the Fund's shares.
3.3 The Fund's statement of additional information shall be
obtainable from the Fund, the Underwriter, the Company or
such other person as the Fund may designate.
3.4 If and to the extent required by law the Company shall
distribute all proxy material furnished by the Fund to
Contract Owners to whom voting privileges are required to be
extended and shall:
(i) solicit voting instructions from Contract owners:
(ii) vote the Fund shares in accordance with instructions
received from Contract owners: and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received, so long
as and to the extent that the Securities and Exchange
Commission continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners.
The Company reserves the right to vote Fund shares held in
any segregated asset account in its own right, to the extent
permitted by law. The Fund and the Company shall
<PAGE>
follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting
instruction solicitations, as set forth in Schedule C
attached hereto and incorporated herein by reference.
Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner
consistent with the standards set forth on Schedule C, which
standards will also be provided to the other Participating
Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund
will either provide for annual meetings (except insofar as
the Securities and Exchange Commission may interpret Section
16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts
described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with
respect thereto."
4. Except as amended hereby the Agreement is hereby ratified and
confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties hereto execute this Amendment No. 4 as of the
date first written above.
THE UNITED STATES LIFE INSURANCE COMPANY AMERICAN GENERAL SECURITIES
IN THE CITY OF NEW YORK INCORPORATED
on behalf of itself and each of its
Accounts named in Schedule B to the
Agreement, as amended from time to time
By:_____________________________________ By:________________________________
VAN KAMPEN FUNDS INC.
MORGAN STANLEY UNIVERSAL (formerly VAN KAMPEN AMERICAN
FUNDS, INC. CAPITAL DISTRIBUTORS, INC.)
By:_____________________________________ By:________________________________
MORGAN STANLEY DEAN WITTER INVESTMENT MILLER ANDERSON & SHERRERD, LLP
MANAGEMENT INC. (formerly MORGAN STANLEY
ASSET MANAGEMENT INC.)
By:_____________________________________ By:________________________________
<PAGE>
SCHEDULE B
----------
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
Name of Separate Account and Form Numbers and Names of
Date Established by Board of Directors Contracts Funded by Separate Account
- -------------------------------------- -------------------------------------
The United States Life Insurance Company Contract Form Numbers:
----------------------
in the City of New York
Separate Account USL VA-R 98033N
Established: August 8, 1997
Name of Contract:
-------------------------------------
Generations Combination Fixed and
Variable Deferred Annuity Certificate
The United States Life Insurance Company
in the City of New York
Separate Account USL VL-R Contract Form Numbers:
-------------------------------------
Established: August 8, 1997 97600N
Name of Contract:
-------------------------------------
Platinum InvestorFlexible Payment
Variable Life Insurance Policied
<PAGE>
Exhibit (8)(c)(i)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AMERICAN GENERAL SECURITES INCORPORATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
Section 1. Available Funds............................................... 4
1.1 Availability................................................ 4
1.2 Addition, Deletion or Modification of Funds................. 4
1.3 No Sales to the General Public.............................. 4
Section 2. Processing Transactions....................................... 5
2.1 Timely Pricing and Orders................................... 5
2.2 Timely Payments............................................. 5
2.3 Applicable Price............................................ 5
2.4 Dividends and Distributions................................. 6
2.5 Book Entry.................................................. 6
Section 3. Costs and Expenses............................................ 6
3.1 General..................................................... 6
3.2 Parties To Cooperate........................................ 6
Section 4. Legal Compliance.............................................. 7
4.1 Tax Laws.................................................... 7
4.2 Insurance and Certain Other Laws............................ 9
4.3 Securities Laws............................................. 9
4.4 Notice of Certain Proceedings and Other Circumstances....... 10
4.5 LIFE COMPANY To Provide Documents; Information About AVIF... 11
4.6 AVIF To Provide Documents; Information About LIFE COMPANY... 12
Section 5. Mixed and Shared Funding...................................... 13
5.1 General..................................................... 13
5.2 Disinterested Directors..................................... 14
5.3 Monitoring for Material Irreconcilable Conflicts............ 14
5.4 Conflict Remedies........................................... 15
5.5 Notice to LIFE COMPANY...................................... 16
5.6 Information Requested by Board of Directors................. 16
5.7 Compliance with SEC Rules................................... 16
5.8 Other Requirements.......................................... 16
Section 6. Termination................................................... 17
6.1 Events of Termination....................................... 17
6.2 Notice Requirement for Termination.......................... 18
6.3 Funds To Remain Available................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.4 Survival of Warranties and Indemnifications.............. 18
6.5 Continuance of Agreement for Certain Purposes............ 19
Section 7. Parties To Cooperate Respecting Termination................. 19
Section 8. Assignment.................................................. 19
Section 9. Notices..................................................... 19
Section 10. Voting Procedures........................................... 20
Section 11. Foreign Tax Credits......................................... 21
Section 12. Indemnification............................................. 21
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER.......... 21
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM.......... 23
12.3 Effect of Notice......................................... 25
12.4 Successors............................................... 26
Section 13. Applicable Law.............................................. 26
Section 14. Execution in Counterparts................................... 26
Section 15. Severability................................................ 26
Section 16. Rights Cumulative........................................... 26
Section 17. Headings.................................................... 26
Section 18. Confidentiality............................................. 26
Section 19. Trademarks and Fund Names................................... 27
Section 20. Parties to Cooperate........................................ 28
Schedule A.............................................................. 30
Schedule B.............................................................. 31
</TABLE>
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of August, 1999
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM")
The United States Life Insurance Company in the City of New York, a New York
life insurance company ("LIFE COMPANY"), 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 American General Securities Incorporated, an affiliate of LIFE COMPANY and
the principal underwriter of the Contracts ("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 fifteen separate series ("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 variable life insurance 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, LIFE COMPANY will be the issuer of certain variable annuity
contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto
may amend from time to time, which Contracts (hereinafter collectively, the
"Contracts"), if required by applicable law, will be registered under the 1933
Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which 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, LIFE COMPANY 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), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
3
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the Securities
Exchange Act of 1934 ("1934 Act") and a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD");
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 LIFE COMPANY 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 Contracts, 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.
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.
4
<PAGE>
Section 2. Processing Transactions
----------------------------------
2.1 Timely Pricing and Orders.
-------------------------
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 5:30 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, (ii) AVIF
calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for
business.
(b) LIFE COMPANY 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. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to provide the net asset value information by 6:00 p.m. Such additional time
shall be equal to the additional time that AVIF takes to make the net asset
values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY 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.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines) through no fault of LIFE
COMPANY, LIFE COMPANY, on behalf of the separate accounts, 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 LIFE COMPANY.
2.2 Timely Payments.
---------------
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF 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 LIFE COMPANY on the same day as the Order is placed, to the extent
practicable, but in any event within five (5) calendar days after the date the
order is placed in order to enable LIFE COMPANY 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 payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New
5
<PAGE>
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), LIFE COMPANY shall be
the designated agent of AVIF for receipt of orders relating to Contract
transactions on each Business Day and receipt by such designated agent, in
proper form, shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders by 9:00 a.m. Central Time on the next following Business
Day or such later time as computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY 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 by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY 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 LIFE COMPANY 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. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 Book Entry.
----------
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, 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, or arrange for others to 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.
6
<PAGE>
Section 4. Legal Compliance
---------------------------
4.1 Tax Laws.
--------
(a) AVIF represents and warrants that each Fund is currently qualified as
a regulated investment company ("RIC") under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and represents that it will use
its best efforts to qualify and to maintain qualification of each Fund as a RIC.
AVIF will notify LIFE COMPANY 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 use its best efforts to comply and to
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 LIFE COMPANY 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. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY 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:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) LIFE COMPANY 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;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in 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, however, that LIFE COMPANY will retain control of the
conduct of such conferences discussions, proceedings, contests
or appeals;
7
<PAGE>
(v) any written materials to be submitted by LIFE COMPANY 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 LIFE COMPANY to AVIF (together with
any supporting information or analysis); subject to the
confidentiality provisions of Section 18, at least ten (10)
business days or such shorter period to which the Parties
hereto agree prior to the day on which such proposed materials
are to be submitted, and (b) shall not be submitted by LIFE
COMPANY to any such person without the express written consent
of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to review
the relevant books and records of LIFE COMPANY) 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) LIFE COMPANY 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 LIFE COMPANY shall not be
required, after exhausting all administrative penalties, to
appeal any adverse judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel to the effect that a reasonable basis exists for taking
such appeal; and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY 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, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY 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 LIFE COMPANY have any 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
8
<PAGE>
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance contracts under the
provisions of Section 817 of the Code and the regulations thereunder and that it
will use its best efforts to maintain such treatment; LIFE COMPANY will notify
AVIF immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
(e) LIFE COMPANY 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. LIFE COMPANY will use its best efforts to continue to
meet such definitional 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 will use its best efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY 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 New York 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 New York Insurance Law and the
regulations thereunder, and (iii) the Contracts 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.
4.3 Securities Laws.
---------------
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts 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 New
York law, (iii) each Account is and will remain registered under the 1940 Act,
to the extent required by
9
<PAGE>
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 Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (vi) LIFE COMPANY will amend the registration statement for its
Contracts 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 Contracts
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 represents and warrants 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's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense 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.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule 12b-
1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
(a) AVIF will immediately notify LIFE COMPANY 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 that may affect the offering
10
<PAGE>
of Shares of AVIF, (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 Contracts issued or to be issued by LIFE
COMPANY. 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) LIFE COMPANY 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 respect to each Account's registration statement under the
1933 Act relating to the Contracts or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (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 Contracts,
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. LIFE COMPANY 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 LIFE COMPANY To Provide Documents; Information About AVIF.
---------------------------------------------------------
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) 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 Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least fifteen (15)
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 in writing 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 AIM as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to LIFE COMPANY in the manner required by
Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its 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 Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration
11
<PAGE>
statement and AVIF Prospectus may be amended from time to time; or (ii) in
reports or proxy materials for AVIF; or (iii) in published reports for AVIF that
are in the public domain and approved by AVIF for distribution; or (iv) in sales
literature or other promotional material approved by AVIF, except with the
express written permission of AVIF.
(d) LIFE COMPANY 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 Contracts (i.e., information that
is not intended for distribution to Participants) ("broker only materials") is
so used, and neither AVIF nor any of its affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF To Provide Documents; Information About LIFE COMPANY.
---------------------------------------------------------
(a) AVIF will provide to LIFE COMPANY at least one (1) 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 LIFE COMPANY a camera ready copy of all AVIF
prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF
statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may
be, to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least fifteen (15) 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 LIFE COMPANY or its designated agent
objects
12
<PAGE>
in writing 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. LIFE COMPANY 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 LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Contracts, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Contracts that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its respective affiliates that is intended for use only by brokers
or agents selling the Contracts (i.e., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
LIFE COMPANY, nor any of its respective affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g., on-
line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
------------------------
5.1 General.
-------
The SEC has granted an order to AVIF 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 annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, 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
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
13
<PAGE>
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract 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 forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (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 insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY 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;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
14
<PAGE>
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY 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 LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests 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, LIFE COMPANY 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 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 or all 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 LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY 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 (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY 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 LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
15
<PAGE>
(d) LIFE COMPANY 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 Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
----------------------
AVIF will promptly make known in writing to LIFE COMPANY 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.
-------------------------------------------
LIFE COMPANY 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 order granted by 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 and Participating Plans 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 Contracts, 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 Other Requirements.
------------------
16
<PAGE>
AVIF will require that each Participating Insurance Company and
Participating Plan 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.
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 any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY, or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, 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 LIFE COMPANY 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, LIFE
COMPANY 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 LIFE COMPANY, 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 Contracts issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
17
<PAGE>
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY 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 Contracts 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
Sections 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
Sections 6.1(b) or 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
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 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.
-------------------------
Notwithstanding any termination of this Agreement, AVIF will, at the option
of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 Survival of Warranties and Indemnifications.
-------------------------------------------
18
<PAGE>
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 LIFE COMPANY 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 Contracts in such Fund.
Section 8. Assignment
----------
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
-------
Notices and communications required or permitted by Section 9 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:
AIM Variable Insurance Funds, Inc.
A I M Distributors, Inc.
19
<PAGE>
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
The United States Life Insurance Company in the City of New York
c/o American General Independent Producers Division
2727-A Allen Parkway
Houston, Texas 77019
Facsimile: (713) 831-3071
Attn: Steven Glover, Esq.
American General Securities Incorporated
2929 Allen Parkway
Houston, Texas 77019
Facsimile: (713) 831-5931
Attn: Nori L. Gabert, Esq.
Section 10. Voting Procedures
-----------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY 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. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, 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, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY 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. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY 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 the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section
20
<PAGE>
16(a) with respect to periodic elections of directors and with whatever rules
the SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
-------------------
AVIF agrees to consult in advance with LIFE COMPANY 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 and AIM by LIFE COMPANY and UNDERWRITER.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM,
their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (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
LIFE COMPANY and UNDERWRITER) 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;
provided, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(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
Contracts, or sales literature or advertising for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to LIFE COMPANY or
UNDERWRITER by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or advertising or
otherwise for use in connection with the sale of Contracts 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
21
<PAGE>
therein by or on behalf of LIFE COMPANY, UNDERWRITER or their
respective affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of LIFE
COMPANY, UNDERWRITER or their respective affiliates or persons
under their control (including, without limitation, their
employees and "persons associated with a member," as that term
is defined in paragraph (q) of Article I of the NASD's By-Laws),
in connection with the sale or distribution of the Contracts 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, AIM or their
affiliates by or on behalf of LIFE COMPANY, 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 LIFE COMPANY or 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 LIFE COMPANY or UNDERWRITER in this Agreement or arise out of
or result from any other material breach of this Agreement by
LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE
COMPANY to qualify as annuity contracts or life insurance
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 LIFE COMPANY nor 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 or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY and 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
22
<PAGE>
on any designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of
any such action shall not relieve LIFE COMPANY and UNDERWRITER from any
liability which they 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, LIFE COMPANY and UNDERWRITER shall be entitled to participate, at their
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
LIFE COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or
UNDERWRITER's election to assume the defense thereof, the Indemnified Party will
cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and
expenses of any additional counsel retained by it, and neither LIFE COMPANY nor
UNDERWRITER will 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 LIFE COMPANY and UNDERWRITER by AVIF and AIM.
-----------------------------------------------
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(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) 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; provided, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(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 LIFE
COMPANY, UNDERWRITER or their respective affiliates for use in
AVIF's 1933 Act registration statement, AVIF Prospectus, or in
sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
23
<PAGE>
(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
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF,
AIM or their affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM or their affiliates or persons under their
control (including, without limitation, their employees and
"persons associated with a member" as that term is defined in
Section (q) of Article I of the NASD By-Laws), 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 Contracts, or any
amendment or supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading, if such statement or omission was made in
reliance upon and in conformity with information furnished to
LIFE COMPANY, UNDERWRITER or their respective affiliates by or
on behalf of AVIF or AIM for use in any Account's 1933 Act
registration statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
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 warranty made by
AVIF in this Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree 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, the written consent of AVIF
and/or AIM) 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 LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
24
<PAGE>
(c) Neither AVIF nor AIM shall 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 LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM 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 or AIM of any such action shall not relieve
AVIF or AIM 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 and/or AIM 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 (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM 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.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, 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 LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY 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 LIFE COMPANY or
any Participating Insurance Company to maintain its variable annuity or life
insurance contracts (with respect to which any Fund serves as an underlying
funding vehicle) as annuity contracts or life insurance contracts under
applicable provisions of the Code.
12.3 Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will
25
<PAGE>
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.
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.
Section 18. Confidentiality
---------------
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are
26
<PAGE>
the valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if
it comes into possession of any list or compilation of the identities of or
other information about the LIFE COMPANY Protected Parties' customers, or any
other information or property of the LIFE COMPANY Protected Parties, other than
such information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
Section 19. Trademarks and Fund Names
-------------------------
(a) Except as may otherwise be provided in a License Agreement among A I M
Management Group, Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY nor
UNDERWRITER or any of their respective affiliates, shall use any trademark,
trade name, service mark or logo of AVIF, AIM or any of their respective
affiliates, or any variation of any such trademark, trade name, service mark or
logo, without AVIF's or AIM's prior written consent, the granting of which shall
be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither
AVIF, its investment adviser, its principal underwriter, or any affiliates
thereof shall use any trademark, trade name, service mark or logo of LIFE
COMPANY or any of its affiliates, or any variation of any such trademark, trade
name, service mark or logo, without LIFE COMPANY's prior written consent, the
granting of which shall be at LIFE COMPANY's sole option.
27
<PAGE>
Section 20. Parties to Cooperate
--------------------
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
________________________________
28
<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.
Attest: __________________________ By: __________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: __________________________ By: __________________________
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK, on
behalf of itself and its separate
accounts
Attest: __________________________ By: __________________________
Name: __________________________ Name: __________________________
Title: __________________________ Title: __________________________
AMERICAN GENERAL SECURITIES INCORPORATED
Attest: __________________________ By: __________________________
Name: __________________________ Name: __________________________
Title: __________________________ Title: __________________________
29
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- -----------------------------------
. AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- -------------------------------------
. The United States Life Insurance Company in the City of New York
Separate Account USL VL-R
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- -----------------------------------------
. Platinum Investor Flexible Payment Variable Life Insurance Policies,
Form No. 97600N.
30
<PAGE>
Schedule B
EXPENSE ALLOCATIONS
- --------------------------------------------------------------------------------
LIFE COMPANY AVIF / AIM
- --------------------------------------------------------------------------------
preparing and filing the Account's preparing and filing the Fund's
registration statement registration statement
- --------------------------------------------------------------------------------
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
- --------------------------------------------------------------------------------
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Account) (Fund) and supplements (Fund)
- --------------------------------------------------------------------------------
printing Account and Fund prospectuses a camera ready Fund prospectus
and supplements
- --------------------------------------------------------------------------------
text composition and printing Account text composition and printing Fund
SAIs SAIs
- --------------------------------------------------------------------------------
mailing and distributing Account mailing and distributing Fund SAIs
SAIs to policy owners upon request by to policy owners upon request by
policy owners policy owners
- --------------------------------------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal Securities
Laws and to prospective purchasers
- --------------------------------------------------------------------------------
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
- --------------------------------------------------------------------------------
text composition, printing, mailing, text composition, printing,
distributing, and tabulation of proxy mailing, distributing and
statements and voting instruction tabulation of proxy statements and
solicitation materials to policy owners voting instruction solicitation
with respect to proxies related to materials to policy owners with
the Account respect to proxies related to the
Fund
- --------------------------------------------------------------------------------
preparation, printing and distributing
sales material and advertising relating
to the Funds, insofar as such materials
relate to the Contracts and filing such
materials with and obtaining approval
from, the SEC, the NASD, any state
insurance regulatory authority, and any
other appropriate regulatory authority,
to the extent required
- --------------------------------------------------------------------------------
31
<PAGE>
Exhibit (8)(c)(ii)
Agreement with respect to
Trademarks and Fund Names
-------------------------
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate
of AIM Variable Insurance Funds, Inc. ("AVIF") and A I M Distributors, Inc.
("AIM"), owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule A (the "AIM licensed marks" or the "licensor's
licensed marks"), as amended from time to time by written notice from AIM to The
United States Life Insurance Company in the City of New York ("Life Company")
and is authorized to use and to license other persons to use such marks. Life
Company and its affiliates are hereby granted a non-exclusive license to use the
AIM licensed marks in connection with Life Company's performance of the services
contemplated under the Participation Agreement among AVIF, AIM, Life Company and
American General Securities Incorporated (the "Participation Agreement") subject
to the terms and conditions set forth in this Agreement.
(b) The grant of license to Life Company and its affiliates (the
"licensee") shall terminate automatically upon termination of the Participation
Agreement pursuant to Section 6.1 thereof. Upon automatic termination, the
licensee shall cease to use the licensor's licensed marks, except that Life
Company shall have the right to continue to service any outstanding Contracts
bearing any of the AIM licensed marks. Upon AIM's elective termination of this
license, Life Company and its affiliates shall immediately cease to issue any
new annuity or life insurance contracts bearing any of the AIM licensed marks
and shall likewise cease any activity which suggests that it has any right under
any of the AIM licensed marks or that it has any association with AIM, except
that Life Company shall have the right to continue to service outstanding
Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the
licensor or AVIF for the public release by such licensee of any materials
bearing the licensor's licensed marks. Such approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to
the best of the knowledge of the licensee, the licensor's licensed marks are
valid and enforceable trademarks and/or service marks and that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (ii) agrees never to contend otherwise
in legal proceedings or in other circumstances; and (iii) acknowledges and
<PAGE>
agrees that the use of the licensor"s licensed marks pursuant to this grant of
license shall inure to the benefit of the licensor.
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.
A I M MANAGEMENT GROUP INC.
Attest: ___________________________ By: ________________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: ___________________________ By: ________________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
Attest: ___________________________ By: ________________________________
Name: _____________________________ Name: ______________________________
Title: ____________________________ Title: _____________________________
AMERICAN GENERAL SECURITES
INCORPORATED
Attest: ___________________________ By: ________________________________
Name: _____________________________ Name: ______________________________
Title: ____________________________ Title: _____________________________
SCHEDULE A
<PAGE>
. AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund
AIM V.I. Value Fund
. AIM and Design
[LOGO]
<PAGE>
Exhibit (8)(d)(i)
PARTICIPATION AGREEMENT
Among
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK,
AMERICAN GENERAL SECURITIES INCORPORATED,
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
and
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
DATED AS OF
JULY 1, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. Fund Shares.................................... 4
ARTICLE II. Representations and Warranties................. 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting................... 8
ARTICLE IV. Sales Material and Information................. 12
ARTICLE V. [Reserved]..................................... 13
ARTICLE VI. Diversification................................ 13
ARTICLE VII. Potential Conflicts............................ 13
ARTICLE VIII. Applicable Law................................. 15
ARTICLE IX. Termination.................................... 15
ARTICLE X. Notices........................................ 18
ARTICLE XI. Miscellaneous.................................. 18
SCHEDULE A Portfolios of American General Series Portfolio 21
Company Available for Purchase by
The United States Life Insurance Company in
The City of New York
SCHEDULE B Separate Accounts and Contracts................ 22
SCHEDULE C Proxy Voting Procedures........................ 23
</TABLE>
<PAGE>
THIS PARTICIPATION AGREEMENT, made and entered into as of the 1st day of July,
1999 by and among THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW
YORK (hereinafter the "Company"), a New York insurance company, on its own
behalf and on behalf of each separate account of the Company set forth on
Schedule B hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account"), AMERICAN GENERAL SECURITIES
INCORPORATED ("AGSI"), a Texas corporation, AMERICAN GENERAL SERIES PORTFOLIO
COMPANY (hereinafter the "Fund"), a Maryland corporation, and THE VARIABLE
ANNUITY LIFE INSURANCE COMPANY (the "Adviser"), a Texas corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Products are required to enter into a
participation agreement with the Fund and the Adviser (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on Schedule A
----------
(each such series hereinafter referred to as a "Portfolio"), as may be amended
from time to time by mutual agreement of the parties hereto, under this
Agreement to the Accounts of the Company; and
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940 (hereinafter the "1940 Act") and its
shares are registered under the Securities Act of 1933, as amended (hereinafter
the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, American General Distributors, Inc., (the "Underwriter") is registered
as a broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD") and serves as
principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable Insurance
Products under the 1933 Act; and
WHEREAS, the Variable Insurance Products issued by the Accounts are variable
annuity contracts or are variable life insurance policies relying on certain
exemptions from the 1930 Act pursuant to
<PAGE>
Rule 6e-3(T), and not Rule 6e-2, thereunder.
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution or under authority of the Board of Directors
of the Company, on the date shown for such Account on Schedule B hereto, to set
----------
aside and invest assets attributable to the aforesaid Variable Insurance
Product; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares in the Portfolios on behalf of each
Account to fund certain of the aforesaid Variable Insurance Products and the
Underwriter is authorized to sell such shares to each such Account at net asset
value; and
WHEREAS, AGSI serves as both the distributor and the principal underwriter of
the Variable Insurance Products that are set forth on Schedule B;
----------
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund, and the Adviser agree as follows:
ARTICLE I. Fund Shares
1.1. The Fund agrees to make available for purchase by the Company shares
of the Portfolios set forth on Schedule A and shall execute orders placed for
----------
each Account on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order as soon as reasonably
practical (normally by 10:00 a.m. Eastern time) on the next following Business
Day. Notwithstanding the foregoing, the Company shall use its best efforts to
provide the Fund with notice of such orders by 10:15 a.m. Eastern time on the
next following Business Day. "Business Day" shall mean any day on which the New
York Stock Exchange is open for trading and on which the Fund calculates the net
asset value pursuant to the rules of the SEC, as set forth in the Fund's
Prospectus and Statement of Additional Information. Notwithstanding the
foregoing, the Board of Directors of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the general
public.
4
<PAGE>
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with the
timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under which
amounts may be invested in the Fund, are listed on Schedule B attached hereto
and incorporated herein by reference, as such Schedule B may be amended from
time to time by mutual written agreement of all of the parties hereto. The
Company will give the Fund and the Adviser sixty (60) days written notice of its
intention to make available in the future, as a funding vehicle under the
Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem shares
of each Portfolio. Each order shall describe the net amount of shares and dollar
amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem a Portfolio's shares is made in accordance with the provision of
Section 1.4 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
securities or otherwise incur substantial additional costs, and if the Portfolio
has determined to settle redemption transactions for all shareholders on a
delayed basis, proceeds shall be wired to the Company within seven (7) days and
the Portfolio shall notify in writing the person designated by the Company as
the recipient for such notice of such delay by 3:00 p.m. Eastern time on the
same Business Day that the Company transmits the redemption order to the
Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to furnish same day notice by
7:00 p.m. Eastern time (by wire or telephone, followed by written confirmation)
to the
5
<PAGE>
Company of any dividends or capital gain distributions payable on the Fund's
shares. The Company hereby elects to receive all such dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Fund shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time. In the event that the Fund is unable to meet the 7:00
p.m. time stated immediately above, then the Fund shall provide the Company with
additional time to notify the Fund of purchase or redemption orders pursuant to
Sections 1.1 and 1.4, respectively, above. Such additional time shall be equal
to the additional time that the Fund takes to make the net asset values
available to the Company; provided, however, that notification must be made by
10:15 a.m. Eastern time on the Business Day such order is to be executed
regardless of when the net asset value is made available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Fund shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the Fund's policy on determining
materiality. The correction of any such errors shall be made at the Company
level and shall be made pursuant to the Fund's policy on determining
materiality. 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 the Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in all
material respects with all applicable federal and state laws and regulations.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under the insurance laws of the State of New York and
the regulations thereunder and has registered or, prior to any issuance or sale
of the Contracts, will register and will maintain the registration of each
Account as a unit investment trust in accordance with and to the extent required
by the provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for issuance
in accordance with the laws of the State of Maryland and sold in compliance with
all applicable federal and state securities laws and regulations and that the
Fund is and shall remain registered under the 1940 Act and the regulations
thereunder to the extent required by the 1940 Act. The Fund shall amend the
registration statement for its shares under the
6
<PAGE>
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the Adviser
(with respect to those Portfolios for which such Adviser acts as investment
adviser) will make every effort to maintain such qualification (under Subchapter
M or any successor or similar provision) and that the Fund [or the appropriate
Adviser] will notify the Company immediately upon having a reasonable basis for
believing that a Portfolio has ceased to so qualify or that a Portfolio might
not so qualify in the future.
2.4. The Company represents that each Account is and will continue to be a
"segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and that
the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
7
<PAGE>
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1(a) The Fund or its designee, at its option shall provide the Company
with as many printed copies of the Fund's current prospectus, including the
profile prospectus, (the "Fund Prospectus") as the Company may reasonably
request or in lieu of providing printed copies of the Fund Prospectus, the Fund
shall provide camera-ready film or computer diskettes containing the Fund
Prospectus and such other assistance as is reasonably necessary in order for the
Company once each year (or more frequently if the Fund Prospectus is materially
amended during the year) to have the prospectus for the Contracts (the "Contract
Prospectus") and the Fund Prospectus printed together in one document or
separately. The Company may elect to print the Fund Prospectus in combination
with other fund companies' prospectuses. For purposes hereof, any combined
prospectus including the Fund Prospectus along with the Contract Prospectus or
prospectus of other fund companies shall be referred to as a "Combined
Prospectus." For purposes hereof, the term "Fund Portion of the Combined
Prospectus" shall refer to the percentage of the number of Fund Prospectus pages
in the Combined Prospectus in relation to the total number of pages of the
Combined Prospectus.
3.1(b) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's current statement of additional information (the
"Fund SAI") as the Company may reasonably request or in lieu of providing
printed copies of the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the Fund SAI is materially amended during the year) to have the statement of
additional information for the Contracts (the "Contract SAI") and the Fund SAI
printed together or separately. The Company may also elect to print the Fund
SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's annual report and semi-annual report (collectively,
the "Fund Reports") as the Company may reasonably request or in lieu of
providing printed copies of the Fund Reports, the Fund shall provide camera-
ready film or computer diskettes containing the Fund's Reports, and such other
assistance as is reasonably necessary in order for the Company once each year to
have the annual report and semi-annual report for the Contracts (collectively,
the "Contract Reports") and the Fund Reports printed together or separately.
The Company may also elect to print the Fund Reports in combination with other
fund companies' annual reports and semi-annual reports. For purposes hereof,
any combined annual reports and semi-annual reports including the Fund Reports
along with the Contract Reports or annual reports and semi-annual reports of
other fund companies shall be referred to as "Combined Reports." For purposes
hereof, the term "Fund Portion of the Combined Reports" shall refer to the
percentage of the number of Fund Reports pages in the Combined Reports
8
<PAGE>
in relation to the total number or pages of the Combined Reports.
3.2 Expenses
--------
3.2(a) Expenses Borne by Company. Except as otherwise provided in this
-------------------------
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively, the
"Participants"), shall be the expense of the Company.
3.2(b) Expenses Borne by Fund
----------------------
Fund Prospectuses
-----------------
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of setting in type, printing and distributing the
Fund Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933 Act
and/or the 1940 Act. In such event, the Fund shall bear the cost of typesetting
to provide the Fund Prospectus to the Company in the format in which the Fund is
accustomed to formatting prospectus. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5) percent
what the Fund would have paid to print such documents. The Fund shall not pay
any costs of typesetting, printing and distributing the Fund Prospectus (or
Combined Prospectus, if applicable) to prospective Participants.
Fund SAIs, Fund Reports and Proxy Material
-------------------------------------------
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined SAI
or Combined Reports, the Fund shall pay the cost of setting in type and printing
the Fund Portion of the Combined SAI or Combined Reports, respectively, made
available by the Company to its existing Participants. In such event, the Fund
shall bear the cost of typesetting to provide the Fund SAI or Fund Reports to
the Company in the format in which the Fund is accustomed to formatting
statements of additional information and annual and semi-annual reports.
Notwithstanding the foregoing, in no event shall the Fund pay for any such costs
that exceed by more than five (5) percent what the Fund would have paid to print
such documents. The Fund shall pay one half the cost of distributing Fund SAIs,
Fund Reports and Fund proxy statements and proxy-related material to such
existing Participants. The Fund shall pay the cost of distributing the Fund
Portion of the Combined SAIs and the Fund Portion of the Combined Reports to
existing Participants. The Fund shall not pay any costs of distributing Fund
SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy statements or
proxy-related material to prospective Participants.
9
<PAGE>
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Participants.
The Fund shall pay no fee or other compensation to the Company under this
Agreement, except that if the Fund or any Portfolio adopts and implements a plan
pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter
may make payments to the Company or to AGSI if and in amounts agreed to by the
Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale.
3.2(c) Expenses Borne by AGSI.
----------------------
Fund Prospectuses
-----------------
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
Fund SAIs, Fund Reports and Proxy Material.
------------------------------------------
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as sales
literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear the
cost of typesetting to provide the Fund SAI and Fund Reports to the Company in
the format in which the Fund is accustomed to formatting statements of
additional information and annual and semi-annual reports. Notwithstanding the
foregoing, in no event shall AGSI pay for any such costs that exceed by more
than five (5) percent what AGSI would have paid to print such documents. AGSI
shall pay one half the cost of distributing Fund SAIs, Combined SAIs, Fund
Reports, Combined Reports, and Fund proxy material to such prospective
Participants as sales literature.
10
<PAGE>
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing the
Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or such
other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute all
proxy material furnished by the Fund to Participants to whom voting privileges
are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received from
Participants; and
(iii) vote Fund shares for which no instructions have been received in the
same proportion as Fund shares of such Portfolio for which
instructions have been received;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. The Fund and the Company shall
follow the procedures, and shall have the corresponding responsibilities, for
the handling of proxy and voting instruction solicitations, as set forth in
Schedule C attached hereto and incorporated herein by reference. Participating
Insurance Companies shall be responsible for ensuring that each of their
separate accounts participating in the Fund calculates voting privileges in a
manner consistent with the standards set forth on Schedule C, which standards
will also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section 16(c)
of the 1940 Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section 16(a) with
respect to periodic elections of directors and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least
11
<PAGE>
ten (10) Business Days prior to its use. No such material shall be used if the
Fund, the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the Company
or AGSI shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or the Fund Prospectus, as such registration statement or
Fund Prospectus may be amended or supplemented from time to time, or in reports
or proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee, except with the permission of the
Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public
12
<PAGE>
media), sales literature (i.e., any written communication distributed or made
----
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. [Reserved]
ARTICLE VI. Diversification
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event a Portfolio ceases to so qualify, the Adviser will
take all reasonable steps (a) to notify the Company of such breach and (b) to
adequately diversify the Portfolio so as to achieve compliance within the grace
period afforded by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
----
owners, or variable Contract owners of one or more
13
<PAGE>
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take remedial
action in the event of a Board determination of an irreconcilable material
conflict and the cost of such remedial action, and these responsibilities will
be carried out with a view only to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take
remedial action in the event of a Board determination of an irreconcilable
material conflict and the cost of such remedial action, and these
responsibilities will be carried out with a view only to the interests of
Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 or 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon them
by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies of a conflict, and determining whether any proposed action
adequately remedies a conflict, shall be properly recorded in the minutes of the
Board or other appropriate records, and such minutes or other records shall be
made available to the SEC upon request.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
14
<PAGE>
8.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts.
Reasonable advance notice of election to terminate shall be
furnished by the Company, said termination to be effective ten
(10) days after receipt of notice unless the Fund makes available
a sufficient number of shares to reasonably meet the requirements
of the Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
medium of the Contracts issued or to be issued by the Company.
The terminating party shall give prompt notice to the other
parties of its decision to terminate; or
(d) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor or
similar provision, or if the Company or AGSI reasonably believes
that the Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written notice
to the Company if the Adviser or the Fund shall determine, in
its sole judgment exercised in good faith, that the Company, AGSI
and/or their affiliated companies has suffered a material adverse
change in its business, operations,
15
<PAGE>
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity, provided that
the Fund or the Adviser will give the Company sixty (60) days'
advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company or AGSI and any
other changes in circumstances since the giving of such notice,
the determination of the Fund or the Adviser shall continue to
apply on the 60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the Fund
and the Adviser, if the Company or AGSI shall determine, in its
sole judgment exercised in good faith, that either the Fund or
the Adviser (with respect to the appropriate Portfolio) has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement
or is the subject of material adverse publicity; provided that
the Company will give the Fund or the Adviser sixty (60) days'
advance written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any other
changes in circumstances since the giving of such notice, the
determination of the Company or AGSIC shall continue to apply on
the 60th day since giving of such notice, then such 60th day
shall be the effective date of termination; or
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the
written notice specified in Section 2.4 hereof and at the time
such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1(h)
shall be effective sixty (60) days after the notice specified in
Section 2.4 was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice
of such breach is delivered to the Fund or the Company, as the
case may be; or
(j) termination by the Fund or the Adviser by written notice to the
Company in the event an Account or Contract is not registered or
sold in accordance with applicable federal or state law or
regulation, or the Company fails to provide pass-through voting
privileges as specified in Section 3.4.
9.2. Notwithstanding any termination of this Agreement, the Fund shall at
the option of the Company, continue to make available additional shares of the
Fund pursuant to the terms and
16
<PAGE>
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.2 shall not apply to
any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
9.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Adviser) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Adviser 90
days prior written notice of its intention to do so.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund: American General Series Portfolio Company
2929 Allen Parkway,
Houston, Texas 77019
Attention: Nori L. Gabert, Esq.
If to Adviser: The Variable Annuity Life Insurance Company
2929 Allen Parkway
Houston, Texas 77019
Attention: Cynthia A. Toles, Esq.
If to the Company: The United States Life Insurance Company
in the City of New York
125 Maiden Lane
New York, NY 10038-4992
17
<PAGE>
Attention: Jane K. Rushton, Esq.
If AGSI: American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77109
Attention: F. Paul Kovach
ARTICLE XI. Miscellaneous
11.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
11.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
18
<PAGE>
11.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) The Company's annual statement (prepared under statutory accounting
principles) and annual report (prepared under generally accepted
accounting principles ("GAAP"), if any), as soon as practical and in
any event within 90 days after the end of each fiscal year;
(b) The Company's June 30th quarterly statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 45 days after the
end of each semi-annual period:
(c) Any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) Any registration statement (without exhibits) and financial reports of
the Company filed with the SEC or any state insurance regulator, as
soon as practical after the filing thereof;
(e) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company, as soon as practical after
the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative
hereto as of the date specified above.
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF, on behalf of
itself and each of its Accounts named in Schedule B hereto, as amended from
----------
time to time.
By: ___________________________________
Name:
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By: ___________________________________
Name:
19
<PAGE>
Title:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: ____________________________________
Name:
Title:
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By: ____________________________________
Name:
Title:
20
<PAGE>
SCHEDULE A
----------
PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AVAILABLE FOR PURCHASE BY
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
UNDER THIS AGREEMENT
Fund Name Separate Account
- --------- ----------------
Money Market Fund The United States Life Insurance Company
the City of New York
Separate Account USL VA-R
Established: August 8, 1997
21
<PAGE>
SCHEDULE B
----------
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
Name of Separate Account and Form Numbers and Names of Contract
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- --------------------------
Form No:
-------
The United States Life Insurance 98505N
Company in the City of New York
Separate Account USL VA-R
Established: August 8, 1997 Name of Contract:
----------------
Select Reserve(SM) Flexible Payment
Variable and Fixed Individual Deferred
Annuity
22
<PAGE>
SCHEDULE C
----------
PROXY VOTING PROCEDURES
-----------------------
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as possible
before the date set by the Fund for the shareholder meeting to enable the
Company to consider and prepare for the solicitation of voting instructions
from owners of the Contracts and to facilitate the establishment of
tabulation procedures. At this time the Fund will inform the Company of the
Record, Mailing and Meeting dates. This will be done verbally approximately
two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contract owner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call in
the number of Customers to the Fund , as soon as possible, but no later than
two weeks after the Record Date.
3. Assuming that the Fund has called an annual meeting, then in that event the
Fund's Annual Report must be sent to each Customer by the Company either
before or together with the Customers' receipt of a proxy statement or other
voting instructions and solicitation material. The Fund will provide at
least one copy of the last Annual Report to the Company pursuant to the terms
of Section 3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately 2-
4 business days for printing information on the Cards. Information commonly
found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as
23
<PAGE>
printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices and
statements will be sent to Company for insertion into envelopes (envelopes
and return envelopes are provided and paid for by the Company). Contents of
envelope sent to Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company or
its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible and
that their vote is important. One copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved in
advance by the Fund.
6. The proxy notice and statement as provided by the Fund should be received by
the Company approximately 3-5 business days before mail date. Individual in
charge at Company reviews and approves the contents of the mailing package to
ensure correctness and completeness. Copy of this approval should be sent to
the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but not including,) the meeting,
---
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place in
another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
--- --------
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) The Fund must review
------
and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the final vote. The Fund
will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
<PAGE>
Exhibit (8)(d)(ii)
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
AMONG
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK,
AMERICAN GENERAL SECURITIES INCORPORATED,
AMERICAN GENERAL SERIES PORTFOLIO COMPANY AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of
_______________, 1999, amends the Participation Agreement dated as of July 1,
1999 (the "Agreement"), among THE UNITED STATES LIFE INSURANCE COMPANY IN THE
CITY OF NEW YORK (the "Company"), on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B of the Agreement (the
----------
"Account"), AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), AMERICAN GENERAL
SERIES PORTFOLIO COMPANY (the "Fund"), and THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY (the "Adviser"), collectively, the "Parties." All capitalized terms not
otherwise defined in this Amendment, shall have the same meaning as ascribed in
the Agreement.
WHEREAS, from time to time, the Company will offer new Variable Insurance
Products and new Separate Accounts set forth on Schedule B of the Agreement
which are not covered under the Agreement, but for which the Fund, through the
Portfolios set forth on Schedule A of the Agreement will act as an investment
vehicle for the Company's Accounts; and
WHEREAS, the Company and the Adviser have reached an agreement to provide for
the reimbursement to the Company by the Adviser of certain of the administrative
costs and expenses incurred by the Company in connection with the servicing of
owners of Contracts covered under the Agreement, who have allocated Contract
values to a Portfolio, including, but not limited to, responding by the Company
to various Contract owner inquiries regarding a Portfolio, and record keeping
relating thereto; and
WHEREAS, the parties now desire to amend the Agreement to reflect, among other
things, (i) the new Variable Insurance Product for which the Fund will act as an
investment vehicle for the Accounts, (ii) the additional Accounts and Portfolios
of the Fund, which will act as investment vehicles for such Accounts, and (iii)
the agreement of the Parties with respect to the Adviser's reimbursement to the
Company of certain of the Company's administrative costs and expenses;
NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as
follows:
1. Schedule B to the Agreement, a revised copy of which is attached hereto, is
----------
hereby amended to add the Platinum Investor Variable Life Insurance Policy.
<PAGE>
2. Schedule A to the Agreement, a revised copy of which is attached hereto, is
----------
hereby amended to add additional Portfolios of the Fund to be offered through
the Company's Separate Accounts.
3. The Parties acknowledge that from time to time the Company will introduce
new Variable Insurance Products for which the Fund will act as an investment
vehicle for certain of the Company's Accounts. In this regard, the Parties
agree that the Company may, upon written notice to the other Parties, add
such new Variable Insurance Products and Separate Accounts of the Company to
Schedule B of the Agreement, and thereby amend Schedule B of the Agreement.
---------- ----------
4. The following new 3.2(e) paragraph is added to the Agreement:
"3.2. Expenses.
--------
. . . .
(e) Certain Administrative Expenses of the Company. The Adviser will
----------------------------------------------
reimburse the Company on a calendar quarterly basis, for certain of
the administrative costs and expenses incurred by the Company as a
result of operations necessitated by the beneficial ownership of
shares of the Portfolios of the Fund by owners of those Contracts
which are subject to such reimbursement as indicated on Schedule B
----------
hereto. Such reimbursement shall be in an amount equal to fifteen
(15) basis points per annum of the net assets of the Funds
attributable to such Contracts. The determination of applicable
assets shall be made by averaging assets in applicable Portfolios of
the Fund as of the last Business Day of each calendar month falling
within the applicable calendar quarter. In no event shall such fee be
paid by the Fund, its shareholders or by any Contract owner.
5. Except as amended hereby, the Agreement is hereby ratified and confirmed in
all respects.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative
hereto as of the date specified above.
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, on behalf of
itself and each of its Accounts named in Schedule B hereto, as amended from
----------
time to time.
By: ___________________________________
Name:
Title:
AMERICAN GENERAL SECURITIES INCORPORATED
By: ___________________________________
Name:
Title:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: ___________________________________
Name:
Title:
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By: ___________________________________
Name:
Title:
<PAGE>
SCHEDULE A
----------
(As of _________________, 1999)
PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AVAILABLE FOR PURCHASE BY
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
UNDER THIS AGREEMENT
Fund Name Separate Account
- --------- ----------------
Money Market Fund The United State Life Insurance Company
In the City of New York
Separate Account USL VA-R
Established: August 8, 1997
Money Market Fund The United States Life Insurance Company
MidCap Index Fund In the City of New York
International Equities Fund Separate Account USL VL-R
Stock Index Fund Established: August 8, 1997
<PAGE>
SCHEDULE B
----------
SEPARATE ACCOUNTS AND CONTRACTS+
-------------------------------
(As of ___________________, 1999)
<TABLE>
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
- -------------------------------------- ----------------
<S> <C>
The United States Life Insurance Company in Form No:
-------
The City of New York 98505N
Separate Account USL VA-R
Established: August 8, 1997 Name of Contract:
----------------
Select Reserve(SM) Flexible Payment Variable and Fixed
Individual Deferred Annuity
The United States Life Insurance Company in Form No:
-------
The City of New York 97600N
Separate Account USL VL-R
Established: August 8, 1997 Name of Contract:
----------------
Platinum Investor Flexible Payment Variable Life
Insurance Policies
</TABLE>
+The parties hereto agree that this Schedule B may be revised and replaced as
----------
necessary to accurately reflect the Separate Accounts and Contracts covered
under this Agreement.
<PAGE>
Exhibit (8)(e)
FUND PARTICIPATION AGREEMENT
----------------------------
THIS AGREEMENT, made and entered into this ____ day of ____ 199_, by and
among DREYFUS VARIABLE INVESTMENT FUND, a ____________________ corporation (the
"Fund"), THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a
New York corporation (the "Company") on its own behalf and on behalf of each of
the segregated asset accounts of the Company set forth in Schedule A hereto, as
may be amended from time to time (the "Accounts"), and the Fund's underwriter
__________________________________________, a Delaware corporation
("Underwriter").
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and its
shares are registered or will be registered under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Fund are divided into several
series of shares, each representing the interests in a particular managed pool
of securities and other assets;
WHEREAS, the series of shares of the Fund offered by the Fund to the Company
and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, THE UNDERWRITER is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities law, and is the Fund's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable life
insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment Funds under the 1940 Act (unless exempt therefrom);
WHEREAS, Underwriter is registered as a broker-dealer with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD");
<PAGE>
WHEREAS, American General Securities Incorporated ("AGSI"), the Underwriter
for the individual variable annuity and the variable life policies, is
registered as a broker-dealer with the SEC under the 1934 Act and is a member in
good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Fund intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Fund, the
Underwriter, and the Company agree as follows:
ARTICLE I. SALE OF FUND SHARES
-------------------
1.1. The Fund agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Fund or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Fund for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Fund; provided
--------
that the Fund receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on
which the New York Stock Exchange, Inc. (the "NYSE") is open for trading
and on which the Fund calculates its net asset value pursuant to the rules
of the SEC.
1.2. The Fund agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the SEC and the Fund shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Fundees of the Fund (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that the Shares will be sold only
to insurance companies which have entered into participation agreements
with the Fund and the Underwriter (the "Participating Insurance Companies")
and their separate accounts, qualified pension and retirement plans and the
Underwriter or its affiliates. The Fund and the Underwriter will not sell
Fund shares to any insurance company or separate account unless an
agreement containing provisions substantially the same as Articles III and
VII of this Agreement is in effect to govern such sales. The Company will
not resell the Shares except to the Fund or its agents.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the request for redemption. For purposes of this Section 1.4,
the Company shall be the designee of the Fund for receipt of requests for
redemption from Policy owners and
-2-
<PAGE>
receipt by such designee shall constitute receipt by the Fund; provided
that the Fund receives notice of such request for redemption by 9:30 a.m.
New York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Fund, the Company
and the Fund shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Fund shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts. The
Shares ordered from the Fund will be recorded in an appropriate title for
the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Fund shall furnish same day notice (by wire or telephone followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Fund shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
1.9. The Fund or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Fund is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Fund takes
to make the net asset value available to the Company. If the Fund provides
materially incorrect share net asset value information, the Fund shall make
an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
--------------------------------------------------
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and
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<PAGE>
has registered or, prior to any issuance or sale of the Policies, will
register the Accounts as unit investment Funds in accordance with the
provisions of the 1940 Act (unless exempt therefrom) to serve as segregated
investment accounts for the Policies, and that it will maintain such
registration for so long as any Policies are outstanding. The Company shall
amend the registration statements under the 1933 Act for the Policies and
the registration statements under the 1940 Act for the Accounts from time
to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company
shall register and qualify the Policies for sales in accordance with the
securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Fund or the Underwriter immediately upon having a
reasonable basis for believing that the Policies have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that AGSI, the Underwriter for
the individual variable annuity and the variable life policies, is a member
in good standing of the NASD and is a registered broker-dealer with the
SEC. The Company represents and warrants that the Company and AGSI will
sell and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Fund and the Underwriter represent and warrant that the Shares
sold pursuant to this Agreement shall be registered under the 1933 Act,
duly authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Fund is and shall remain registered under the
1940 Act. The Fund shall amend the registration statement for its Shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its Shares. The Fund shall register
and qualify the Shares for sale in accordance with the laws of the various
states only if and to the extent deemed necessary by the Fund.
2.5. the Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter will sell and distribute the Shares in accordance in all
material respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Fund represents that it is lawfully organized and validly
existing under the laws of ________________________________and that it does
and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. the Underwriter represents and warrants that it is and shall remain
duly registered under all applicable federal securities laws and that it
shall perform its obligations for the Fund in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of ________________________________ the Underwriter
represents and warrants that it is not subject to state securities laws
other than the securities laws of ______________________________________and
that it is exempt from registration as an investment adviser under the
securities laws of _______________________________________.
-4-
<PAGE>
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
---------------------------------------
3.1. At least annually, the Fund or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Fund or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by
the Company in lieu thereof, the Fund or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Fund or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Fund or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
--------
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Fund or its designee provides the Fund's prospectus in a "camera ready" or
diskette format, the Fund shall be responsible for providing the prospectus
in the format in which it or the Underwriter is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense
----
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Fund or its
designee. The Fund or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Fund or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Fund or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Fund's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
-5-
<PAGE>
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Fund hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order.
The Fund and the Underwriter will notify the Company of any changes of
interpretations or amendments to the Mixed and Shared Funding Exemptive
Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
-------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, the Underwriter, any other investment adviser
to the Fund, or any affiliate of the Underwriter are named, at least three
(3) Business Days prior to its use. No such material shall be used if the
Fund, the Underwriter, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Fund, the Underwriter, any
other investment adviser to the Fund, or any affiliate of the Underwriter
or concerning the Fund or any other such entity in connection with the sale
of the Policies other than the information or representations contained in
the registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus and
statement of additional information may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund, the
Underwriter or their respective designees, except with the
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<PAGE>
permission of the Fund, the Underwriter or their respective designees. The
Fund, the Underwriter or their respective designees each agrees to respond
to any request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
information concerning the Fund, the Underwriter or any of their affiliates
which is intended for use only by brokers or agents selling the Policies
(i.e., information that is not intended for distribution to Policy owners
----
or prospective Policy owners) is so used, and neither the Fund, the
Underwriter nor any of their affiliates shall be liable for any losses,
damages or expenses relating to the improper use of such broker only
materials.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give, and agree that any
information or make any representations on behalf of the Company or
concerning the Company, the Accounts, or the Policies in connection with
the sale of the Policies other than the information or representations
contained in a registration statement, prospectus, or statement of
additional information for the Policies, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports for the Accounts, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company. The Company or its
designee agrees to respond to any request for approval on a prompt and
timely basis. The parties hereto agree that this Section 4.4. is neither
intended to designate nor otherwise imply that the Underwriter is an
underwriter or distributor of the Policies.
4.5. The Company and the Fund (or its designee in lieu of the Company or
the Fund, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Fund or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Fund shall also each promptly inform the other of the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Fund or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Fund and the Underwriter will provide the Company with as much
notice as is reasonably practicable of any proxy solicitation for any
Portfolio, and of any material change in the Fund's registration statement,
particularly any change resulting in change to the registration statement
or prospectus or statement of additional information for any Account. The
Fund and the Underwriter will cooperate with the Company so as to enable
the Company to solicit proxies from Policy owners or to make changes to its
prospectus, statement of additional information or registration statement,
in an orderly manner. The Fund and the Underwriter will make reasonable
efforts to attempt to have changes affecting Policy prospectuses become
effective simultaneously with the annual updates for such prospectuses.
-7-
<PAGE>
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
-----------------
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Fund, except that if the Fund or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and
Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Fund may make payments to the
Company or to the Underwriter for the Policies if and in amounts agreed to
by the Fund in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof, reimburse
other parties for expenses initially paid by one party but allocated to
another party. In addition, nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Fund and/or to the
Accounts.
5.2. The Fund or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Fund's registration
statement, and payment of filing fees and registration fees; preparation
and filing of the Fund's proxy materials and reports to Shareholders;
setting in type and printing its prospectus and statement of additional
information (to the extent provided by and as determined in accordance with
Article III above); setting in type and printing the proxy materials and
reports to Shareholders (to the extent provided by and as determined in
accordance with Article III above); the preparation of all statements and
notices required of the Fund by any federal or state law with respect to
its Shares; all taxes on the issuance or transfer of the Shares; and the
costs of distributing the Fund's prospectuses and proxy materials to owners
of Policies funded by the Shares and any expenses permitted to be paid or
assumed by the Fund pursuant to a plan, if any, under Rule 12b-1 under the
1940 Act. The Fund shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Fund's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
---------------------------------------
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<PAGE>
6.1. The Fund and the Underwriter represent and warrant that each
Portfolio of the Fund will meet the diversification requirements of Section
817 (h) (1) of the Code and Treas. Reg. 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life
insurance contracts, as they may be amended from time to time (and any
revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these sections),
as if those requirements applied directly to each such Portfolio.
6.2. The Fund and the Underwriter represent that each Portfolio will elect
to be qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M or
any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
----------------------------
7.1. The Fund agrees that the Board, constituted with a majority of
disinterested Fundees, will monitor each Portfolio of the Fund for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Fund. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested Fundees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Fund's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are
disregarded. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Fund or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested Fundees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Fund each of the
Accounts designated by the disinterested Fundees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided,
--------
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<PAGE>
however, that such withdrawal and termination shall be limited to the
-------
extent required to remedy any such material irreconcilable conflict as
determined by a majority of the disinterested Fundees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
---------------
8.1. Indemnification by the Company
------------------------------
The Company agrees to indemnify and hold harmless the Fund, the
Underwirter, any affiliates of the Underwirter, and each of their
respective directors/Fundees, officers and each person, if any, who
controls the Fund or the Underwirter within the meaning of Section 15 of
the 1933 Act, and any agents or employees of the foregoing (each an
"Indemnified Party," or collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent
of the Company) or expenses (including reasonable counsel fees) to which
any Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the 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 reasonable
reliance upon and in conformity with information furnished to
the Company or its designee by or on behalf of the Fund or the
Underwirter for use in the registration statement, prospectus or
statement of additional information for the Policies or in the
Policies or sales literature or other promotional material (or
any amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of
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<PAGE>
additional information or sales literature or other promotional
material of the Fund not supplied by the Company or its
designee, or persons under its control and on which the Company
has reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Fund, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Fund
---------------------------
The Fund agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement therein
not misleading, provided that this agreement to indemnify shall
--------
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reasonable reliance upon and in conformity with information
furnished to the Fund, the Underwriter or their respective
designees by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature or other
-11-
<PAGE>
promotional material for the Fund (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
for the Policies not supplied by the Fund, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Fund or persons under its
control, with respect to the sale or distribution of the
Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this
Agreement by the Fund; or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Fund be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment Fund under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company or
any Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
-12-
<PAGE>
8.4. Neither the Company nor the Fund shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party will,
if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any Indemnified Party
otherwise than under this section. In case any such action is brought
against any Indemnified Party, and it notified the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party. After notice
from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional
counsel obtained by it, and the indemnifying party shall not be liable to
such Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, Fundees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
-13-
<PAGE>
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
----------------------------
The Fund, the Underwirter, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
-----------
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article VI
hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or 6e-
3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause shall
be furnished to the Fund by the Company; or
(c) at the option of the Fund or the Underwirter upon institution
of formal proceedings against the Company by the NASD, the SEC,
or any insurance department or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Policies, the operation of the Accounts, or
the purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Fund's or THE UNDERWRITER' duties under this
Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Fund or the Underwirter upon
receipt of any necessary regulatory approvals and/or the vote
of the Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio Shares
had been selected to serve as the underlying investment media.
The Company will give thirty (30) days' prior written notice to
the Fund of the Date of any proposed vote or other action taken
to replace the Shares; or
-14-
<PAGE>
(f) termination by either the Fund or the Underwirter by written
notice to the Company, if either one or both of the Fund or the
Underwirter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company has suffered
a material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwirter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund or the
Underwirter has suffered a material adverse change in this
business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material
adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem the Shares attributable to the Policies (as
opposed to the Shares attributable to the Company's assets held in the
Accounts), and the Company shall not prevent Policy owners from allocating
payments to a Portfolio that was otherwise available under the Policies,
until thirty (30) days after the Company shall have notified the Fund of
its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Fund and the
Underwirter shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and conditions of
this Agreement, for all Policies in effect on the effective date of
termination of this Agreement (the "Existing Policies"), except as
otherwise provided under Article VII of this Agreement. Specifically,
without limitation, the owners of the Existing Policies shall be permitted
to transfer or reallocate investment under the Policies, redeem investments
in any Portfolio and/or invest in the Fund upon the making of additional
purchase payments under the Existing Policies.
-15-
<PAGE>
ARTICLE XII. NOTICES
-------
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund:
Name
Address
City, State, Zip
Facsimile No.:_______________
Attention: _____________
If to the Company:
Name
Address
City, State, Zip
Facsimile No.:_______________
Attention: _____________
If to The Underwriter:
Name
Address
City, State, Zip
Facsimile No.:_______________
Attention: _____________
ARTICLE XIII. MISCELLANEOUS
-------------
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement or as otherwise required by applicable law
or regulation, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as it may come into the
public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
-16-
<PAGE>
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. A copy of the Fund's Declaration of Fund is on file
___________________________________________________. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Fund's Fundees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and
property of the Fund in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Fund has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance with
its proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
THE UNTIED STATES LFE INSURANCE COMPANY IN THE CITY OF
NEW YORK,
By its authorized officer,
By:_____________________________________
Title:__________________________________
DREYFUS VARIABLE INSURANCE FUND,
on behalf of the Portfolios
By its authorized officer and not individually,
By:_____________________________________
Title: _________________________________
(Underwirter)
By its authorized officer,
By:______________________________________
Title:___________________________________
-18-
<PAGE>
SCHEDULE A
LIST OF PARTICIPATING FUNDS
- ---------------------------
. Small Cap Portfolio
. Quality Bond Portfolio
ACCOUNS
- -------
The United States Life Insurance Company in the
City of New York Separate Account USL VL-R
-19-
<PAGE>
Exhibit (8)(f)
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of ____ 199_, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), The United States Life Insurance Company in the City of New York, a
New York corporation (the "Company") on its own behalf and on behalf of each of
the segregated asset accounts of the Company set forth in Schedule A hereto, as
may be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
<PAGE>
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, American General Securities Incorporated ("AGSI"), the underwriter
for the individual variable annuity and the variable life policies, is
registered as a broker-dealer with the SEC under the 1934 Act and is a member in
good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
--------------------
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
--------
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
-2-
<PAGE>
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 9:30 a.m. New York time on the next
following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section
1.1. hereof. In the event of net redemptions, the Trust shall pay the
redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts. The
Shares ordered from the Trust will be recorded in an appropriate title for
the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby elects
to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and
-3-
<PAGE>
federal laws, including without limitation the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. The
Company further represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it has
legally and validly established the Account as a segregated asset account
under applicable law and has registered or, prior to any issuance or sale
of the Policies, will register the Accounts as unit investment trusts in
accordance with the provisions of the 1940 Act (unless exempt therefrom) to
serve as segregated investment accounts for the Policies, and that it will
maintain such registration for so long as any Policies are outstanding. The
Company shall amend the registration statements under the 1933 Act for the
Policies and the registration statements under the 1940 Act for the
Accounts from time to time as required in order to effect the continuous
offering of the Policies or as may otherwise be required by applicable law.
The Company shall register and qualify the Policies for sales in accordance
with the securities laws of the various states only if and to the extent
deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that AGSI, the underwriter for
the individual variable annuity and the variable life policies, is a member
in good standing of the NASD and is a registered broker-dealer with the
SEC. The Company represents and warrants that the Company and AGSI will
sell and distribute such policies in accordance in all material respects
with all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under the
1940 Act. The Trust shall amend the registration statement for its Shares
under the 1933 Act and the 1940 Act from time to time as required in order
to effect the continuous offering of its Shares. The Trust shall register
and qualify the Shares for sale in accordance with the laws of the various
states only if and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The
-4-
<PAGE>
Commonwealth of Massachusetts. MFS represents and warrants that it is not
subject to state securities laws other than the securities laws of The
Commonwealth of Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
---------------------------------------
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
--------
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Trust or its designee provides the Trust's prospectus in a "camera ready"
or diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g., typesetting expenses), and the Company shall bear the expense
---
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
-5-
<PAGE>
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received
in the same proportion as the Shares of such Portfolio for
which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order. The
Trust and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the registration
statement, prospectus or statement of additional information for the
Shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or
in reports or proxy
-6-
<PAGE>
statements for the Trust, or in sales literature or other promotional
material approved by the Trust, MFS or their respective designees, except
with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any
request for approval on a prompt and timely basis. The Company shall adopt
and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for
use only by brokers or agents selling the Policies (i.e., information that
---
is not intended for distribution to Policy owners or prospective Policy
owners) is so used, and neither the Trust, MFS nor any of their affiliates
shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4. is
neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other of the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
-7-
<PAGE>
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
-----------------
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution and Shareholder servicing expenses, then, subject to obtaining
any required exemptive orders or regulatory approvals, the Trust may make
payments to the Company or to the underwriter for the Policies if and in
amounts agreed to by the Trust in writing. Each party, however, shall, in
accordance with the allocation of expenses specified in Articles III and V
hereof, reimburse other parties for expenses initially paid by one party
but allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
---------------------------------------
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1) of
the Code and Treas. Reg. 1.817-5, relating
-8-
<PAGE>
to the diversification requirements for variable annuity, endowment, or
life insurance contracts, as they may be amended from time to time (and any
revenue rulings, revenue procedures, notices, and other published
announcements of the Internal Revenue Service interpreting these sections),
as if those requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
----------------------------
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are
disregarded. The Company also agrees that, if a material irreconcilable
conflict arises, it will at its own cost remedy such conflict up to and
including (a) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract
owners whether to withdraw assets from the Trust or any Portfolio and
reinvesting such assets in a different investment medium and, as
appropriate, segregating the assets attributable to any appropriate group
of contract owners that votes in favor of such segregation, or offering to
any of the affected contract owners the option of segregating the assets
attributable to their contracts or policies, and (b) establishing a new
registered management investment company and segregating the assets
underlying the Policies, unless a majority of Policy owners materially
adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately remedies
any material irreconcilable conflict. In the event that the Board
determines that any proposed action does not adequately remedy any material
irreconcilable conflict, the Company will withdraw from investment in the
Trust each of the Accounts designated by the disinterested trustees and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that
-------- -------
such withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
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<PAGE>
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
---------------
8.1. Indemnification by the Company
------------------------------
The Company agrees to indemnify and hold harmless the Trust, MFS,
any affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within
the meaning of Section 15 of the 1933 Act, and any agents or employees
of the foregoing (each an "Indemnified Party," or collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or expenses
(including reasonable counsel fees) to which any Indemnified Party may
become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Policies or contained in the
Policies or sales literature or other promotional material
for the Policies (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
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 reasonable reliance upon
and in conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS for use
in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies
or sales literature or other promotional material (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional
material of the Trust not supplied by the Company or its
designee, or persons under its control and on which the
Company has reasonably relied) or wrongful conduct of the
Company or
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<PAGE>
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information,
or sales literature or other promotional literature of the
Trust, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. Indemnification by the Trust
----------------------------
The Trust agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement therein not misleading,
provided that this agreement to indemnify shall not apply as
--------
to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished
to the Trust, MFS, the Underwriter or their respective
designees by or on behalf of the Company for use in the
registration statement, prospectus or statement of
additional information for the Trust or in sales literature
or other promotional material for the Trust (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Policies or Shares; or
-11-
<PAGE>
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional
material for the Policies not supplied by the Trust, MFS,
the Underwriter or any of their respective designees or
persons under their respective control and on which any such
entity has reasonably relied) or wrongful conduct of the
Trust or persons under its control, with respect to the sale
or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration
statement, prospectus, statement of additional information,
or sales literature or other promotional literature of the
Accounts or relating to the Policies, or any amendment
thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of
this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution
rate; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance,
endowment or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such
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<PAGE>
Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section. In
case any such action is brought against any Indemnified Party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties
of the commencement of any litigation or proceeding against it or any
of its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
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<PAGE>
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
----------------------------
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
-----------
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing,
the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt
of any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30) days'
prior written notice to the Trust of the Date of any
proposed vote or other action taken to replace the Shares;
or
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<PAGE>
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Trust
and MFS, if the Company shall determine, in its sole
judgment exercised in good faith, that the Trust or MFS has
suffered a material adverse change in this business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
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<PAGE>
ARTICLE XII. NOTICES
-------
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, New York 10038-4992
Facsimile No.: (212) 709-6410
Attn: Jane K. Rushton, Esq.
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
-------------
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
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13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
THE UNTIED STATES LFE INSURANCE COMPANY IN
THE CITY OF NEW YORK
By its authorized officer,
By:__________________________________________
Title:_______________________________________
MFS VARIABLE INSURANCE TRUST,
on behalf of the Portfolios
By its authorized officer and not individually,
By:__________________________________________
James R. Bordewick, Jr. OR Stephen E. Cavan
Assistant Secretary OR Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By:__________________________________________
Jeffrey L. Shames OR Arnold D. Scott
Chairman and Chief Executive Officer OR
Senior Vice President
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<PAGE>
As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
=================================================================================================================================
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
=================================================================================================================================
<S> <C> <C>
The United States Life Insurance Platinum Investor Flexible Premium MFS Emerging Growth Series
Company in the City of New York Variable Life Insurance Policies
Separate Account USL VL-R Contract Form No. 97600N
Established on August 8, 1997
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</TABLE>
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Exhibit (8)(g)
PARTICIPATION AGREEMENT
Among
PUTNAM VARIABLE TRUST
PUTNAM MUTUAL FUNDS CORP.
and
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
THIS AGREEMENT, made and entered into as of this ____ day of __________,
1999, among The United States Life Insurance Company in the City of New York
(the "Company"), a New York corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as such Schedule
may be amended from time to time (each such account hereinafter referred to as
the "Account"), PUTNAM VARIABLE TRUST (the "Trust"), a Massachusetts business
trust, and PUTNAM MUTUAL FUNDS CORP. (the "Underwriter"), a Massachusetts
corporation.
WHEREAS, the Trust is an open-end diversified management investment company
and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into Participation Agreements with the Trust and
the Underwriter (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission ("SEC"), dated December 29, 1993 (File No. 812-8612), granting the
variable annuity and variable life insurance separate accounts participating in
the Trust exemptions from the provisions of sections 9(a), 13(a), 15(a) and
15(b) of the Investment Company Act of 1940, as amended (the "1940 Act"), and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by variable annuity and
variable life insurance
<PAGE>
separate accounts of the Participating Insurance Companies (the "Shared Funding
Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the " 1933 Act"); and
WHEREAS, the Company has registered or will register certain variable life
and/or variable annuity contracts under the 1933 Act and any applicable state
securities and insurance law; and
WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to one or more variable insurance contracts (the
"Contracts"); and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the " 1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;
NOW, THEREFORE, in consideration of the promises herein, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE 1. Sale of Trust Shares
--------------------
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1. 1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 8:30 a.m. Eastern time on the next following Business
Day. "Business Day" shall mean any day on
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which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the SEC. The initial
Authorized Funds are set forth in Schedule B, as such schedule is amended from
time to time.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall use reasonable efforts to
calculate such net asset value on each day on which the New York Stock Exchange
is open for trading. Notwithstanding the foregoing, the Trustees of the Trust
(the "Trustees") may refuse to sell shares of any Fund to the Company or any
other 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 over
the Trust or if the Trustees determine, in the exercise of their fiduciary
responsibilities, that to do so would be in the best interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 8:30
a.m., Eastern time, on the next following Business Day.
1.5 The Company shall purchase and redeem the shares of Authorized Funds
offered by the then current prospectus of the Trust in accordance with the
provisions of such prospectus.
1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Underwriter in an appropriate title for each Account or the appropriate sub-
account of each Account.
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1.8 The Underwriter shall furnish prompt notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and therefore to
receive all such income dividends and capital gain distributions in cash. The
Underwriter shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.9 The Underwriter shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the Trust calculates its net asset value per share and each of the Trust and the
Underwriter shall use its best efforts to make such net asset value per share
available by 7:00 p.m. Eastern time.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Company represents and warrants that
(a) at all times during the term of this Agreement the Contracts are or
will be registered under the 1933 Act; the Contracts will be issued and sold in
compliance in all material respects with all applicable laws and the sale of the
Contracts shall comply in all material respects with state insurance suitability
laws and regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a separate account under applicable law and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts; and
(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.2 The Trust represents and warrants that
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(a) it is lawfully organized and validly existing under the laws of the
Commonwealth of Massachusetts and that it does and will comply in all material
respects with the 1940 Act.
(b) it is currently qualified as a Regulated Investment Company under
Subchapter M of the Code, and that it will use its best efforts to maintain such
qualification (under Subchapter M or any successor provision) and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future; and
(c) at all times during the term of this Agreement Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and the Trust is
and shall remain registered under the 1940 Act. The Trust shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Trust or the Underwriter in connection with their sale by the Trust to
the Company and only as required by Section 2.4;
2.3 The Underwriter represents and warrants that
(a) it is a member in good standing of the NASD;
(b) is registered as a broker-dealer with the SEC;
(c) it will sell and distribute the Trust shares in accordance
with all applicable securities laws, including without limitation, the 1933
Act, the 1934 Act and the 1940 Act.
2.4 Notwithstanding any other provision of this Agreement, the Trust shall
be responsible for the registration and qualification of its shares and of the
Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company through the Underwriter. The Trust shall
not be responsible, and the Company shall take full responsibility, for
determining any jurisdiction in which any qualification or registration of Trust
shares or the Trust by the Trust may be required in connection with the sale of
the Contracts or the indirect interest of any Contract in any shares of the
Trust and advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
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2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1 The Trust shall provide such documentation (including a camera-ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one or more documents. The cost of printing
prospectuses for the Contracts and the Trust for delivery in connection with the
offering and sale of new Contracts will be at the Underwriter's expense.
Printing of prospectuses for other purposes will be at the Company's expense.
The Company will bear the expense of mailing prospectuses to new purchasers of
Contracts.
3.2 The Trust's Prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and free of
charge to any owner of a Contract or prospective owner who requests such
Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners, such distribution shall be at the expense
of the Trust, provided that the Trust and the Company shall bear their
proportional share of the distribution expenses of any report containing both
the Trust's and the Accounts' financial reports.
3.4 The Company shall vote all Trust shares as required by law and the
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any separate account in its own right, to the extent permitted by
law and the Shared Funding Exemptive Order. The Company shall be responsible for
assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements
and the Shared Funding Exemptive Order.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
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requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1 Without limiting the scope or effect of Section 4.2 hereof, the
Company shall furnish, or shall cause to be furnished, to the Underwriter each
piece of sales literature or other promotional material (as defined hereafter)
in which the Trust, its investment adviser or the Underwriter is named at least
10 days prior to its use. No such material shall be used if the Underwriter
objects to such use within five Business Days after receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Trust shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in annual or semi-annual reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee or by the Underwriter, except with the written permission
of the Trust or the Underwriter or the designee of either or as is required by
law.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Underwriter in which the Company
and/or its separate account(s) is named at least 10 days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within five Business Days after receipt of such material.
4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in
7
<PAGE>
published reports for each Account which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
written permission of the Company or as is required by law.
4.5 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e. any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all registered representatives.
ARTICLE V. Fees and Expenses
-----------------
5.1 Except as provided in Article VI, the Trust and Underwriter shall pay
no fee or other compensation to the Company under this agreement.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall bear the expenses for the cost of
registration and qualification of the Trust's shares, preparation and filing of
the Trust's prospectus and registration statement, proxy materials and reports,
setting the prospectus and shareholder reports in type, setting in type and
printing the proxy materials, distributing reports and proxy statements to
contractholders (provided that if the reports are combined with the Company's
reports the Trust and the Company shall bear such share of the expense as its
proportion of the joint report bears the the whole combined report) and the
preparation of all statements and notices required by any federal or state law,
in each case as may reasonably be necessary for the performance by it of its
obligations under this Agreement.
5.3 The Company shall bear the expenses of printing the Trust's prospectus
(other than those used in connection with the offering and sales of the
Contracts) and of distributing the Trust's prospectuses to new purchasers of
Contracts.
Article VI. Service Fees
------------
6.1 The Underwriter shall pay the Company a service fee (the "Service
Fee") on shares of the Funds held in the Accounts at the annual rates specified
in Schedule
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B (excluding any accounts for the Company's own corporate retirement plans),
subject to Section 6.2 hereof.
6.2 The Company understands and agrees that all Service Fee payments are
subject to the limitations contained in each Fund's Distribution Plan, which may
be varied or discontinued at any time, and understands and agrees that it will
cease to receive such Service Fee payments with respect to a Fund if the Fund
ceases to pay fees to the Underwriter pursuant to its Distribution Plan.
6.3 (a) The Company's failure to provide the services described in
Section 6.4 will render it ineligible to receive Service Fees; and
(b) the Underwriter may, without the consent of the Company, amend
this Article VI to change the amount of Service Fees or the terms on which
Service Fees are paid or to terminate further payments of Service Fees upon
written notice to the Company.
6.4 The Company will provide the following services to the Contract
Owners purchasing Fund shares:
(i) Maintaining regular contact with Contract owners and assisting in
answering inquiries concerning the Funds;
(ii) Assisting in the process of printing and distributing shareholder
reports, prospectuses and other sale and service literature provided by the
Underwriter;
(iii) Assisting the Underwriter and its affiliates in the establishment and
maintenance of Contract owner and shareholder accounts and records;
(iv) Assisting Contract owners in effecting administrative changes, such
as exchanging shares in or out of the Funds;
(v) Assisting in processing purchase and redemption transactions; and
(vi) Providing any other information or services as the Contract owners or
the Underwriter may reasonably request.
The Company will support the Underwriter's marketing and servicing efforts
by granting reasonable requests for visits to the Company's offices by
representatives of the Underwriter.
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6.5 The Company's performance under the service requirement set forth in
this Agreement will be evaluated from time to time by the Underwriter's
monitoring of redemption levels of Fund shares held in any Account and by such
other methods as the Underwriter deems appropriate.
ARTICLE VII. Diversification
---------------
7.1 The Trust shall cause each Authorized Fund to maintain a diversified
pool of investments that would, if such Fund were a segregated asset account,
satisfy the diversification provisions of Treas. Reg. (S) 1.817-5(b)(1) or (2).
7.2 The Trust shall annually send the Company a certificate, in the form
mutually agreed, certifying as to its compliance with Section 7.1.
ARTICLE VIII. Potential Conflicts
-------------------
8.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities law 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 owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company if the Trustees determine that a
material irreconcilable conflict exists and the implications thereof.
8.2 The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order, by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
8.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the
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disinterested Trustees), take, at the Company's expense, whatever steps are
necessary to remedy or eliminate the material irreconcilable conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
8.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in one or more Authorized Funds of the Trust and terminate this
Agreement with respect to such Account; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty shall be imposed as a result of
such withdrawal. Any such withdrawal and termination must take place within six
(6) months after the Trust gives written notice that this provision is being
implemented, and until the end of that six month period the Underwriter and
Trust shall, to the extent permitted by law and any exemptive relief previously
granted to the Trust, continue to accept and implement orders by the Company for
the purchase (or redemption) of shares of the Trust.
8.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected Account's investment in one
or more Authorized Funds of the Trust; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented, unless a shorter period is required by law, and until the
end of the foregoing six month period (or such shorter period if required by
law), the Underwriter and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
implement orders by
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the Company for the purchase (and redemption) of shares of the Trust. No charge
or penalty will be imposed as a result of such withdrawal.
8.6 For purposes of Sections 8.3 through 8.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict. Neither the Trust nor
the Underwriter shall be required to establish a new funding medium for the
Contracts, nor shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any material
irreconcilable conflict, then the Company will withdraw the Account's investment
in one or more Authorized Funds of the Trust and terminate this Agreement within
six (6) months (or such shorter period as may be required by law or any
exemptive relief previously granted to the Trust) after the Trustees inform the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a result of such
withdrawal.
8.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Article VIII shall be carried out
with a view only to the interests of Contract owners.
8.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 8.1, 8.2, 8.3, 8.4 and 8.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
8.9 The Company has reviewed the Shared Funding Exemption Order and hereby
assumes all obligations referred to therein which are required, including,
without limitation, the obligation to provide reports, material or data as the
Trustees
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may request as conditions to such Order, to be assumed or undertaken by the
Company.
ARTICLE IX. Indemnification
---------------
9.1. Indemnification by the Company
------------------------------
9.1 (a). The Company shall indemnify and hold harmless the Trust
and the Underwriter and each of the Trustees, directors of the Underwriter,
officers, employees or agents of the Trust or the Underwriter and each person,
if any, who controls the Trust or the Underwriter within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 9.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company which consent
may not be unreasonably withheld) or litigation (including reasonable legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation or at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Trust's shares or the
Contracts or the performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Trust for use in the
Registration Statement, Prospectus or Statement of Additional
Information for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the Trust's Registration Statement or Prospectus, or in sales
literature for Trust shares not supplied by the Company, or persons
under its control) or wrongful conduct of the
13
<PAGE>
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, or sales
literature of the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Trust or the Underwriter by or on behalf of
the Company; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other breach of this Agreement by the Company, as limited by and
in accordance with the provisions of Sections 9.1(b) and 9.1(c) hereof.
9.1 (b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
9.1 (c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Company to such Indemnified Party of
the Company's election to assume the defense thereof the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will
14
<PAGE>
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.
9.1 (d) The Underwriter shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust or the
Underwriter in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
9. 1 (e) The provisions of this Section 9.1 shall survive
any termination of this Agreement.
9.2 Indemnification by the Underwriter
----------------------------------
9.2 (a) The Underwriter shall indemnify and hold harmless the
Company and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act and any director, officer, employee or agent of the
foregoing (collectively, the "Indemnified Parties" for purposes of this Section
9.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter which consent may
not be unreasonably withheld) or litigation (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject under any
statute, regulation or at common law, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Trust's shares or the Contracts or the
performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the sales literature of the
Trust prepared by or approved by the Trust or Underwriter (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Underwriter or Trust by or on behalf of the
Company for use in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
15
<PAGE>
(ii) arise out of or as a result of written statements or representations
(other than statements or representations contained in the Registration
Statement, Prospectus, Statement of Additional Information or sales
literature for the Contracts not supplied by the Underwriter or persons
under its control) of the Underwriter or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, Statement
of Additional Information or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Underwriter; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Underwriter in this Agreement or arise out of or
result from any other breach of this Agreement by the Underwriter or result
from a breach of Article VII; as limited by and in accordance with the
provisions of Sections 9.2(b) and 9.2(c) hereof.
9.2 (b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party for willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to each Company or the Account, whichever is
applicable.
9.2 (c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Underwriter will be entitled to
16
<PAGE>
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the Indemnified Party named in the action. After notice from the Underwriter to
such Indemnified Party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not be liable to
such 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.
9.2 (d) The Company shall promptly notify the Underwriter of the Trust
of the commencement of any litigation or proceedings against it or any of its
officers or directors, in connection with the issuance or sale of the Contracts
or the operation of each Account.
9.2 (e) The provisions of this Section 9.2 shall survive any termination
of this Agreement.
9.3 Indemnification by the Trust
----------------------------
9.3 (a) The Trust shall indemnify and hold harmless the Company, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in a Registration Statement,
Prospectus and Statement of Additional Information of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Underwriter or
Trust by or on behalf of the
17
<PAGE>
Company for use in the Registration Statement, Prospectus, or Statement of
Additional Information for the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or
result from any other material breach of this Agreement by the Trust
(including Section 7.1 hereof), as limited by and in accordance with the
provisions of Sections 9.3(b) and 9.3(c) hereof.
9.3 (b) The Trust shall not be liable under the indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party for willful misfeasance, bad
faith, or gross negligence or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement or to the Company, the
Trust, the Underwriter or each Account, whichever is applicable.
9.3 (c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Trust of any such claim shall
not relieve the Trust from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Trust 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.
9.3 (d) The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or
18
<PAGE>
directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.
9.3 (e) The provisions of this Section 9.3 shall survive any
termination of this Agreement.
ARTICLE X. Applicable Law
--------------
10.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
10.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE XI. Termination
-----------
11.1. This Agreement shall terminate:
(a) at the option of the Trust upon 180 days prior written notice, upon
a decision by the Trustees of the Trust that termination of the Agreement is in
the best interests of shareholders of the Trust; or
(b) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 90 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares; or
(c) with respect to any Authorized Fund, upon 60 days advance written
notice from the Underwriter to the Company, upon a decision by the Underwriter
to cease offering shares of the Fund for sale.
11.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1 (a) may be exercised for any
reason or for no reason.
19
<PAGE>
11.3 No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination. Such prior written notice shall be given
in advance of the effective date of termination as required by this Article XI.
11.4 Notwithstanding any termination of this Agreement, subject to
Section 1.2 of this Agreement, the Trust and the Underwriter shall, at the
option of the Company, continue to make available additional shares of the Trust
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, subject
to Section 1.2 of this Agreement, the owners of the Existing Contracts shall be
permitted to reallocate investments in the Trust, redeem investments in the
Trust and/or invest in the Trust upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section 11.4 shall not
apply to any termination under Article VIII and the effect of such Article VIII
termination shall be governed by Article VIII of this Agreement.
11.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter an opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Contracts, subject to Section 1.2
of this Agreement, the Company shall not prevent Contract owners from allocating
payments to an Authorized Fund that was otherwise available under the Contracts
without first giving the Trust or the Underwriter 90 days notice of its
intention to do.
ARTICLE XII. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
20
<PAGE>
One Post Office Square
Boston, MA 02109
Attention: John R. Verani
If to the Underwriter:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
If to the Company:
125 Maiden Lane
New York, New York 10038-4992
Attn: Jane K. Rushton, Esq.
ARTICLE XIII. Miscellaneous
-------------
13.1 A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of or arising out of this instrument, including without limitation Article VII,
are not binding upon any of the Trustees or shareholders individually but
binding only upon the assets and property of the Trust.
13.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
21
<PAGE>
13.4 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall pertmit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.6 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.7 Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Underwriter are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for any action or failure to act by the other party, or any person
acting on such other party's behalf.
22
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
By its authorized officer,
_________________________________
Name:
Title:
PUTNAM VARIABLE TRUST
By its authorized officer,
_________________________________
Name:
Title:
PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,
_________________________________
Name:
Title:
23
<PAGE>
Schedule A
----------
Separate Accounts
-----------------
The United States Life Insurance Company
in the City of New York Separate Account USL VL-R
24
<PAGE>
Schedule B
----------
Authorized Funds
Putnam VT Diversified Income Fund
Putnam VT Growth and Income Fund
Putnam VT International Growth and Income Fund
25
<PAGE>
Exhibit (8)(h)
PARTICIPATION AGREEMENT
AMONG
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK,
AMERICAN GENERAL SECURITIES INCORPORATED,
SAFECO RESOURCE SERIES TRUST
AND
SAFECO SECURITIES, INC.
DATED AS OF
________________________________
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ______ day of
_____________, 1999 ("Agreement"), by and among The United States Life Insurance
Company in the City of New York, a New York life insurance company ("USL") (on
behalf of itself and its "Separate Account," defined below), American General
Securities Incorporated, a Texas corporation ("AGSI"), the principal underwriter
and distributor with respect to the Policies referred to below, SAFECO Resource
Series Trust, an unincorporated business trust organized under the laws of the
state of Delaware, (the "Fund"), and SAFECO Securities, Inc., a Washington
corporation, (the "Distributor"), the Fund's principal underwriter
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS the Distributor and the Fund desire that shares of the Fund's
Equity Portfolio and Growth Portfolio (the "Series"; reference herein to the
"Fund" includes reference to each of the foregoing Series to the extent the
context requires) be made available by the Distributor to serve as underlying
investment media for those variable life insurance policies of USL that are the
subject of USL's Form S-6 registration statement filed with the Securities and
Exchange Commission (the "SEC"), File No. 333-________ and 811-________ (the
"Policies") and to be offered through AGSI.
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and the Distributor will make shares in the Series
available to USL for this purpose at net asset value and with no sales charges,
all subject to the following provisions:
Section 1. Introduction
------------------------
1.1 Availability of Separate Account Divisions.
------------------------------------------
USL represents that Separate Account USL VL-R (the "Separate Account") is
and will continue to be available to serve as an investment vehicle for its
Policies. The Policies provide for the allocation of net amounts received by USL
to separate series (the "Divisions"; reference herein
<PAGE>
to the "Separate Account" includes reference to each Division to the extent the
context requires) of the Separate Account for investment in the shares of
corresponding Series of the Fund that are made available through the Separate
Account to act as underlying investment media. Other series of the Fund may
become subject to this Agreement, upon mutual agreement of the parties. USL will
not unreasonably deny any request by the Distributor to create new Divisions
corresponding to such other Series.
1.2 Broker-Dealer Registration.
--------------------------
The Distributor and AGSI each represents and warrants that it is and will
remain duly registered as a broker-dealer with the SEC under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD").
Section 2. Processing Transactions
-----------------------------------
2.1 The Fund agrees, as provided in its Registration Statement, to
make available to the Separate Account, and any Division, shares of the Series
for investment of purchase payments of the Policies allocated to the Separate
Account.
2.2 The Fund agrees to sell to USL those shares of the Series which USL
orders. Orders which are sent by USL to the Fund and received by the Fund by
8:00 a.m. Pacific time, will be executed by the Fund at the net asset value
determined on the prior Business Day. Any orders received by the Fund after 8:00
a.m. and prior to 1:00 p.m. Pacific time, will be executed by the Fund at the
net asset value next computed pursuant to the rules of the SEC. For purposes of
this Section 2.2, the Fund hereby appoints USL as its designee for receipt of
such orders from the Separate Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice from USL
by telephone or facsimile (or by such other means as the Fund and USL may agree
in writing) of receipt of such orders by 8:00 a.m. Pacific time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock
2
<PAGE>
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the SEC.
2.3 The Fund agrees to redeem, on USL's request, any full or fractional
shares of the Fund held by USL, executing such requests on each Business Day at
the net asset value next computed after receipt by the Fund or its designee of
the request for redemption, in accordance with the provisions of this Agreement
and the Fund's Registration Statement. For purposes of this Section 2.3, USL
hereby appoints the Fund as its designee for receipt of requests for redemption
from the Separate Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice from USL by telephone or
facsimile (or by such other means as the Fund and USL may agree in writing) of
receipt of such request for redemption by 8:00 a.m. Pacific time on the next
following Business Day.
2.4 In the event that USL's order results in a net purchase of Series
shares, USL shall pay for Series shares on the same Business Day that the notice
of order to purchase the Fund shares is made in accordance with the provisions
of this section. If USL's order requests a net redemption resulting in a payment
of redemption proceeds to USL, the Fund shall normally pay and transmit the
proceeds of redemptions of Series shares on the same Business Day that the
notice of a redemption order is received in accordance with the provisions of
this Agreement, unless doing so would require the Fund to dispose of Series
securities or otherwise incur additional costs. In any event, proceeds shall be
wired to USL within three (3) Business Days or such longer period permitted by
the Investment Company Act of 1940, as amended (the "1940 Act") or the rules,
orders or regulations thereunder, and the Fund shall notify the person
designated in writing by USL as the recipient for such notice of such delay by
1:00 p.m. Pacific time the same Business Day that USL transmits the redemption
order to the Fund. If USL's order requests the application of redemption
proceeds from the redemption of shares to the purchase of shares of another fund
advised by Adviser (as defined below), the Fund shall so apply such proceeds the
same Business Day that USL transmits such order to the Fund. Any payment made
pursuant to this Section 2.4 shall be in federal funds transmitted by wire.
3
<PAGE>
2.5 The Fund will provide to USL closing net asset value per share for the
Series at the close of trading each Business Day. In any event, the Fund shall
use its best efforts to make the net asset value per share for each Series
available by 3:30 p.m. Pacific time each Business Day, and as soon as reasonably
practicable after the net asset value per share for each Series is calculated,
and shall calculate such net asset value in accordance with the Fund's
Registration Statement. Any material error in the calculation of the net asset
value of the Series shall be reported immediately to USL.
2.6 At the end of each Business Day, USL shall use the information
described in Section 2.5 to calculate Separate Account unit values for the day.
Using these unit values, USL shall process each such Business Day's Separate
Account transactions based on requests and premiums received by it by the close
of trading on the floor of the New York Stock Exchange (currently 4:00 p.m. New
York time) to determine the net dollar amount of the Fund shares which shall be
purchased or redeemed at that day's closing net asset value per share. The net
purchase or redemption orders so determined shall be transmitted to the Fund by
USL by 8:00 a.m. Pacific time on the Business Day next following USL's receipt
of such requests and premiums in accordance with the terms of Sections 2.2 and
2.3 hereof. Orders will be sent directly, via facsimile (or by such other means
as the Fund and USL may agree in writing), to the Fund or such other person as
the Fund may designate.
2.7 The Fund shall furnish, on or before the exdividend date, notice to
USL of any income dividends or capital gain distributions payable on the shares
of any Series. USL hereby elects to receive all such income dividends and
capital gain distributions as are payable on a Series' shares in additional
shares of the Series, but reserves the right to revoke the election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify USL or its designee of the number of shares so issued as
payment of such dividends and distributions.
2.8 The Fund may refuse to sell shares of any Series to any person or
suspend or terminate the offering of the shares of or liquidate any Series if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board of Trustees of the
4
<PAGE>
Fund (the "Board of Trustees"), acting in good faith and in light of its duties
under federal and any applicable state laws, deemed necessary, desirable or
appropriate and in the best interests of the shareholders of such Series. The
Fund further reserves the right to pay any portion of a redemption in kind of
portfolio securities of any Series if the Fund's Board of Trustees determines
that it would be detrimental to the best interests of the shareholders to make a
redemption wholly in cash.
2.9 Issuance and transfer of Series shares will be by book entry only.
Stock certificates will not be issued to USL or the Separate Account. Shares
ordered from the Series will be recorded in appropriate book entry titles for
the Separate Account.
2.10 Each Party has the right to rely on information or confirmations
provided by each other Party (or by any affiliate of each other Party) and shall
not be liable in the event that an error is a result of any misinformation
supplied by any other Party or any such affiliate. If a mistake is caused in
supplying such information or confirmations, which results in a reconciliation
with incorrect information, the amount required to make a Policy owner's or
participant's account whole shall be borne by the Party providing the incorrect
information.
Section 3. Costs and Expenses
------------------------------
3.1 General.
-------
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 Expense allocations.
-------------------
(a) The Fund will pay the cost of keeping its registration of shares
under the Securities Act of 1933, as amended (the "1933 Act") and its
registration as a management investment company under the 1940 Act, current and
effective. USL will pay the cost of registering the Separate Account as a unit
investment trust under the 1940 Act and registering units of interest under the
Policies under the 1933 Act and keeping such registrations current and
effective.
5
<PAGE>
(b) At least annually, the Fund or its designee shall provide USL
with the current prospectus, statement of additional information and any
supplements thereto for the shares of the Series in the form of "camera ready"
copy as set in type or, at the request of USL, as a diskette in the form sent to
the financial printer. The prospectuses provided by the Fund shall be limited to
only those Series of the Fund that are made available through the Separate
Account to serve as underlying investments. The Fund shall be responsible for
providing the prospectus and/or statement of additional information in the
format (i.e., "camera ready" or diskette) in which it is accustomed to
formatting prospectuses and/or statements of additional information and shall
bear the expense of providing the prospectus and/or statement of additional
information, and any supplements thereto, in such format (e.g. typesetting
expenses), and USL shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses and/or statements of additional
information. At USL's option and expense, once a year (or more frequently if the
prospectus and/or statement of additional information for the shares is
supplemented or amended), USL may cause the Fund's prospectus and/or statement
of additional information to be printed separately and/or together in one
document with the prospectus and/or statement of additional information for
other investment companies and/or for the Policies. USL shall be responsible for
the costs of printing the Fund's prospectus and/or statement of additional
information, either separately or in combination as aforesaid, and distribution
to existing Policy owners whose Policies are funded by such shares and to
prospective purchasers of Policies; provided that the Fund shall be responsible
for one-half of the cost of printing the Fund's prospectus in a quantity
sufficient to provide each existing Policy owner with a copy.
(c) The Fund and USL will each bear one-half of the costs of
preparing, filing with the SEC and setting for printing the Fund's periodic
reports to shareholders, the Fund proxy material and other shareholder
communications (collectively "Fund Reports") provided to existing owners under
the Policies (collectively, "Participants") and USL will bear the costs of
delivering the Fund Reports to Participants.
6
<PAGE>
(d) USL will bear the costs of preparing, filing with the SEC,
setting for printing, printing and delivering to Participants the Separate
Account's prospectus, statement of additional information and any supplements
thereto (collectively, the "Separate Account Prospectus"), periodic reports to
Participants, voting instruction solicitation material, and other Participant
communications.
3.3 Parties to Cooperate.
--------------------
The Fund, USL, AGSI and the Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or
coordinated prospectuses or other materials of the Fund and Separate Account.
Section 4. Legal Compliance
----------------------------
4.1 Tax Laws.
--------
(a) The Fund represents and warrants that each Series is currently
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will make every effort to qualify and to maintain qualification of each Series
as a RIC. The Fund or the Distributor will notify USL immediately upon having a
reasonable basis for believing that a Series has ceased to so qualify or that it
might not so qualify in the future.
(b) USL represents and warrants that the Policies are currently and
at the time of issuance will be treated as life insurance policies under
applicable provisions of the Code and that it will make every effort to maintain
such treatment. USL will notify the Fund and the Distributor 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.
(c) The Fund represents and warrants that each Series is currently in
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5 of the regulations under the Code, and the Fund
represents that it will make every effort to maintain
7
<PAGE>
each Series' compliance with such diversification requirements. The Fund or the
Distributor will notify USL immediately upon having a reasonable basis for
believing that a Series has ceased to so comply or that a Series might not so
comply in the future.
(d) USL represents and warrants that the Separate Account is a
"segregated asset account" and that interests in the Separate Account are
offered exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817(h) of the Code and
the regulations thereunder. USL will make every effort to continue to meet such
definitional requirements, and it will notify the Fund and the Distributor
immediately upon having a reasonable basis for believing that such requirements
have ceased to be met or that they might not be met in the future.
quarter.
(e) The Fund represents that, under the terms of its investment
advisory agreements with SAFECO Asset Management Company (the "Adviser"), the
Adviser is and will be responsible for managing the Fund in compliance with the
Fund's investment objectives, policies and restrictions as set forth in the Fund
Prospectus. The Fund represents that these objectives, policies and restrictions
do and will include operating as a RIC in compliance with Subchapter M of the
Code and Section 817(h) of the Code and regulations thereunder. The Fund has
adopted and will maintain procedures for ensuring that the Fund is managed in
compliance with Subchapter M and Section 817(h) and regulations thereunder. On
request, the Fund shall also provide USL with such materials, cooperation and
assistance as may be reasonably necessary for USL or any appropriate person
designated by USL to review from time to time the procedures and practices of
the Adviser or each sub-investment adviser to the Fund for ensuring that the
Fund is managed in compliance with Subchapter M and Section 817(h) and
regulations thereunder.
In the event of any noncompliance regarding its status as a RIC, the Fund will
pursue those efforts necessary to enable each affected Series to qualify once
again for treatment as a RIC in compliance with Subchapter M, including
cooperation in good faith with USL. If the Fund does not so cure the
8
<PAGE>
noncompliance regarding its status under Section 817(h), the Fund will cooperate
in good faith with USL's efforts to obtain a ruling and closing agreement, as
provided in Revenue Procedure 92-25 issued by the Internal Revenue Service (or
any applicable ruling or procedure subsequently issued by the Internal Revenue
Service), that the Series satisfies Section 817(h) for the period or periods of
non-compliance.
4.2 Insurance and Certain Other Laws.
--------------------------------
(a) The Distributor and the Fund make no representation as to whether
any aspect of the Fund's operations complies with the insurance laws or
regulations of the various states. The Fund will use reasonable efforts to
comply with any applicable state insurance laws or regulations, to the extent
specifically requested in writing by USL.
(b) USL represents and warrants that (i) it is an insurance company
duly organized, validly existing and in good standing under the insurance laws
of the State of New York and the regulations thereunder, and has full corporate
power, authority and legal right to execute, deliver and perform its duties and
comply with its obligations under this Agreement, (ii) it has legally and
validly established and maintains the Separate Account as a segregated asset
account under Article 3.75 of the Texas Insurance Code, and (iii) the Policies
comply in all material respects with all other applicable federal and state laws
and regulations.
(c) USL and AGSI represent and warrant that AGSI is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(d) The Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Washington and has full corporate power, authority and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
9
<PAGE>
(e) The Distributor and the Fund represent and warrant that the Fund
is a business trust 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) USL represents and warrants that (i) it has registered the
Separate Account as a unit investment trust in accordance with the provisions of
the 1940 Act to serve as a segregated investment account for its variable life
insurance policies, including the Policies, (ii) the Separate Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, (iii) the Separate Account's 1933 Act registration
statement relating to the 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,(iv) the Separate Account Prospectus will at all
times comply in all material respects with the requirements of the 1933 Act and
the rules thereunder; and (v) interests in the Separate Account pursuant to the
Policies will be registered under the 1933 Act to the extent required by the
1933 Act and the Policies will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws and that the sale of the
Policies will comply in all material respects with state insurance suitability
requirements.
(b) The Fund and the Distributor represent and warrant that (i) Fund
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 Washington law, (ii) the Fund is and will remain registered
under the 1940 Act to the extent required by the 1940 Act, and (iii) the Fund
will amend the registration statement for its shares under the 1933 Act and
itself under the 1940 Act from time to time as required in order to effect the
continuous offering of its shares.
(c) The Fund represents and warrants that (i) the Fund does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, (ii) its 1933 Act registration statement, together with any
amendments thereto, will at all times comply in all material
10
<PAGE>
respects with the requirements of the 1933 Act and rules thereunder, and (iii)
the Fund Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(d) The Fund will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Fund, USL or any other life insurance
company utilizing the Fund.
(e) USL represents and warrants that its directors, officers, and
employees, if any, dealing with the money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than $2 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
(f) The Fund represents and warrants that its directors, officers,
and employees, if any, dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage in an amount not less than the minimal coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
4.4 Notice of Certain Proceedings and Other Circumstances.
-----------------------------------------------------
(a) The Distributor or the Fund shall promptly notify USL of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any
11
<PAGE>
circumstances in which (x) the Fund's shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law or (y) such law precludes the use of such shares as an underlying
investment medium of the Policies issued or to be issued by USL. The Distributor
and the Fund will make every reasonable effort to prevent the issuance of any
stop order, cease and desist order or similar order and, if any such order is
issued, to obtain the lifting thereof at the earliest possible time.
(b) USL or AGSI shall promptly notify the Fund of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to the Separate Account's registration statement
under the 1933 Act relating to the Policies or the Separate Account Prospectus,
(ii) any request by the SEC for any amendment to such registration statement or
Separate Account prospectus, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of the
Separate Account interests pursuant to the Policies, (iv) any other action or
circumstances that 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. USL and AGSI will make
every reasonable effort to prevent the issuance of any stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 USL to Provide Documents.
------------------------
USL will provide to the Fund one complete copy of all SEC registration
statements, Separate Account Prospectuses, annual and semi-annual 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 the Separate Account or the Policies, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
12
<PAGE>
4.6 Fund to Provide Documents.
-------------------------
The Fund will provide to USL one complete copy of all SEC registration
statements, Fund Prospectuses, annual and semi-annual reports, any preliminary
and final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or its
shares, contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.7 Sales Literature
----------------
(a) USL will furnish, or will cause to be furnished, to the Fund and
Distributor for review, each piece of sales literature or other promotional
material in which the Fund, or any Series thereof, or Adviser is named, before
such material is submitted to any regulatory body for review, and in any event,
at least fifteen (15) Business Days prior to its use. No such material will be
used if the Fund or Distributor objects to its use in writing within fifteen
(15) Business Days after receipt of such material.
(b) Advertising and sales literature with respect to USL, the Separate
Account and/or the Policies prepared by the Fund, Distributor or any affiliate
thereof will be submitted to USL for review before such material is submitted to
any regulatory body for review, and in any event, at least fifteen (15) Business
Days prior to its use. No such material will be used if USL objects to its use
in writing within fifteen (15) Business Days after receipt of such material.
(c) The Fund and its affiliates and agents shall not give any
information or make any representations on behalf of USL or concerning USL, the
Separate Account or the Policies issued by USL, other than the information or
representations contained in a registration statement or prospectus for such
Policies, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports of the Separate Account or reports
prepared for distribution to owners of such Policies, or in sales literature or
other promotional material approved by USL or its designee, without the written
permission of USL.
13
<PAGE>
(d) USL and its affiliates and agents shall not give any information
or make any representations on behalf of the Fund or concerning the Fund other
than the information or representations contained in a Registration Statement or
prospectus for the Fund, as such Registration Statement and prospectus may be
amended or supplemented from time to time, or in reports of the Fund or reports
prepared for distribution to owners of shares of the Fund or for owners of the
Policies, or in sales literature or other promotional material approved by the
Fund or its designee, without the written permission of the Fund.
(e) For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, electronic media,
telephone or tape recording, videotape display, signs or billboards, motion
pictures or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, or reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under National Association
of Securities Dealers, Inc. ("NASD") rules, the 1940 Act or the 1933 Act.
(f) USL will bear the cost of printing and delivering to prospective
purchasers of the Policies Fund and Separate Account sales literature or other
promotional material and the cost of filing any such materials with, and
obtaining approval from, any state insurance regulatory authorities.
14
<PAGE>
Section 5. Mixed and Shared Funding
------------------------------------
5.1 General.
-------
The order Fund has obtained, and USL has received and reviewed, a copy
of the amended and restated application for exemptive relief filed by the Fund
and certain affiliates on December 20, 1995 with the SEC and the Exemptive Order
issued by the SEC on January 17, 1996 in response thereto (Securities and
Exchange Commission Release No. IC-21608 the "Mixed and Shared Funding Order")
exempting it from certain provisions of the 1940 Act and rules thereunder so
that the Fund may be available for investment by certain other entities,
including, without limitation, separate accounts funding variable life insurance
policies and variable annuity contracts, separate accounts of insurance
companies unaffiliated with USL and trustees of qualified pension and retirement
plans ("Mixed and Shared Funding"). The Parties recognize that the SEC has
imposed terms and conditions for such orders that are substantially identical to
many of the provisions of this Section 5. The Parties represent and warrant
that they will comply with the terms and conditions of the SEC order, whether or
not recited in this Section 5.
5.2 Disinterested Directors.
-----------------------
The Fund agrees that the Board of Trustees shall at all times consist
of Trustees, a majority of whom (the "Disinterested Directors") are not
interested persons of the Adviser or the Distributor 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 Trustee or
Trustees, 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 of
Trustees; (b) for a period of 60 days if a vote of shareholders is permitted to
fill the vacancy or vacancies; or (C) for such longer period as the SEC may
permit.
15
<PAGE>
5.3 Monitoring for Material Irreconcilable Conflicts.
------------------------------------------------
The Fund agrees that the Board of Trustees will monitor for the
existence of any material irreconcilable conflict between the interests of the
Participants of all separate accounts of life insurance companies utilizing the
Fund, including the Separate Account. 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 Series are being
managed;
(e) a difference in voting instructions given by variable
insurance life insurance policy and variable annuity contract participants or by
participants of different life insurance companies utilizing the Fund; or
(f) a decision by a life insurance company utilizing the Fund to
disregard the voting instructions of participants.
USL will report any potential or existing conflicts of which it becomes
aware to the Fund's Board of Trustees. USL will assist the Board in carrying
out its responsibilities under the Mixed and Shared Funding Order by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This assistance shall include, but is not limited to, an
obligation by USL to (i) inform the Board whenever the voting instructions of
the Policy owners or Participants are disregarded, and (ii) to submit to the
Board such reports, materials or data as the Board may
16
<PAGE>
reasonably request so that the Board may fully carry out the obligations imposed
upon it by the Mixed and Shared Funding Order, and such reports, materials and
data shall be submitted more frequently if deemed appropriate by the Board. USL
will carry out its responsibilities under this paragraph with a view only to the
interests of the Policy owners and Participants.
5.4 Conflict Remedies.
-----------------
(a) It is agreed that if it is determined by a majority of the members
of the Board of Trustees or a majority of the Disinterested Trustees that a
material irreconcilable conflict exists affecting USL, USL will, at its own
expense and to the extent reasonably practicable (as determined by a majority of
the Disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the material irreconcilable conflict, which steps may include, but are
not limited to:
(i) withdrawing the assets allocable to the separate account from
the Fund or any series and reinvesting such assets in a
different investment medium, including another series of the
Fund or another investment company, 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.,
variable life insurance contract owners, variable annuity
contract owners or all variable contract owners and
participants of one or more life insurance companies
utilizing the Fund) that votes in favor of such segregation,
or offering to the affected variable contract owners or
participants the option of making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "Management Company" in Section 4(3) of the
1940 Act or a new separate account that is operated as a
Management Company.
17
<PAGE>
(b) If the material irreconcilable conflict arises because of USL's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, USL may be
required, at the Fund's election, to withdraw the Separate Account's investment
in the Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the
Fund gives notice to USL that this provision is being implemented, and until
such withdrawal the Distributor and Fund shall continue to accept and implement
orders by USL for the purchase and redemption of shares of the Fund.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to USL conflicts with the
majority of other state regulators, then USL will withdraw the Separate
Account's investment in the Fund within six months after the Fund's Board of
Directors informs USL that it has determined that such decision has created a
material irreconcilable conflict, and until such withdrawal the Distributor and
Fund shall continue to accept and implement orders by USL for the purchase and
redemption of shares of the Fund.
(d) USL 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 the Fund or the
Distributor be required to establish a new funding medium for any Policies. USL
will not be required by the terms hereof to establish a new funding medium for
any Policies if any offer to do so has been declined by vote of a majority of
Participants materially adversely affected by the material irreconcilable
conflict.
18
<PAGE>
5.5 Notice to USL.
-------------
The Fund will promptly make known in writing to USL the Board of
Trustees' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 Information Requested by Board of Trustees.
------------------------------------------
USL will at least annually submit to the Board of Trustees of the Fund
such reports, materials or data as the Board of Trustees may reasonably request
so that the Board of Trustees may fully carry out the obligations imposed upon
it by the provisions hereof, and said reports, materials and data will be
submitted at any reasonable time deemed appropriate by the Board of Trustees.
All reports received by the Board of Trustees of potential or existing
conflicts, and all Board of Trustees actions with regard to determining the
existence of a conflict, notifying life insurance companies utilizing the Fund
of a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Trustees or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 Compliance with SEC Rules.
-------------------------
If, at any time during which the Fund is serving an investment medium
for variable life insurance policies, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to mixed and shared funding, the Parties agree that they will comply
with the terms and conditions thereof and that the terms of this Section 5 shall
be deemed modified if and only to the extent required in order also to comply
with the terms and conditions of such exemptive relief that is afforded by any
of said rules that are applicable.
Section 6. Termination
-----------------------
6.1 Events of Termination.
---------------------
Subject to Section 6.4 below, this Agreement will terminate as to a
Series:
19
<PAGE>
(a) at the option of USL, the Distributor or the Fund upon (i)
at least six months' advance written notice to the other Parties unless a
shorter time period is agreed to by the parties,
(b) at the option of the Fund upon
(i) at least sixty days advance written notice to the other
parties, and
(ii) the approval by (x) a majority of the Disinterested
Directors or (y) a majority vote of the shares of the
affected Series that are held in the corresponding Divisions
of the Separate Account (pursuant to the procedures set
forth in Section 10 of this Agreement for voting Series
shares in accordance with Participant instructions);or
(c) at the option of the Fund upon written notice upon institution of
formal proceedings against USL or AGSI by the SEC, the NASD, any state insurance
regulator or any other regulatory body regarding USL's duties under this
Agreement or related to the sale of the Policies, the operation of the Separate
Account, or the purchase of the Fund shares, if, in each case, the Fund
reasonably determines that such proceedings, or the facts on which such
proceedings may be based, have a material likelihood of imposing material
adverse consequences on the Series to be terminated; or
(d) at the option of USL upon written notice upon institution of
formal proceedings against the Fund, the Adviser or any sub-investment adviser
to the Fund, or the Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body, if, in each case, USL
reasonably determines that such proceedings, or the facts on which such
proceedings may be based, have a material likelihood of imposing material
adverse consequences on USL, AGSI or the Division corresponding to the Series to
be terminated; or
(e) at the option of any Party upon occurrence without written notice
in the event that (i) the Series's shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law or (ii) such law precludes the use of such shares as an underlying
investment medium of the Policies issued or to be issued by USL; or
20
<PAGE>
(f) upon termination of the corresponding Division's investment in the
Series pursuant to Section 5 hereof; or
(g) at the option of USL upon written notice if the Series ceases to
qualify as a RIC under Subchapter M of the Code or under successor or similar
provisions, or if USL reasonably believes that the Series may fail to so
qualify; or
(h) at the option of USL upon written notice if the Series fails to
comply with Section 817(h) of the Code or with successor or similar provisions,
or if USL reasonably believes that the Series may fail to so comply.
(i) at the option of the Fund upon written notice if the Policies
cease to qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if the Fund reasonably believes that the Policies
may fail to so qualify; or
(j) at the option of the Fund, upon USL's breach of any material
provision of this Agreement, which breach has not been cured to the satisfaction
of the Fund within thirty (30) days after written notice of such breach is
delivered to USL; or
(k) at the option of USL, upon the Fund's breach of any material
provision of this Agreement, which breach has not been cured to the satisfaction
of USL within thirty (30) days after written notice of such breach is delivered
to the Fund; or
(l) at the option of the Fund upon written notice, if the Policies are
not registered, issued or sold in accordance with applicable federal and/or
state law and any applicable rules and regulations thereunder; or
(m) effective immediately in the event the agreement is assigned
without the prior written consent of all parties.
21
<PAGE>
6.2 Series to Remain Available.
--------------------------
Except (i) as necessary to implement Participant initiated transactions,
(ii) as required by state insurance laws or regulations, (iii) as required
pursuant to Section 5 of this Agreement, or (iv) with respect to any Series as
to which this Agreement has terminated, USL shall not (x) redeem Fund shares
attributable to the Policies (as opposed to Fund shares attributable to USL's
assets held in the Separate Account), or (y) prevent Participants from
allocating payments to or transferring amounts from a Series that was otherwise
available under the Policies, until, in either case, 90 calendar days after USL
shall have notified the Fund or Distributor of its intention to do so.
6.3 Survival of Warranties and Indemnifications.
-------------------------------------------
All warranties and indemnifications will survive the termination of this
Agreement.
6.4 Continuance of Agreement for Certain Purposes.
---------------------------------------------
If any Party terminates this Agreement with respect to any Series pursuant
to Section 6.1 hereof, this Agreement shall nevertheless continue in effect as
to any shares of that Series that are outstanding as of the date of such
termination (the "Initial Termination Date"). This continuation shall extend to
the earlier of the date as of which the Separate Account owns no shares of the
affected Series or a date (the "Final Termination Date") six months following
the Initial Termination Date, except that (i) USL may, by written notice to the
other Parties, shorten said six month period in the case of a termination
pursuant to Sections 6.1(d), 6.1(e) 6.1(g) 6.1(k) or 6.1(m) and (ii) the Fund
may, by written notice to the other Parties, shorten said 6 month period in the
case of a termination pursuant to Sections 6.1(b), 6.1(c), 6.1(f), 6.1(h),
6.1(i), 6.1(j) 6.1(l) or 6.1(m).
22
<PAGE>
Section 7. Parties to Cooperate Respecting Termination
-------------------------------------------------------
The Parties agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that the Separate Account owns no shares of a Series after the Final
Termination Date with respect thereto, or, in the case of a termination pursuant
to Section 6.1(a), the termination date specified in the notice of termination.
Section 8. Assignment
----------------------
This Agreement may not be assigned, except with the written consent of each
other Party.
Section 9. Notices
-------------------
Notices and communications required or permitted by Section 2 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
The United States Life
Insurance Company
In the City of New York
125 Maiden Lane
New York, NY 10038-4992
Attn: Jane K. Rushton, Esq.
FAX: 212-709-6410
American General Securities
Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attn: F. Paul Kovach, Jr.
FAX: 713-831-3366
23
<PAGE>
SAFECO Resource Series Trust
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attn: Neal A. Fuller
FAX: 206-548- 7150
SAFECO Securities, Inc.
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attn: Neal A. Fuller
FAX: 206-548- 7150
Section 10. Voting Procedures
------------------------------
Subject to the cost allocation procedures set forth in Section 3 hereof,
USL will distribute all proxy material furnished by the Fund to Participants and
will vote Fund shares in accordance with instructions received from
Participants. USL will vote Fund shares that are (a) not attributable to
Participants or (b) attributable to Participants, but for which no instructions
have been received, in the same proportion as Fund shares for which said
instructions have been received from Participants. USL agrees that it will
disregard Participant voting instructions only to the extent (i) it would be
permitted to do so pursuant to Rule 6e-3(T)(b)(15)(iii) under the 1940 Act if
the Policies were variable life insurance policies subject to that rule or (ii)
it is permitted under applicable state insurance laws affecting the Fund. USL
will be responsible for assuring that the Separate Account calculates voting
privileges in a manner consistent with that of other participating life
insurance companies that utilize the Fund.
Section 11. Foreign Tax Credits
--------------------------------
The Fund agrees to consult in advance with USL 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 Fund and Distributor by USL.
------------------------------
24
<PAGE>
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, USL agrees to indemnify and hold harmless the Fund and the Distributor,
each of their respective affiliates, and each of their directors and officers,
employees and agents, and each person, if any, who controls the Fund or the
Distributor within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 12.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of USL) 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, actions, or settlements
are related to the sale or acquisition of the Fund's shares or the Policies and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Separate Account's 1933 Act registration statement, the
Separate Account Prospectus, the Policies or, to the extent
prepared by USL or AGSI, or agents thereof, 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 USL or AGSI,
or agents thereof by or on behalf of the Fund, the
Distributor or the Adviser for use in the Separate Account's
1933 Act registration statement, the Separate Account
Prospectus, the Policies, or sales literature or advertising
(or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the
Policies or Fund shares; or
25
<PAGE>
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Fund's 1933 Act registration statement,
Fund Prospectus, sales literature or advertising of the
Fund, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
USL or AGSI) or wrongful conduct of USL or AGSI or persons
under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined
in paragraph (m) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Policies or
Fund shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Fund's 1933 Act registration statement, Fund Prospectus,
sales literature or advertising of the Fund, or any
amendment or supplement to any of the foregoing, or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of USL or
AGSI for use in the Fund's 1933 Act registration statement,
Fund Prospectus, sales literature or advertising of the
Fund, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by USL or AGSI 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 the USL or AGSI in this
26
<PAGE>
Agreement or arise out of or result from any other material
breach of this Agreement by USL or AGSI.
(b) USL shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of its reckless disregard of obligations or duties under
this Agreement or to the Distributor or to the Fund.
(c) USL shall not be liable under this indemnification provision with
respect to any action against an Indemnified Party unless such Indemnified
Party shall have notified USL 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 USL of any such action shall not relieve USL from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against an Indemnified Party, USL shall be
entitled to participate, at its own expense, in the defense of such action. USL
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 USL to such Indemnified Party of USL's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with USL and shall bear the fees and expenses of any additional counsel
retained by it, and USL 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 USL and AGSI by Distributor.
------------------------------
(a) Except to the extent provided in Sections 12.2(b) and 12.2(C)
hereof, the Distributor agrees to indemnify and hold harmless USL, AGSI, each of
their respective affiliates,
27
<PAGE>
and each of their directors and officers, employees and agents, and each person,
if any, who controls USL or AGSI, 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 the Distributor) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses) to which
the Indemnified Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities,
actions, or settlements are related to the sale or acquisition of the Fund's
shares or the Policies and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Fund's 1933 Act registration statement, Fund Prospectus,
sales literature or advertising of the Fund or, to the
extent not prepared by USL or AGSI or agents thereof, 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 the
Distributor or Fund or agents thereof by or on behalf of USL
or AGSI for use in the Fund's 1933 Act registration
statement, Fund Prospectus, or in sales literature or
advertising (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale
of the Policies or Fund shares; or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in the Separate
28
<PAGE>
Account's 1933 Act registration statement, Separate 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
the Distributor, Fund or Adviser) or the wrongful conduct of
the Fund or Distributor, or persons under their control
(including, without limitation, their employees and
Associated Persons), in connection with the sale or
distribution of the Policies or Fund shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Separate Account's 1933 Act registration statement,
Separate Account Prospectus, sales literature or advertising
covering the 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 USL or AGSI by
or on behalf of the Fund, the Adviser or the Distributor for
use in the Separate Account's 1933 Act registration
statement, Separate Account Prospectus, sales literature or
advertising covering the Policies, or any amendment or
supplement to any of the foregoing; or arise as a result of
any failure by the Fund or the Distributor 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 the Fund or the Distributor in this Agreement or arise
out of or result from any other material breach of this
Agreement by the Fund or the Distributor;
(b) Except to the extent provided in Sections 12.2(C) and 12.2(d)
hereof, the Distributor agrees to indemnify and hold harmless the Indemnified
Parties from and against any and
29
<PAGE>
all losses, claims, damages, liabilities (including amounts paid in settlement
thereof with the written consent of the Fund) 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
Series 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 USL or AGSI 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 USL of shares of another investment company
or portfolio for those of any adversely affected Series as a funding medium for
each Separate Account that USL reasonably deems necessary or appropriate as a
result of the noncompliance.
(c) The Fund and the Distributor shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or actions to which an Indemnified Party would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance by that Indemnified Party of its duties or by reason of its reckless
disregard of obligations and duties under this Agreement or to USL, AGSI or the
Separate Account.
(d) The Fund and the Distributor shall not be liable under this
indemnification provision with respect to any action against an Indemnified
Party unless such Indemnified Party shall have notified the Fund and the
Distributor in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the action shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Distributor of any such action shall not relieve the Distributor from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against an Indemnified Party, the Distributor will be
entitled to
30
<PAGE>
participate, at its own expense, in the defense of such action. The Distributor
also shall be entitled to assume the defense thereof, with counsel approved by
the Indemnified Party named in the action, which approval shall not be
unreasonably withheld. After notice from the Distributor to such Indemnified
Party of the Distributor's election to assume the defense thereof, the
Indemnified Party will cooperate fully with the Distributor and shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
12.3 Effect of Notice.
----------------
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 12.1 or 12.2 above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
-----------
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
Section 13. Applicable Law
---------------------------
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Delaware 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
-------------------------
31
<PAGE>
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.
Section 18. Limitation of Liability
-----------------------------------
It is understood and expressly stipulated that neither the shareholders of
shares of any Series nor the Trustees or officers of the Fund or any Series
shall be personally liable hereunder. No Series shall be liable for the
liabilities of any other Series. All persons dealing with the Fund or a Series
must look solely to the property of the Fund or that Series, respectively, for
enforcement of any claims against the Fund or that Series. It is also
understood that each of the Series shall be deemed to be entering into a
separate Agreement with USL so that it is as if each of the Series had signed a
separate Agreement with USL and that a single document is being signed simply to
facilitate the execution and administration of the Agreement.
Section 19
----------
No provision of this Agreement may be amended or modified in any manner except
by a written agreement properly authorized and executed by all Parties.
32
<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.
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
By ______________________________________
David J. Dietz
Title President and Chief Executive Officer
--------------------------------------
AMERICAN GENERAL SECURITIES INCORPORATED
By ______________________________________
F. Paul Kovach, Jr.
Title President and Chief Executive Officer
--------------------------------------
SAFECO RESOURCE SERIES TRUST
By ______________________________________
Neal A. Fuller
Title Vice President & Controller
--------------------------------------
SAFECO SECURITIES, INC.
By ______________________________________
Neal A. Fuller
Title Vice President & Controller
--------------------------------------
33
<PAGE>
Exhibit (8)(i)
SAFECO
December 1, 1998
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, New York 10038-4992
Ladies and Gentlemen:
This letter between SAFECO Asset Management Company ("SAM") and The United
States Life Insurance Company in the City of New York ("USL") concerning certain
administrative services to be provided by USL on a sub-administration basis with
respect to certain series of the SAFECO Resource Series Trust (the "Fund") in
connection with the Participation Agreement between USL, American General
Securities Incorporated, the Fund, and SAFECO Securities, Inc. (the
"Participation Agreement"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Participation Agreement.
1. Administrative Services and Expenses. USL shall be responsible for
------------------------------------
administrative services for purchasers of Policies and for the Separate
Accounts named in Schedule B attached hereto and made a part hereof and
which invest in the Series pursuant to the Participation Agreement.
Administrative services for the Series in which the Separate Accounts
invest, and for purchasers of shares of the Series, are the responsibility
of the Fund.
USL has agreed to assist SAM, as SAM may request from time to time, with
the provision of administrative services ("Administrative Services") to the
Series, on a sub-administration basis, as they may relate to the investment
in the Series by the Separate Accounts. It is anticipated that
Administrative Services may include (but shall not be limited to) the
printing and mailing of informational materials to owners of the Policies
supported by the Separate Accounts with allocations to the Series; the
provision of various reports for the Fund and for submission to the Fund's
Board of Trustees; the provision of shareholder support services with
respect to the Series; and the services listed on Schedule A attached
hereto and made a part hereof.
2. Administrative Expense Payments. In consideration of the anticipated
-------------------------------
administrative expense savings resulting from the arrangements set forth in
this Agreement, SAM agrees to pay USL on a quarterly basis an amount set
forth in Schedule B.
For purposes of computing the payment to USL contemplated under this
Paragraph 2 for each quarterly period, the total of the average daily net
assets invested by the Separate Accounts shall be multiplied by the rate
shown in Schedule B multiplied by the actual number of days in the period
divided by 365.
The expense payment contemplated by this Paragraph 2 shall be calculated by
SAM at the end of each quarter and will be paid to USL within 30 days
thereafter on a pro-rata basis. Payment will be accompanied by a statement
showing the calculation of the quarterly amount payable by SAM and such
other supporting data as may be reasonably requested by USL.
-1-
<PAGE>
3. Nature of Payments. The parties to this letter agreement recognize and
------------------
agree that payments to USL relate to Administrative Services only. The
amount of administrative expense payments made by SAM to USL pursuant to
Paragraph 2 of this letter agreement shall not be deemed to be conclusive
with respect to SAM's actual administrative expenses or savings.
4. Term. This letter agreement shall remain in full force and effect for so
----
long as the assets of the Series are attributable to amounts invested by
the Separate Accounts under the Participation Agreement, unless terminated
in accordance with Paragraph 5 of this letter agreement.
5. Termination. This letter agreement may be terminated by either party upon
-----------
90 days' advance written notice or immediately upon termination of the
Participation Agreement or upon the mutual agreement of the parties hereto
in writing.
6. Representation. USL represents and agrees that it will maintain and
--------------
preserve all records as required by law to be maintained and preserved in
connection with providing the Administrative Services, and will otherwise
comply with all laws, rules and regulations applicable to the
Administrative Services.
7. Subcontractors. USL may, with the prior written consent of SAM, contract
--------------
with or establish relationships with other parties for the provision of the
Administrative Services or other activities of USL required by this letter
agreement, provided that USL shall be fully responsible for the acts and
omissions of such other parties. SAM agrees that American General Life
Companies, an affiliate of USL, may provide services on behalf of USL under
this letter agreement as provided in this paragraph.
8. Authority. This letter agreement shall in no way limit the authority of
---------
the Fund or SAM to take such action as either party may deem appropriate or
advisable in connection with all matters relating to the operations of the
Fund and/or sale of its shares. USL understands and agrees that the
obligations of SAM under this letter agreement are not binding upon the
Fund.
9. Indemnification. This letter agreement will be subject to the
---------------
indemnification provisions in Section 12 of the Participation Agreement.
10. Miscellaneous. This letter agreement may be amended only upon mutual
-------------
agreement of the parties hereto in writing. This letter agreement may not
be assigned by either party hereto, by operation of law or otherwise,
without the prior written consent of the other party. This letter
agreement, including Schedule A and Schedule B, constitutes the entire
agreement between the parties with respect to the matters dealt with
herein, and supersedes any previous agreements and documents with respect
to such matters. This letter agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall together
constitute one and the same instrument. Each party agrees to notify the
other party promptly if for any reason it is unable to perform fully and
promptly any of its obligations under this letter agreement.
11. Notice. Any notices required to be sent hereunder shall be sent in
------
accordance with the Participation Agreement, except that any notice to SAM
hereunder shall be sent to:
SAFECO Asset Management Company
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Institutional Division
-2-
<PAGE>
Please indicate USL's understanding of, and agreement to, the matters set forth
above by signing below and returning a signed copy to us.
Very truly yours,
By: ___________________________________
Name: Leslie Eggerling - Vice President
Acknowledged and Agreed:
The United States Life Insurance Company
in the City of New York
By: ___________________________________
Name: _________________________________
Title: ________________________________
Attachment: Schedule A
Schedule B
-3-
<PAGE>
SCHEDULE A
I. Fund-related Policyowner services
. Fund proxies services, including facilitating distribution of proxy
material to Policyowners, tabulation and reporting.
. Telephonic support for Policyowners with respect to inquiries about the
Fund (not including information related to sales).
. Communications to Policyowners regarding performance of the Series.
II. Sub-accounting services
. Aggregating purchase and redemption orders of the Separate Accounts for
sales of the Series.
. Assistance in resolution of pricing errors.
III. Other administrative support
. Providing other administrative support to the Fund as mutually agreed
between USL and SAM.
-4-
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
Separate Account Registration Nos. of Variable Administrative Expense Amounts
- ---------------- ----------------------------- ------------------------------
Life Insurance Policy(ies)/Annuity
----------------------------------
Contracts and Policy or Contract
--------------------------------
Name(s)
-------
<S> <C> <C>
American General Life Insurance File Nos. 333-42567 SAM agrees to pay USL a quarterly
Company Separate Account VL-R 811-08561 amount that is equal on a annual
Policies: Platinum Investor I basis to twenty-five basis points
and Platinum Investor II Variable (.25%) of the average combined
Life Insurance Policies (Contract daily net assets of all of shares
Form Nos. 97600 and 97610) of the Fund held in the Separate
Account of USL pursuant to the
Corporate America-Variable Life Participation Agreement.
Insaurance Policies (Contract
Form No. 99301)
American General Life Insurance File Nos. 333-70667 SAM agrees to pay USL a quarterly
Company Separate Account D 811-2441 amount that is equal on a annual
Policy: Platinum Investor basis to twenty-five basis points
Variable Annuity Contract (.25%) of the average combined
(Contract Form No. 98202) daily net assets of all of shares
of the Fund held in the Separate
Account of USL pursuant to the
Participation Agreement
</TABLE>
-5-
<PAGE>
Exhibit (8)(j)
AGREEMENT
THIS AGREEMENT ("Agreement") made as of December 1, 1998, is by and among MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC., a Delaware corporation ("MSAM"),
MILLER ANDERSON & SHERRERD, LLP, a Pennsylvania limited partnership ("MAS")
(each of MSDWIM and MAS are referred to herein as an "Adviser" and collectively
as, the "Advisers") and UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW
YORK, a New York corporation ("USL").
W I T N E S S E T H:
WHEREAS, the investment company identified on Schedule One hereto ("Schedule
------------ --------
One," as the same may be amended from time to time), is registered as an open-
- ---
end management investment company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" - the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
------------
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of USL, established for variable life insurance policies
and/or variable annuity contracts offered by USL (individually or collectively,
the "Separate Account"); and
WHEREAS, USL has entered into a participation agreement dated January 24, 1997
among USL, the Investment Company and the Advisers (the "Participation
Agreement," as the same may be amended from time to time); and
WHEREAS, the Advisers provide, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, the Advisers desire USL to provide the administrative services
specified in the attached Exhibit A ("Administrative Services"), in connection
---------
with the ownership of interests of the Separate Account, which holds shares of
the Funds, and USL is willing and able to provide such Administrative Services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
---------
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. USL may, with the consent of an Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of USL required by this Agreement, provided that
USL shall be fully responsible for the acts and omissions of such other
parties.
1
<PAGE>
3. USL hereby agrees to notify the Advisers promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
4. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained under USL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of the
Advisers or the Investment Company to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of the Funds and/or sale of shares of the Funds.
6. In consideration of the Administrative Services provided by USL with respect
to the variable life insurance and variable annuity contracts identified on
Schedule Two attached hereto, each Adviser agrees to pay USL with respect to
------------
the Funds for which it serves as adviser (as indicated on Schedule One), a
------------
monthly fee at an annual rate which shall equal .15% of the net asset value
of the shares of each such Fund held in the Separate Account. The foregoing
fee will be paid by the applicable Adviser to USL on a calendar quarter
basis; payment of such fee will be made by the appropriate Adviser to USL
within thirty (30) days following the end of each calendar quarter. The
determination of applicable assets shall be made by averaging the assets of
the applicable portfolios of the Fund maintained in the Master Account for
the Shareholders as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by an Adviser to USL relate solely to
the performance by USL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by USL to
USL policy or contract owners, or to any separate account organized by USL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
7. USL shall indemnify and hold harmless the Investment Company, the Funds, and
the Advisers and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by USL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by USL or by an
Adviser as to one or more of the Funds, upon one hundred and eighty days
(180) written notice to the other party. Notwithstanding the foregoing, the
provisions of paragraphs 7 and 9 of this Agreement, shall continue in full
force and effect after termination of this Agreement.
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any shares
of the Funds first placed in the Separate
2
<PAGE>
Account after the date of such termination. However, notwithstanding any
such termination, the Advisers will remain obligated to pay USL the fee
specified in paragraph 6 of this Agreement, with respect to the net asset
value of shares of the Funds maintained in the Separate Account as of the
date of such termination, for so long as such amounts are held in the
Separate Account and USL continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
10. USL understands and agrees that the obligations of the Advisers under this
Agreement are not binding upon the Investment Company, upon any of its Board
members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement USL, acting in its capacity described herein, shall at no time be
acting as an agent for an Adviser or the Investment Company. USL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company or the Funds except those contained in the Investment
Company's then-current prospectus; in current sales literature furnished by
the Investment Company or an Adviser to USL; in the then current prospectus
for a variable annuity contract or variable life insurance policy issued by
USL or then current sales literature with respect to such variable annuity
contract or variable life insurance policy, approved by an Adviser.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of Texas, without
giving effect to the principles of conflicts of law of such jurisdiction.
14. This Agreement, including Exhibit A and Schedules One and Two, constitutes
--------- ---------------------
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedule One may be
------------
replaced from time to time with a new Schedule One to accurately reflect any
------------
changes in the Investment Company or Funds available as investment vehicles
under the Participation Agreement.
3
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By: ______________________________
Authorized Signatory
______________________________
Print or Type Name
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
By: ______________________________
Authorized Signatory
______________________________
Print or Type Name
MILLER ANDERSON & SHERRERD, LLP
By: ______________________________
Authorized Signatory
______________________________
Print or Type Name
4
<PAGE>
SCHEDULE ONE
Investment Company Name: Fund Name(s) and Adviser to Fund:
- ------------------------ ---------------------------------
Morgan Stanley Universal Funds, Inc. Adviser: Morgan Stanley Dean Witter
Investment Management Inc.
Funds:
Equity Growth
International Magnum
Emerging Markets Equity
Global Equity
Adviser:
Miller Anderson & Sherrerd, LLP
Funds:
Fixed Income
High Yield
Mid Cap Value
Value
5
<PAGE>
SCHEDULE TWO
VARIABLE LIFE INSURANCE AND
ANNUITY CONTRACTS COVERED UNDER
AGREEMENT (as of August 20, 1999)
The United States Life Insurance
Company In the City of New York
Separate Account: USL VA-R Contract Form No.
-----------------
Established: August 8, 1997 98033N
Separate Account: USL VL-R Contract Form No.
-----------------
Established: August 8, 1997 97600N
6
<PAGE>
EXHIBIT A
(As of January 1, 1999)
Pursuant to the Agreement by and among the parties hereto, USL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance and
(c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating USL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received by
USL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company and transmit communications deemed by the Investment
Company, through its Board of Directors, to be necessary and proper for
receipt by all policy and contract owners participating in the Separate
Account.
5 Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable Investment Company and its Advisers to comply with
applicable securities and insurance laws.
7
<PAGE>
Exhibit (8)(k)
AGREEMENT
---------
Agreement made as of the ___ day of _______, 1999 by and between (i)
Dreyfus Corporation("Dreyfus"), a New York corporation; and (ii) The United
States Life Insurance Company in the City New York ("Client"), a New York
corporation.
W I T N E S S E T H:
WHEREAS, the Investment Company identified on Schedule One hereto ("Schedule
------------ --------
One," as the same may be amended from time to time), is registered as an open-
- ---
end management Investment Company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" - the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
------------
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of USL, established for variable life insurance policies
and/or variable annuity contracts offered by USL (individually or collectively,
the "Separate Account"); and
WHEREAS, USL has entered into a participation agreement dated ____________, 1999
among USL, the Investment Company and Dreyfus (the "Participation Agreement," as
the same may be amended from time to time); and
WHEREAS, Dreyfus provide, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, Dreyfus desire USL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
---------
ownership of interests of the Separate Account, which holds shares of the Funds,
and USL is willing and able to provide such Administrative Services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
---------
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. USL may, with the consent of Dreyfus, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of USL required by this Agreement, provided that
USL shall be fully responsible for the acts and omissions of such other
parties.
3. USL hereby agrees to notify Dreyfus promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
1
<PAGE>
4. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained under USL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of
Dreyfus or the Investment Company to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of the Funds and/or sale of shares of the Funds.
6. In consideration of the Administrative Services provided by USL with respect
to the variable life insurance and variable annuity contracts identified on
Schedule Two attached hereto, Dreyfus agrees to pay USL with respect to the
------------
Funds (as indicated on Schedule One), a monthly fee at an annual rate which
------------
shall equal .of the net asset value of the shares of each such Fund held in
the Separate Account. The foregoing fee will be paid by Dreyfus to USL on a
calendar quarter basis; payment of such fee will be made by Dreyfus to USL
within thirty (30) days following the end of each calendar quarter. The
determination of applicable assets shall be made by averaging the assets of
the applicable portfolios of the Fund maintained in the Master Account for
the Shareholders as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Dreyfus to USL relate solely to the
performance by USL of the Administrative Services described herein only, and
do not constitute payment in any manner for services provided by USL to USL
policy or contract owners, or to any separate account organized by USL, or for
any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
7. USL shall indemnify and hold harmless the Investment Company, the Funds, and
Dreyfus and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by USL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by USL or by
Dreyfus as to one or more of the Funds, upon one hundred and eighty days
(180) written notice to the other party. Notwithstanding the foregoing, the
provisions of paragraphs 7 and 9 of this Agreement, shall continue in full
force and effect after termination of this Agreement.
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any shares
of the Funds first placed in the Separate Account after the date of such
termination. However, notwithstanding any such termination, Dreyfus will
remain obligated to pay USL the fee specified in paragraph 6 of this
Agreement, with respect to the net asset value of shares of the Funds
maintained in the Separate Account as
2
<PAGE>
of the date of such termination, for so long as such amounts are held in the
Separate Account and USL continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
10. USL understands and agrees that the obligations of Dreyfus under this
Agreement are not binding upon the Investment Company, upon any of its Board
members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement USL, acting in its capacity described herein, shall at no time be
acting as an agent for Dreyfus or the Investment Company. USL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company or the Funds except those contained in the Investment
Company's then-current prospectus; in current sales literature furnished by
the Investment Company or Dreyfus to USL; in the then current prospectus
for a variable annuity contract or variable life insurance policy issued by
USL or then current sales literature with respect to such variable annuity
contract or variable life insurance policy, approved by Dreyfus.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of New York,
without giving effect to the principles of conflicts of law of such
jurisdiction.
14. This Agreement, including Exhibit A and Schedules One and Two, constitutes
--------- ---------------------
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedule One may be
------------
replaced from time to time with a new Schedule One to accurately reflect any
------------
changes in the Investment Company or Funds available as investment vehicles
under the Participation Agreement.
3
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By:_______________________________
Authorized Signatory
_______________________________
Print or Type Name
THE DREYFUS CORPORATION
By:_______________________________
Authorized Signatory
_______________________________
Print or Type Name
4
<PAGE>
SCHEDULE ONE
DREYFUS VARIABLE INVESTMENT FUND:
. Small Cap Portfolio
. Quality Bond Portfolio
5
<PAGE>
SCHEDULE TWO
ACCOUNTS AND POLICIES
- ---------------------
The United States Life Insurance
Company In the City of New York
Separate Account: USL VL-R Contract Form No.
-----------------
Established: August 8, 1997 97600N
6
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, USL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance and
(c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating USL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received
by USL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company and transmit communications deemed by the Investment
Company, through its Board of Directors, to be necessary and proper for
receipt by all policy and contract owners participating in the Separate
Account.
5 Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable Investment Company and Dreyfus to comply with
applicable securities and insurance laws.
7
<PAGE>
Exhibit (8)(L)
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
("INSURER") and A I M ADVISORS, INC. ("AIM") (collectively, the "Parties")
mutually agree to the arrangements set forth in this Administrative Services
Agreement (the "Agreement") dated as of _____________________1999.
WHEREAS, AIM is the investment adviser to AIM Variable Insurance Funds,
Inc. (the "Fund"); and
WHEREAS, AIM has entered into an amended Master Administrative Services
Agreement, dated May 1, 1998, with the Fund ("Master Agreement") pursuant to
which it has agreed to provide, or arrange to provide, certain administrative
services, including such services as may be requested by the Fund's Board of
Directors from time to time; and
WHEREAS, INSURER issues variable life insurance policies and/or variable
annuity contracts (collectively, the "Contracts"); and
WHEREAS, INSURER has entered into a participation agreement, dated June 1,
1998 ("Participation Agreement") with the Fund, pursuant to which the Fund has
agreed to make shares of certain of its portfolios ("Portfolios") available for
purchase by one or more of INSURER's separate accounts or divisions thereof
(each, a "Separate Account"), in connection with the allocation by Contract
owners of purchase payments to corresponding investment options offered under
the Contracts; and
WHEREAS, INSURER and AIM expect that the Fund, and its Portfolios, can
derive substantial savings in administrative expenses by virtue of having one or
more Separate Accounts of INSURER each as a single shareholder of record of
Portfolio shares, rather than having numerous public shareholders of such
shares; and
WHEREAS, INSURER and AIM expect that the Fund, and its Portfolios, can
derive such substantial savings because INSURER performs the administrative
services listed on Schedule A hereto for the Fund in connection with the
Contracts issued by INSURER; and
WHEREAS, INSURER has no contractual or other legal obligation to perform
such administrative services, other than pursuant to this Agreement and the
Participation Agreement; and
WHEREAS, INSURER desires to be compensated for providing such
administrative services; and
WHEREAS, AIM desires that the Fund benefit from the lower administrative
expenses resulting from the administrative services performed by INSURER; and
1
<PAGE>
WHEREAS, AIM desires to retain the administrative services of INSURER and
to compensate INSURER for providing such administrative services;
NOW, THEREFORE, the Parties agree as follows:
Section 1. Administrative Services; Payments Therefor.
------------------------------------------
(a) INSURER shall provide the administrative services set out in Schedule
A hereto and made a part hereof, as the same may be amended from time to time.
For such services, AIM agrees to pay to INSURER a quarterly fee ("Quarterly
Fee") equal to a percentage of the average daily net assets of the Fund
attributable to the Contracts issued by INSURER ("INSURER Fund Assets") at the
following annual rates:
Annual Rate Total Average Quarterly Net Assets for All Portfolios
----------- -----------------------------------------------------
0.15% Less than $100 million
0.20% $100 million or more
(b) AIM shall calculate the Quarterly Fee at the end of each calendar
quarter and will make such payment to INSURER, without demand or notice by
INSURER, within 30 days thereafter, in a manner mutually agreed upon by the
Parties from time to time.
(c) From time to time, the Parties shall review the Quarterly Fee to
determine whether it exceeds or is reasonably expected to exceed the incurred
and anticipated costs, over time, of INSURER. The Parties agree to negotiate in
good faith a reduction to the Quarterly Fee as necessary to eliminate any such
excess or as necessary to reflect a reduction in the fee paid by the Fund to AIM
pursuant to the Master Agreement.
Section 2. Nature of Payments.
-------------------
The Parties to this Agreement recognize and agree that AIM's payments
hereunder are for administrative services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution of
Contracts or of Portfolio shares, and are not otherwise related to investment
advisory or distribution services or expenses. INSURER represents and warrants
that the fees to be paid by AIM for services to be rendered by INSURER pursuant
to the terms of this Agreement are to compensate the INSURER for providing
administrative services to the Fund, and are not designed to reimburse or
compensate INSURER for providing administrative services with respect to the
Contracts or any Separate Account.
2
<PAGE>
Section 3. Term and Termination.
--------------------
Any Party may terminate this Agreement, without penalty, on 60 days'
written notice to the other Party. Unless so terminated, this Agreement shall
continue in effect for so long as AIM or its successor(s) in interest, or any
affiliate thereof, continues to perform in a similar capacity for the Fund, and
for so long as INSURER provides the services contemplated hereunder with respect
to Contracts under which values or monies are allocated to a Portfolio.
Section 4. Amendment.
---------
This Agreement may be amended upon mutual agreement of the Parties in
writing.
Section 5. Notices.
-------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered
The United States Life Insurance Company in the City of New York
c/o American General Independent Producer Division
2727-A Allen Parkway
Houston, Texas 77019
Facsimile: (713) 831-3071
Attention: Steven Glover, Esq.
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attention: Nancy L. Martin, Esq.
Section 6. Miscellaneous.
-------------
(a) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Parties and their transferees, successors and assigns. The benefits of and the
right to enforce this Agreement shall accrue to the Parties and their
transferees, successors and assigns.
(b) Assignment. Neither this Agreement nor any of the rights, obligations
----------
or liabilities of any Party hereto shall be assigned without the written consent
of the other Party.
(c) Intended Beneficiaries. Nothing in this Agreement shall be construed
----------------------
to give any person or entity other than the Parties, as well as the Fund, any
legal or equitable claim, right or remedy. Rather, this Agreement is intended to
be for the sole and exclusive benefit of the Parties, as well as the Fund.
3
<PAGE>
(d) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original but all of which shall together constitute one
and the same instrument.
(e) Applicable Law. This Agreement shall be interpreted, construed, and
--------------
enforced in accordance with the laws of the State of Delaware without reference
to the conflict of law principles thereof.
(f) Severability. If any portion of this Agreement shall be found to be
------------
invalid or unenforceable by a court or tribunal or regulatory agency of
competent jurisdiction, the remainder shall not be affected thereby, but shall
have the same force and effect as if the invalid or unenforceable portion had
not been inserted.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
of first above written.
THE UNITED STATES LIFE INSURANCE COMPANY IN
THE CITY OF NEW YORK
By: ________________________________
Title: ________________________________
A I M ADVISORS, INC.
By: ________________________________
Title: ________________________________
4
<PAGE>
SCHEDULE A
----------
ADMINISTRATIVE SERVICES FOR
---------------------------
AIM VARIABLE INSURANCE FUNDS, INC.
----------------------------------
INSURER shall provide certain administrative services respecting the
operations of the Fund, as set forth below. This Schedule, which may be amended
from time to time as mutually agreed upon by INSURER and AIM, constitutes an
integral part of the Agreement to which it is attached. Capitalized terms used
herein shall, unless otherwise noted, have the same meaning as the defined terms
in the Agreement to which this Schedule relates.
A. Records of Portfolio Share Transactions; Miscellaneous Records
--------------------------------------------------------------
1. INSURER shall maintain master accounts with the Fund, on behalf of
each Portfolio, which accounts shall bear the name of INSURER as the record
owner of Portfolio shares on behalf of each Separate Account investing in the
Portfolio.
2. INSURER shall maintain a daily journal setting out the number of
shares of each Portfolio purchased, redeemed or exchanged by Contract owners
each day, as well as the net purchase or redemption orders for Portfolio shares
submitted each day, to assist AIM, the Fund and/or the Fund's transfer agent in
tracking and recording Portfolio share transactions, and to facilitate the
computation of each Portfolio's net asset value per share. INSURER shall
promptly provide AIM, the Fund, and the Fund's transfer agent with a copy of
such journal entries or information appearing thereon in such format as may be
reasonably requested from time to time. INSURER shall provide such other
assistance to AIM, the Fund, and the Fund's transfer agent as may be necessary
to cause various Portfolio share transactions effected by Contract owners to be
properly reflected on the books and records of the Fund.
3. In addition to the foregoing records, and without limitation, INSURER
shall maintain and preserve all records as required by law to be maintained and
preserved in connection with providing administrative services hereunder.
B. Order Placement and Payment
---------------------------
1. INSURER shall determine the net amount to be transmitted to the
Separate Accounts as a result of redemptions of each Portfolio's shares based on
Contract owner redemption requests and shall disburse or credit to the Separate
Accounts all proceeds of redemptions of Portfolio shares. INSURER shall notify
the Fund of the cash required to meet redemption payments.
2. INSURER shall determine the net amount to be transmitted to the Fund
as a result of purchases of Portfolio shares based on Contract owner purchase
payments and transfers allocated to the Separate Accounts investing in each
Portfolio. INSURER shall transmit net purchase payments to the Fund's custodian.
5
<PAGE>
C. Accounting Services
-------------------
INSURER shall perform miscellaneous accounting services as may be
reasonably requested from time to time by AIM, which services shall relate to
the business contemplated by the Participation Agreement between INSURER and the
Fund, as amended from time to time. Such services shall include, without
limitation, periodic reconciliation and balancing of INSURER's books and records
with those of the Fund with respect to such matters as cash accounts, Portfolio
share purchase and redemption orders placed with the Fund, dividend and
distribution payments by the Fund, and such other accounting matters that may
arise from time to time in connection with the operations of the Fund as related
to the business contemplated by the Participation Agreement.
D. Reports
-------
INSURER acknowledges that AIM may, from time to time, be called upon by the
Fund's Board of Directors ("Board"), to provide various types of information
pertaining to the operations of the Fund and related matters, and that AIM also
may, from time to time, decide to provide such information to the Board in its
own discretion. Accordingly, INSURER agrees to provide AIM with such assistance
as AIM may reasonably request so that AIM can report such information to the
Fund's Board in a timely manner. INSURER acknowledges that such information and
assistance shall be in addition to the information and assistance required of
INSURER pursuant to the Fund's mixed and shared funding SEC exemptive order,
described in the Participation Agreement.
INSURER further agrees to provide AIM with such assistance as AIM may
reasonably request with respect to the preparation and submission of reports and
other documents pertaining to the Fund to appropriate regulatory bodies and
third party reporting services.
E. Fund-related Contract Owner Services
------------------------------------
INSURER agrees to print and distribute, in a timely manner, prospectuses,
statements of additional information, supplements thereto, periodic reports,
proxy materials and any other materials of the Fund required by law or otherwise
to be given to its shareholders, including, without limitation, Contract owners
investing in Portfolio shares. INSURER further agrees to provide telephonic
support for Contract owners, including, without limitation, advice with respect
to inquiries about the Fund and each Portfolio thereof (not including
information about performance or related to sales), communicating with Contract
owners about Fund (and Separate Account) performance, and assisting with proxy
solicitations, specifically with respect to soliciting voting instructions from
Contract owners.
F. Miscellaneous Services
----------------------
INSURER shall provide such other administrative support to the Fund as mutually
agreed between INSURER and AIM or the Fund from time to time. INSURER shall,
from time to time, relieve the
6
<PAGE>
Fund of other usual or incidental administration services of the type ordinarily
borne by mutual funds that offer shares to individual members of the general
public.
7
<PAGE>
EXHIBIT 2(A)
American
|General
|Life Companies
2929 Allen Parkway (a40-04), Houston, Texas 77019
Pauletta P. Cohn
Associate General Counsel
Direct Line (713) 831-8471
Fax (713) 831-1106
E-mail: [email protected]
November 5, 1999
The United States Life Insurance Company
in the City of New York
125 maiden lane
New York, NY 10038
Dear Ladies and Gentlemen:
As Associate General Counsel of American General Life Companies, I have acted as
counsel to The United States Life Insurance Company in the City of New York (the
"Company") in connection with the filing of Pre-effective Amendment No. 1 to
Registration Statement on Form s-6, File Nos. 333-79471 and 811-09359
("Registration Statement") of Separate Account USL VL-R ("Separate Account USL
VL-R") of the Company with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended. The Registration Statement relates to a
proposed issuance of an indefinite number of units of interest in Separate
Account USL VL-R ("Units") funding Platinum Investor (policy form No. 97600N)
flexible premium variable life insurance policies issued by the Company
("Policies"). Net premiums received under the policies are allocated by the
company to separate account usl vl-r to the extent directed by owners of the
policies. net premiums under other variable life insurance policies or policies
that may be issued by the company may also be allocated to Separate Account USL
VL-R. The Policies are designed to provide retirement protection and are to be
offered in the manner described in the prospectus and the prospectus supplements
included in the Registration Statement. The Policies will be sold only in
jurisdictions authoriziing such sales.
In connection with rendering this opinion, I have examined and am familiar with
originals or copies, certified or otherwise identified to my satisfaction, of
the corporate records of the Company and all such other documents as I have
deemed necessary or appropriate as a basis for the opinion expressed herein and
have assumed that prior to the issuance or sale of any Policies the Registration
Statement, as finally amended, will be effective.
<PAGE>
The United States Life Insurance Company
in the City of New York
November 5, 1999
Page 2
Based on and subject to the foregoing and the limitations, qualifications,
exceptions and assumptions set forth herein, I am of the opinion that:
1. The Company is a corporation duly organized and validly existing under the
laws of the State of New York.
2. Separate Account USL VL-R was duly established and is maintained by the
Company pursuant to the laws of the State of New York, under which income,
gains and losses, whether or not realized, from assets allocated to
Separate Account USL VL-R, are, in accordance with the policies, credited
to or charged against Separate Account USL VL-R without regard to other
income, gains or losses of the Company.
3. Assets allocated to Separate Account USL VL-R will be owned by the Company.
The Company is not a trustee with respect thereto. The Policies provide
that the portion of the assets of Separate Account USL VL-R equal to the
reserves and other Policy liabilities with respect to Separate Account USL
VL-R will not be chargeable with liabilities arising out of any other
business the Company may conduct. The Company reserves the right to
transfer assets of Separate Account USL VL-R in excess of such reserves and
other Policy liabilities to the general account of the Company.
3. When issued and sold as described above, the Policies (including any Units
duly credited thereunder) will be duly authorized and will constitute
validly issued and binding obligations of the Company in accordance with
their terms.
I am admitted to the bar in the State of Texas, and I do not express any opinion
as to the laws of any other jurisprudence.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5), Regulation S-K of the 1933 Act and i hereby consent to the use of
this opinion as an exhibit to the Registration Statement.
Sincerely,
/S/ PAULETTA P. COHN
--------------------
<PAGE>
Exhibit 2(b)
Writer's Direct Number
(713) 831-2738
November 5, 1999
The United States Life Insurance Company
in the City of New York
125 Maiden Lane
New York, NY 10038
Dear Ladies and Gentlemen:
This opinion is furnished in connection with the Registration Statement on Form
S-6, File No. 333-79471 ("Registration Statement") of Separate Account VL-R
("Separate Account VL-R") of The United States Life Insurance Company in the
City of New York ("USL") covering an indefinite number of units of interest in
Separate Account VL-R under Platinum Investor (policy form No. 97600N) flexible
premium variable life insurance policies ("Policies"). Net premiums received
under the Policies may be allocated to Separate Account VL-R as described in the
prospectus included in the Registration Statement.
I participated in the preparation of the Policies and I am familiar with their
provisions. I am also familiar with the description contained in the
prospectus. In my opinion:
The Illustrations of Hypothetical Policy Benefits appearing on page 20 of
the Prospectus (the "Illustrations") are consistent with the provisions of
the Policies. The assumptions upon which these Illustrations are based,
including the current charges and the currently planned .25% and .50%
reductions in the daily charges after a specified number of years, are
stated in the prospectus and are reasonable. The Policies have not been
designed so as to make the relationship between premiums and benefits, as
shown in the Illustrations, appear disproportionately more favorable to
prospective purchasers of Policies for preferred risk (the best risk class
offered by USL) non-tobacco user males age 45, than to prospective
purchasers of Policies for males at other ages within this risk class or
any other risk class, or for females. The particular Illustrations shown
were not selected for the purpose of making the relationship appear more
favorable.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Actuarial Expert"
in the prospectus.
/s/ ROBERT M. BEUERLEIN
------------------------------------------
Robert M. Beuerlein
Senior Vice President & Chief Actuary
<PAGE>
EXHIBIT 6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our reports dated August 5, 1999 and April 23, 1999
as to The United States Life Insurance Company in the City of New York, in
Pre-Effective Amendment No. 1 to the Registration Statement (Form S-6, Nos.
333-79471 and 811-09359) of The United States Life Insurance Company in the City
of New York.
/s/ ERNST & YOUNG LLP
----------------------------
ERNST & YOUNG LLP
New York, New York
November 4, 1999
<PAGE>
EXHIBIT 7(B)
POWERS OF ATTORNEY
I, Donald W. Britton, hereby appoint Robert F. Herbert, Jr. and Pauletta P.
Cohn and each of them, any one of whom may act without the joinder of the
others, as attorney-in-fact to sign on my behalf and in the capacity stated
below and to file all amendments to this amended Registration Statement (SEC
File No. 333-79471), which amendment or amendments may make such changes and
additions to this amended Registration Statement as such attorney-in-fact may
deem necessary or appropriate.
By: /s/ DONALD W. BRITTON
---------------------
Donald W. Britton
Date: November 1, 1999
<PAGE>
EXHIBIT 7(C)
POWERS OF ATTORNEY
I, James P. Corcoran, hereby appoint Robert F. Herbert, Jr. and Pauletta P.
Cohn and each of them, any one of whom may act without the joinder of the
others, as attorney-in-fact to sign on my behalf and in the capacity stated
below and to file all amendments to this amended Registration Statement (SEC
File No. 333-79471), which amendment or amendments may make such changes and
additions to this amended Registration Statement as such attorney-in-fact may
deem necessary or appropriate.
By: /s/ JAMES P. CORCORAN
---------------------
James P. Corcoran
Date: November 1, 1999
<PAGE>
EXHIBIT 7(D)
POWERS OF ATTORNEY
I, John V. LaGrasse, hereby appoint Robert F. Herbert, Jr. and Pauletta P.
Cohn and each of them, any one of whom may act without the joinder of the
others, as attorney-in-fact to sign on my behalf and in the capacity stated
below and to file all amendments to this amended Registration Statement (SEC
File No. 333-79471), which amendment or amendments may make such changes and
additions to this amended Registration Statement as such attorney-in-fact may
deem necessary or appropriate.
By: /s/ JOHN V. LAGRASSE
--------------------
John V. LaGrasse
Date: November 1, 1999
