<PAGE>
Registration No. 333-87307
As filed with the Securities and Exchange Commission on January 20, 2000
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
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT VL-R
(Exact Name of Trust)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Exact Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Complete Address of Depositor's Principal Executive Offices)
Pauletta P. Cohn, Esq.
Deputy General Counsel
American General Life Companies
2727 Allen Parkway
Houston, Texas 77019-2191
(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.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT 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
ITEM NO. OF FORM N-8B-2* PROSPECTUS CAPTION
- -------------------------------------------------------------------------------
1 Additional Information: Separate Account VL-R.
2 Additional Information: AGL.
3 Inapplicable.
4 Additional Information: Distribution of Policies.
5, 6 Additional Information: Separate Account 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 AGL pays out any proceeds from
my Policy? Additional Information: Payment of
Policy Proceeds.
10(e) Basic Questions You May Have: Must I invest any
minimum amount in a policy?
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
AGL 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) Additional Information: Separate Account 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 VL-R.
12(a) Additional Information: Separate Account VL-R;
Front Cover.
12(b) Inapplicable.**
12(c), 12(d) Inapplicable.**
12(e) Inapplicable, because the Separate Account did
not commence operations until 1998.
13(a) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy? What
charges and expenses will the Mutual Funds
deduct from the amounts I invest through my
Policy? Additional Information: More About
Policy Charges.
13(b) Illustrations of Hypothetical Policy Benefits.
13(c) Inapplicable.**
13(d) Basic Questions You May Have: To what extent will
AGL vary the terms and conditions of the Policy
in particular cases?
13(e), 13(f), 13(g) None.
<PAGE>
14 Basic Questions You May Have: How can I invest
money in a Policy?
15 Basic Questions You May Have: How can I invest
money in a Policy? How do I communicate
with AGL?
16 Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
ITEM NO. ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
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 VL-R.
19 Additional Information: Separate Account VL-R;
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: Payment of Policy
Proceeds-Delay to Challenge Coverage.
23 Inapplicable.**
24 Basic Questions You May Have; Additional
Information.
25 Additional Information: AGL.
26 Inapplicable, because the Separate Account did
not commence operations until 1998.
27 Additional Information: AGL.
28 Additional Information: AGL's Management.
29 Additional Information: AGL.
30, 31, 32, 33, 34 Inapplicable, because the Separate Account did
not commence operations until 1998.
35 Inapplicable.**
36 Inapplicable.**
37 None.
38, 39 Additional Information: Distribution of the
Policies.
40 Inapplicable, because the Separate Account did
not commence operations until 1998.
41(a) Additional Information: Distribution of
the Policies.
41(b), 41(c) Inapplicable**
41,43 Inapplicable, because the Separate Account did
not commence operations or issue any securities
until 1998.
44(a)(1), 44(a)(2), 44(a)(3) Basic Questions You May Have: How will the value
of my investment in a Policy change over time?
44(a)(4) Additional Information: Tax Effects--Our taxes.
44(a)(5), 44(a)(6) Basic Questions You May Have: What charges will
AGL deduct from my investment in a Policy?
44(b) Inapplicable.**
44(c) Caption referenced in 13(d) above.
<PAGE>
45 Inapplicable, because the Separate Account did
not commence operations until 1998.
46(a) Captions referenced in 44(a) above.
46(b) Inapplicable.**
47, 48, 49 None.
50 Inapplicable.**
51 Inapplicable.**
52(a), 52(c) Basic Questions You May Have: To what extent can
AGL vary the terms and conditions of the Policy
in particular cases? Additional Information:
Additional Rights That We Have.
52(b), 52(d) None.
53(a) Additional Information: Tax Effects--Our taxes.
53(b), 54 Inapplicable.**
55 Illustrations of Hypothetical Policy Benefits.
56-59 Inapplicable.**
* 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 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>
THE ONE(R) VUL SOLUTION/(SM)/
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY (THE "POLICY") ISSUED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
HOME OFFICE:
(Express Delivery) (US Mail)
2727-A Allen Parkway Variable Universal Life
Houston, Texas 77019-2191 Administration
PHONE: 1-888-436-5255 P.O. Box 4880
or 1-713-831-3443 Houston, Texas 77210-4880
FAX: 1-877-445-3098
This booklet is called the "prospectus."
Investment options. You may use AGL's Separate Account VL-R ("Separate
Account") to invest in the following variable investment options and change your
selections from time to time:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS, INC. AMERICAN GENERAL SERIES PORTFOLIO PUTNAM VARIABLE TRUST
COMPANY
. AIM V.I. Capital Appreciation Fund . Putnam VT Vista Fund -
. AIM V.I. International Equity Fund . Money Market Fund Class IB
. AIM V.I. Government Securities Fund
. AIM V.I. High Yield Fund
The Variable Annuity Life
A I M Advisors, Inc.* Insurance Company * Putnam Investment Management,
- ----------------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS TEMPLETON VARIABLE PRODUCTS KEMPER VARIABLE SERIES
SERIES FUND
. Oppenheimer High Income Fund/VA . Kemper International
. Templeton Developing Markets Portfolio
Fund - Class 2 . Kemper Small Cap Value
Portfolio
OppenheimerFunds, Inc.* Templeton Asset Management Ltd.* Scudder Kemper Investments, Inc.*
- ----------------------------------------------------------------------------------------------------------------------------------
MFS VARIABLE INSURANCE TRUST VAN KAMPEN LIFE INVESTMENT TRUST One Group\\(R)\\ Investment Trust
. Growth With Income Series . Emerging Growth Portfolio . One Group Investment
Trust Equity Index
Portfolio
. One Group Investment
Trust Mid Cap Growth
Portfolio
. One Group Investment
Trust Large Cap Growth
Portfolio
. One Group Investment Trust
Government Bond
Portfolio
. One Group Investment
Trust Diversified Equity
Portfolio
Massachusetts Financial Services Banc One Investment Advisors
Company* Van Kampen Asset Management Inc.* Corporation*
- ----------------------------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST
. Franklin Small Cap Fund - Class 2
Franklin Advisers, Inc.*
- ----------------------------------------------------------------------------------------------------------------------------------
*The Investment Adviser of the investment option
</TABLE>
<PAGE>
SEPARATE PROSPECTUSES CONTAIN MORE INFORMATION ABOUT THE MUTUAL FUNDS ("FUNDS"
OR "MUTUAL FUNDS") IN WHICH WE INVEST THE ACCUMULATION VALUE THAT YOU ALLOCATE
TO ANY OF THE ABOVE-LISTED INVESTMENT OPTIONS. 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 AGL REPRESENTATIVE OR FROM US AT OUR HOME OFFICE
LISTED ON PAGE 1.
Other choices you have. During the insured person's lifetime, you may, within
limits: (1) request an increase 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 6.
Right to return. If for any reason you are not satisfied with your Policy,
you may return it to us and we will refund you the greater of (i) any premium
payments received by us or (ii) your accumulation value plus any charges that
have been deducted. To exercise your right to return your Policy, you must mail
it directly to the Home Office address shown on the first page of this
prospectus or return it to the AGL representative through whom you purchased the
Policy within 10 days after you receive it. In a few states, this period may be
longer. 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 division and
allocated to the 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. 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 DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY
BANK ONE CORPORATION OR ANY OF ITS AFFILIATES OR CORRESPONDENTS OR ANY OTHER
AGENCY. THE POLICIES ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY. 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
The One VUL Solution 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:
<TABLE>
<CAPTION>
PAGE TO
SEE IN THIS
PROSPECTUS
------------
<S> <C>
BASIC QUESTIONS YOU MAY HAVE
- ----------------------------
. How can I invest money in a Policy?.................................... 4
. How will the value of my investment in a Policy change over time?...... 5
. What is the basic amount of insurance ("death benefit")
that AGL pays when the insured person dies?........................... 5
. What charges will AGL deduct from my investment in a Policy?........... 6
. What charges and expenses will the Mutual Funds deduct from
amounts I invest through my Policy?................................... 8
. Must I invest any minimum amount in a Policy?.......................... 10
. How can I change my Policy's investment options?....................... 10
. How can I change my Policy's insurance coverage?....................... 11
. What additional rider benefits might I select?......................... 11
. How can I access my investment in a Policy?............................ 12
. Can I choose the form in which AGL pays out proceeds from my Policy?... 13
. To what extent can AGL vary the terms and conditions of the Policy
in particular cases? 14
. How will my Policy be treated for income tax purposes?................. 15
. How do I communicate with AGL?......................................... 15
</TABLE>
Illustrations of a hypothetical Policy. Starting on page 17, 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 AGL representative will also provide you
with a similar sample illustration that is more tailored to your own
circumstances and wishes.
Underwriting. We will issue the Policy using either simplified underwriting
or full underwriting based on our established guidelines. See the discussion
regarding our underwriting process on page 14.
Additional information. You may find the answers to any other questions you
have under "Additional Information" beginning on page 22 or in the form of our
Policy. A table of contents for the "Additional Information" portion of this
prospectus also appears on page 22. You can obtain copies of our form of Policy
from (and direct any other questions to) your AGL representative or our Home
Office (shown on the first page of this prospectus).
Financial statements. We have included certain financial statements of AGL.
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 back of this prospectus. That index will
tell you on what page you can read more about many of the words and phrases that
we use.
3
<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 initial premium varies
depending on the specifics of your Policy and the insured person. We can refuse
to accept a subsequent premium payment that is less than $50. 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. 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. These tax law
requirements and a discussion of modified endowment contracts are summarized
further under "Tax Effects" beginning on page 23.
Ways to pay premiums. You may pay premiums by check or money order drawn on a
U.S. bank in U.S. dollars and made payable to "American General Life Insurance
Company," or "AGL." Premiums after the initial premium must be sent directly to
our Home Office. 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 AGL
representative or from our Home Office shown on the first page of this
prospectus.
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.
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. 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 that contains the day of the
month that you select other than the 29th, 30th or 31st day of the month. The
term "valuation period" is described on page 31. 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. We do not charge you for using this feature.
4
<PAGE>
Automatic rebalancing. This feature automatically rebalances the proportion of
your accumulation value in each investment option under your Policy 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. We do not charge you for using this feature.
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 on page 6 under "Deductions from each premium payment."
We invest the rest in one or more of the investment options listed on the first
page of this prospectus. We call the amount that is at any time invested under
your Policy (including any loan collateral we are holding for your Policy loans)
your "accumulation value."
Your investment options. We invest the accumulation value that you have
allocated to any investment option in shares of a corresponding Mutual Fund.
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 also be
reduced by certain charges that we deduct. We describe these charges beginning
on page 6 under "What charges will AGL 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. You can request additional
free copies of these prospectuses from your AGL representative or from our Home
Office shown on the first page of this prospectus.
Policies are "non-participating." You will not be entitled to any dividends
from AGL.
WHAT IS THE BASIC AMOUNT OF INSURANCE ("DEATH BENEFIT") THAT AGL PAYS WHEN THE
INSURED PERSON DIES?
Your specified amount of insurance. In your application to buy The One VUL
Solution 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 Policy 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.
5
<PAGE>
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:
TABLE OF ALTERNATIVE BASIC DEATH BENEFITS AS A PERCENTAGE MULTIPLE OF
POLICY ACCUMULATION VALUE
<TABLE>
<CAPTION>
INSURED'S INSURED'S
AGE ON % OF AGE ON % OF
POLICY ACCUMULATION POLICY ACCUMULATION
ANNIVERSARY* VALUE ANNIVERSARY VALUE
- ----------------- ------------ ----------- ------------
<S> <C> <C> <C>
0-40 250 60 130
41 243 61 128
42 236 62 126
43 229 63 124
44 222 64 122
45 215 65 120
46 209 66 119
47 203 67 118
48 197 68 117
49 191 69 116
50 185 70 115
51 178 71 113
52 171 72 111
53 164 73 109
54 157 74 107
55 150 75-90 105
56 146 91 104
57 142 92 103
58 138 93 102
59 134 94 101
95+ 100
</TABLE>
- --------------
* Nearest birthday at the beginning of the Policy year in which the insured
person dies.
WHAT CHARGES WILL AGL DEDUCT FROM MY INVESTMENT IN A POLICY?
Deductions from each premium payment. There is currently no deduction from
each premium payment you make. However, we have the right at any time to assess
a charge not to exceed more than 1.5% on all
6
<PAGE>
future premium payments for the costs associated with the issuance of the Policy
and administrative services we perform.
Daily Charge. We will deduct a daily charge based on either the guaranteed
rate or the current rate (if lower than the guaranteed rate) for the costs
associated with the mortality and expense risks we assume under the Policy.
. The guaranteed daily charge will be at an annual effective rate of .90%
for the first 10 Policy Years, .65% for Policy Years 11 - 20 and .40%
thereafter. The guaranteed daily deduction charges are .15% higher than
the current daily charges. The guaranteed daily deduction charges are the
maximums we may charge; we may charge less, but we can never charge more.
. The current daily charge will be at an annual effective rate of .75% of
your accumulation value that is then being invested in any of the
investment options. After a Policy has been in effect for 10 years, we
intend to reduce the rate of the current charge to .50%, and after 20
years, we intend to further reduce the current charge to .25%. We may
change the applicable current charge at any time as long as the charge
does not exceed the guaranteed daily charge.
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
before reduction by policy loans 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.
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.
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.
We will offer the Policy on a simplified issue method based on our established
guidelines, including that the specified amount of the Policy cannot exceed
$250,000. Our cost of insurance rates will generally be higher for a simplified
issue Policy.
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 (except in Montana where such costs cannot be
based on gender).
Similarly, our current cost of insurance rates are generally lower for non-
smokers than smokers. 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.
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.
7
<PAGE>
Transaction Fee. The fee for each partial surrender you make will be the
lesser of 2% of the amount withdrawn or $25 to cover administrative services.
This charge will be deducted from the remaining accumulation value in the
investment options in the same ratio as the requested partial surrender.
Charge for taxes. We can make a charge in the future for federal or state
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.
Allocation of charges. You may choose the investment options from which we
deduct all monthly charges. If you do not have enough accumulation value in the
investment options, we will deduct these charges in proportion to the amount of
accumulation value you then have in each investment option.
For a further discussion regarding the charges we will deduct from your
investment in a Policy, see "More About Policy Charges" on page 29.
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 indirectly the return you will earn on any
accumulation value that you have invested in that Fund. Current and future fees
and expenses may vary from the fiscal year 1998 fees and expenses. The charges
and expenses for fiscal year 1998 are as follows:
The Mutual Funds' Annual Expenses (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 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. High Yield Fund/2/...................... 0.00% 1.13% 1.13%
AIM V.I. Government Securities Fund.............. 0.50% 0.26% 0.76%
AIM V.I. Capital Appreciation Fund............... 0.62% 0.05% 0.67%
The following fund of
AMERICAN GENERAL SERIES PORTFOLIO COMPANY:/1/
Money Market Fund................................ 0.50% 0.04% 0.54%
The following fund of
MFS VARIABLE INSURANCE TRUST/1/
Growth With Income Series........................ 0.75% 0.13% 0.88%
</TABLE>
(Footnotes on next page)
8
<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 REIMBURSEMENT) REIMBURSEMENT)
- ---------------------------------------------------- -------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
The following fund of
PUTNAM VARIABLE TRUST/1/
Putnam VT Vista Fund - Class IB/3/ 0.44% 0.10% 0.08% 0.62%
The following fund of
TEMPLETON VARIABLE PRODUCT SERIES FUND/1, 4/
Templeton Developing Markets Fund - Class 2/3/ 1.35% 0.25% 0.31% 1.91%
The following fund of
OPPENHEIMER VARIABLE ACCOUNT FUNDS/1/
Oppenheimer High Income Fund/VA 0.74% .04% 0.78%
The following funds of
KEMPER VARIABLE SERIES/1/
Kemper International Portfolio 0.75% 0.18% 0.93%
Kemper Small Cap Value Portfolio 0.75% 0.05% 0.80%
The following fund of
FRANKLIN TEMPLETON VARIABLE INSURANCE
PRODUCTS TRUST/1/
Franklin Small Cap Fund - Class 2/3/ 0.75% .25% 0.02% 1.02%
The following fund of
VAN KAMPEN LIFE INVESTMENT TRUST/1/
Emerging Growth Portfolio/2/ 0.32% 0.53% 0.85%
The following funds of
ONE GROUP INVESTMENT TRUST/5/
One Group Investment Trust
Equity Index Portfolio 0.30% 0.25% 0.55%
One Group Investment Trust
Mid Cap Growth Portfolio 0.65% 0.26% 0.91%
One Group Investment Trust
Large Cap Growth Portfolio 0.65% 0.22% 0.87%
One Group Investment Trust
Government Bond Portfolio 0.45% 0.26% 0.71%
One Group Investment Trust
Diversified Equity Portfolio/2/ 0.70% 0.25% 0.95%
</TABLE>
/1/ Certain of the Mutual Funds' advisers or administrators have entered
into service agreements with AGL. Under these arrangements, the advisers or
administrators pay fees to AGL for certain administrative services. The fees do
not have a direct relationship to the Mutual Funds' Annual Expenses. (See
"Miscellaneous" under "More About Policy Changes.")
/2/ If certain voluntary expense reimbursements from the investment
adviser were terminated, management fees and other expenses for the fiscal year
ended in 1998 would have been as set out in the following table.
(Footnotes continued on next page)
9
<PAGE>
<TABLE>
<CAPTION>
OTHER TOTAL
FUND FUND FUND
MANAGEMENT OPERATING OPERATING
NAME OF FUND FEES EXPENSES EXPENSES
- ----------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
AIM V.I. High Yield Fund................. 0.63% 1.87% 2.50%
Van Kampen Emerging Growth Portfolio..... 0.70% 0.53% 1.23%
One Group Diversified Equity Portfolio... 0.74% 0.25% 0.99%
</TABLE>
/3/ The prospectus for Putnam Variable Trust under "Distribution Plan"
discusses this fund's 12b-1 fee. The prospectuses for Templeton Variable
Products Series Fund and Franklin Templeton Variable Insurance Products Trust
under "Distribution and Services (12b-1) Fees" discuss each fund's 12b-1 fees.
/4/ On February 8, 2000, a shareholders' meeting will be held to approve a
proposal to merge the funds of Templeton Variable Products Series Fund into
similar corresponding funds of Franklin Templeton Variable Insurance Product
Trust (the "Reorganization"). If approved, this Reorganization will be
completed around May 1, 2000.
/5/ Fees and charges for One Group Investment Trust are for fiscal year
2000.
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 these or any other specific amounts of premiums is not
mandatory. After payment of your initial premium, you need only invest enough to
ensure your Policy's cash surrender value stays above zero. The less you invest,
the more likely it is that your Policy's cash surrender value could fall to
zero, as a result of the deductions we periodically make from your accumulation
value.
Policy lapse and reinstatement. If your Policy's cash surrender value does
fall to zero, we will notify you and give you a grace period of 61 days 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 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 future premiums you pay 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 free
of charge. You may make transfers at any time. Unless
10
<PAGE>
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" on page 34.
Market Timing. The Policy is not designed for professional market timing
organizations or other entities using programmed and frequent transfers. We
reserve the right at any time and without prior notice to any party to
terminate, suspend, or modify our policies or procedures regarding telephone
requests or to stop permitting telephone requests altogether.
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. 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.
Decrease in Coverage. After the first Policy year, you may request a
reduction in the specified amount of coverage, but not below certain minimums.
After any decrease, the death benefit amount cannot be less than the greater of
(i) $50,000, and (ii) any death benefit amount which, upon comparing such
amounts to the sums already paid, would result in an excess of premium payments.
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 also 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 23 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 maturity extension rider benefit
described below. Eligibility for and changes in this benefit are subject to our
rules and procedures as in effect from time to time. More details are included
in the form of the rider, which we suggest that you review if you choose this
benefit.
11
<PAGE>
Maturity Extension Rider
. This rider permits you to extend the Policy's maturity date beyond what it
otherwise would be. The rider provides for a death benefit after the
original maturity date that is equal to the accumulation value on the date
of death. With this rider, all accumulation value that is in the separate
account can remain there.
. In this rider, only the insurance coverage associated with the base policy
will be extended beyond the original maturity date. No additional premium
payments, new loans, monthly insurance charge, or changes in specified
amount will be allowed after the original maturity date. There is no
charge for this rider except for a flat monthly charge of no more than $10
each month after the original maturity date.
. Extension of the maturity date beyond the insured person's age 100 may
result in the current taxation of increases in your Policy's accumulation
value as a result of interest or investment experience after that time.
You should consult a qualified tax adviser before making such an extension.
HOW CAN I ACCESS MY INVESTMENT IN A POLICY?
Full surrender. You may at any time, without charge, surrender your Policy in
full. If you do, we will pay you the accumulation value, less any Policy loans.
We call this amount your "cash surrender value."
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.
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.
Exchange of Policy in Certain States. Certain states require that a policy
owner be given the right to exchange the Policy for a fixed benefit life
insurance policy, within either 18 or 24 months from the date of issue. This
right is subject to various conditions imposed by the states and us. In such
states, this right has been more fully described in your Policy or related
endorsements to comply with the applicable state requirements.
Transaction Fee. The fee for each partial surrender you make will be the
lesser of 2% of the amount withdrawn or $25 to cover administrative services.
This charge will be deducted from the remaining accumulation value in the
investment options in the same ratio as the requested partial surrender.
Policy loans. You may at any time borrow from us an amount equal to your
Policy's cash surrender value less the interest that will be payable on your
loan through your next Policy anniversary. This rule is not applicable in all
states. The minimum amount of each loan is $500.
12
<PAGE>
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%. 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 $500 unless it is the final
payment) 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. 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.
Preferred loan interest rate. We will credit a higher interest rate, but not
more than 4.75%, 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%. Because we first offered the Policies in 2000,
we have not yet applied the preferred loan interest rate to any Policy loan
amounts.
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 AGL PAYS OUT THE PROCEEDS FROM MY POLICY?
Choosing a payment option. You may choose to receive the full proceeds from
the Policy 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.
13
<PAGE>
. 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%.
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 AGL VARY THE TERMS AND CONDITIONS OF THE POLICY IN PARTICULAR
CASES?
Listed below are some variations we may make in the terms and conditions of a
Policy. Any variations will be made only in accordance with uniform rules that
we establish.
Underwriting. We use two underwriting methods to issue a Policy, simplified
underwriting and full underwriting, which are described below. We reserve the
right to request additional information or reject an application for any reason
under either underwriting procedure.
. Simplified Underwriting - Any Policy with a specified amount of $250,000
or lower must be issued based on simplified underwriting. Our guidelines
include that the proposed insured must answer limited health questions and
certain medical records are required. The Policy specified amount is
limited to $250,000, and any requested increases in specified amount are
considered under full underwriting only. Additionally, a proposed insured
who is rejected under simplified underwriting cannot be considered for full
underwriting.
. Full Underwriting - Any Policy that has a specified amount of over
$250,000 must be issued based on full underwriting. Our guidelines include
medical exams or tests and other satisfactory evidence of insurability.
Policies purchased through "internal rollovers." We maintain published rules
that describe the procedures necessary to replace the other life insurance we
issue with a Policy. Not all types of other
14
<PAGE>
insurance we issue are eligible to be replaced with a Policy. 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 The One VUL Solution 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.
State law requirements. AGL is subject to the insurance laws and regulations
in every jurisdiction in which The One VUL Solution Policies are sold. As a
result, various time periods and other terms and conditions described in this
prospectus may vary depending on where you reside. These variations will be
reflected in your Policy and related endorsements.
Variations in expenses or risks. AGL may vary the charges and other terms of
the Policy where special circumstances result in sales, administrative or other
expenses, mortality risks or other risks that are different from those normally
associated with the Policy.
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 23.
HOW DO I COMMUNICATE WITH AGL?
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, except for transfers and changes in the allocation of
future premiums or changes among the investment options.
General. You should mail or express checks and money orders for premium
payments and loan repayments directly to our Home Office.
The following requests must be made in writing and signed by you:
. transfer of accumulation value;
15
<PAGE>
. loan;
. full surrender;
. partial surrender;
. change of beneficiary or contingent beneficiary;
. change of allocation percentages for premium payments;
. loan repayments or charges;
. change of death benefit option or manner of death benefit payment;
. changes in specified amount;
. addition or cancellation of, or other action with respect to, election of
a payment option for Policy proceeds;
. tax withholding elections; and
. telephone transaction privileges.
You should mail or express these requests to our Home Office 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 Home
Office.
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 obtain these forms from our Home Office or from your AGL
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.
Telephone transactions. If you have a completed telephone authorization
form on file with us, you may make transfers, or change the allocation of future
premium payments or deduction of charges, by telephone, subject to the terms of
the form. We will honor telephone instructions from any person who provides the
correct information, so there is a risk of possible loss to you if unauthorized
persons use this service in your name. Our current procedure is that only the
owner or your AGL representative may make a transfer request by phone. We are
not liable for any acts or omissions based upon instructions that we reasonably
believe to be genuine. Our procedures include verification of the Policy number,
the identity of the caller, both the insured person's and owner's names, and a
form of personal identification from the caller. We will mail you a prompt
written confirmation of the transaction. If (a) many people seek to make
telephone requests at or about the same time, or (b) our recording equipment
malfunctions, it may be impossible for you to make a telephone request at the
time you wish. You should submit a written request if you cannot make a
telephone transfer. Also, if, due to malfunction or other circumstances, the
recording of your telephone request is incomplete or not fully comprehensible,
we will not process the transaction. The phone number for telephone requests is
1-888-436-5255.
16
<PAGE>
ILLUSTRATIONS OF HYPOTHETICAL POLICY BENEFITS
To help explain how our Policy works, we have prepared the following tables:
<TABLE>
<CAPTION>
PAGE TO
SEE IN THIS
PROSPECTUS
-----------
<S> <C>
Death Benefit Option 1--Simplified Underwriting/Current Charges.............. 18
Death Benefit Option 1--Full Underwriting/Current Charges.................... 19
Death Benefit Option 1--Simplified Underwriting/Guaranteed Maximum Charges... 20
Death Benefit Option 1--Full Underwriting/Guaranteed Maximum Charges......... 21
</TABLE>
The tables show how death benefits, accumulation values, and cash surrender
values ("Policy benefits") under a sample The One VUL Solution Policy 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. A single premium payment
of $56,279 for an initial $250,000 or $250,001 of specified amount of coverage
is assumed to be paid at issue. The illustrations assume no Policy loan has been
taken. As illustrated, this Policy would be classified as a modified endowment
contract (See "Tax Effects" in Additional Information for further discussion).
Although the tables below do not include an example of a Policy with an Option
2 death benefit, such a Policy would have higher death benefits and lower cash
surrender values.
Separate tables are included to show both current and guaranteed maximum
charges under both simplified underwriting and full underwriting. We have used
the maximum specified amount of $250,000 for the simplified underwriting table
and the minimum specified amount of $250,001 for the full underwriting table to
show the applicable investment results.
. The charges assumed in the current charge tables include a daily charge at
an annual effective rate of .75% for the first 10 Policy years, .50% for
Policy years 11--20, and .25% thereafter and current monthly insurance
charges.
. The guaranteed maximum charge tables assume that these charges will
include a daily charge at an annual effective rate of .90% for the first 10
Policy years, .65% for Policy years 11--20, and .40% thereafter, and an
additional charge of 1.5% of every premium and guaranteed maximum insurance
charges.
The charges assumed by both the current and guaranteed maximum charge tables
also include Mutual Fund expenses of 0.90% 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 8 - 10 of this prospectus. 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 0.98% of aggregate Mutual Fund assets.
Individual illustrations. On request, we will furnish you with a comparable
illustration based on your Policy's characteristics. If you request
illustrations more than once in any Policy year, we may charge $25 for the
illustration.
17
<PAGE>
THE ONE VUL SOLUTION
SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,000
DEATH BENEFIT OPTION 1
MALE AGE 45
SIMPLIFIED UNDERWRITING
NONSMOKER
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
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>
1 250,000 250,000 250,000 54,511 57,841 61,173 54,511 57,841 61,173
2 250,000 250,000 250,000 52,659 59,373 66,487 52,659 59,373 66,487
3 250,000 250,000 250,000 50,758 60,909 72,308 50,758 60,909 72,308
4 250,000 250,000 250,000 48,889 62,529 78,770 48,889 62,529 78,770
5 250,000 250,000 250,000 46,967 64,159 85,868 46,967 64,159 85,868
6 250,000 250,000 250,000 45,023 65,827 93,702 45,023 65,827 93,702
7 250,000 250,000 250,000 42,998 67,485 102,311 42,998 67,485 102,311
8 250,000 250,000 250,000 41,051 69,275 111,906 41,051 69,275 111,906
9 250,000 250,000 250,000 39,097 71,131 122,532 39,097 71,131 122,532
10 250,000 250,000 250,000 37,110 73,033 134,289 37,110 73,033 134,289
15 250,000 250,000 292,072 27,749 85,063 217,964 27,749 85,063 217,964
20 250,000 250,000 434,047 16,105 98,612 355,776 16,105 98,612 355,776
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.
18
<PAGE>
THE ONE VUL SOLUTION
SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001
DEATH BENEFIT OPTION 1
MALE AGE 45
FULL UNDERWRITING
NONSMOKER
ASSUMING CURRENT CHARGES
<TABLE>
<CAPTION>
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>
1 250,001 250,001 250,001 54,995 58,337 61,680 54,995 58,337 61,680
2 250,001 250,001 250,001 53,625 60,384 67,543 53,625 60,384 67,543
3 250,001 250,001 250,001 52,313 62,562 74,059 52,313 62,562 74,059
4 250,001 250,001 250,001 50,941 64,762 81,189 50,941 64,762 81,189
5 250,001 250,001 250,001 49,523 67,002 89,013 49,523 67,002 89,013
6 250,001 250,001 250,001 48,067 69,292 97,620 48,067 69,292 97,620
7 250,001 250,001 250,001 46,578 71,640 107,100 46,578 71,640 107,100
8 250,001 250,001 250,001 45,051 74,048 117,549 45,051 74,048 117,549
9 250,001 250,001 250,001 43,476 76,508 129,069 43,476 76,508 129,069
10 250,001 250,001 250,001 41,822 79,002 141,767 41,822 79,002 141,767
15 250,001 250,001 309,388 32,941 93,430 230,887 32,941 93,430 230,887
20 250,001 250,001 459,781 21,164 109,549 376,870 21,164 109,549 376,870
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.
19
<PAGE>
THE ONE VUL SOLUTION
SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,000
DEATH BENEFIT OPTION 1
MALE AGE 45
SIMPLIFIED UNDERWRITING
NONSMOKER
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
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>
1 250,000 250,000 250,000 53,560 56,835 60,110 53,560 56,835 60,110
2 250,000 250,000 250,000 51,641 58,230 65,211 51,641 58,230 65,211
3 250,000 250,000 250,000 49,676 59,619 70,785 49,676 59,619 70,785
4 250,000 250,000 250,000 47,640 60,981 76,866 47,640 60,981 76,866
5 250,000 250,000 250,000 45,531 62,314 83,514 45,531 62,314 83,514
6 250,000 250,000 250,000 43,350 63,620 90,796 43,350 63,620 90,796
7 250,000 250,000 250,000 41,069 64,874 98,769 41,069 64,874 98,769
8 250,000 250,000 250,000 38,662 66,054 107,500 38,662 66,054 107,500
9 250,000 250,000 250,000 36,127 67,158 117,085 36,127 67,158 117,085
10 250,000 250,000 250,000 33,436 68,160 127,618 33,436 68,160 127,618
15 250,000 250,000 270,347 17,236 72,003 201,751 17,236 72,003 201,751
20 0 250,000 393,277 0 69,959 322,358 0 69,959 322,358
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.
20
<PAGE>
THE ONE VUL SOLUTION
SINGLE PREMIUM $ 56,279 INITIAL SPECIFIED AMOUNT $250,001
DEATH BENEFIT OPTION 1
MALE AGE 45
FULL UNDERWRITING
NONSMOKER
ASSUMING GUARANTEED CHARGES
<TABLE>
<CAPTION>
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>
1 250,001 250,001 250,001 53,561 56,835 60,110 53,561 56,835 60,110
2 250,001 250,001 250,001 51,641 58,230 65,211 51,641 58,230 65,211
3 250,001 250,001 250,001 49,676 59,619 70,786 49,676 59,619 70,786
4 250,001 250,001 250,001 47,640 60,981 76,866 47,640 60,981 76,866
5 250,001 250,001 250,001 45,531 62,314 83,514 45,531 62,314 83,514
6 250,001 250,001 250,001 43,350 63,620 90,796 43,350 63,620 90,796
7 250,001 250,001 250,001 41,069 64,875 98,769 41,069 64,875 98,769
8 250,001 250,001 250,001 38,662 66,055 107,500 38,662 66,055 107,500
9 250,001 250,001 250,001 36,127 67,158 117,086 36,127 67,158 117,086
10 250,001 250,001 250,001 33,436 68,161 127,619 33,436 68,161 127,619
15 250,001 250,001 270,348 17,236 72,004 201,752 17,236 72,004 201,752
20 0 250,001 393,279 0 69,959 322,360 0 69,959 322,360
</TABLE>
THE VALUES WILL CHANGE IF PREMIUMS ARE PAID IN DIFFERENT AMOUNTS OR FREQUENCIES.
THE INVESTMENT RESULTS ARE AN EXAMPLE ONLY AND ARE NOT A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS
THAN THOSE SHOWN.
21
<PAGE>
ADDITIONAL INFORMATION
A general overview of the Policy appears at pages 1 - 21. 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>
AGL................................................. 22
Separate Account VL-R............................... 23
Tax Effects......................................... 23
Voting Privileges................................... 28
Your Beneficiary.................................... 29
Assigning Your Policy............................... 29
More About Policy Charges........................... 29
Effective Date of Policy and Related Transactions... 30
Distribution of the Policies........................ 32
Payment of Policy Proceeds.......................... 33
Adjustments to Death Benefit........................ 34
Additional Rights That We Have...................... 34
Performance Information............................. 35
Our Reports to Policy Owners........................ 36
AGL's Management.................................... 36
Principal Underwriter's Management.................. 39
Legal Matters....................................... 40
Independent Auditors................................ 40
Actuarial Expert.................................... 40
Services Agreement.................................. 41
Certain Potential Conflicts......................... 41
Year 2000 Considerations............................ 41
</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 44, 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.
AGL
We are American General Life Insurance Company ("AGL"). AGL is a stock life
insurance company organized under the laws of Texas. AGL is a successor in
interest to a company originally organized under the laws of Delaware on January
10, 1917. AGL is an indirect, wholly-owned subsidiary of American General
Corporation (formerly American General Insurance Company), a diversified
financial services holding
22
<PAGE>
company engaged primarily in the insurance business. The commitments under the
Policies are AGL's, and American General Corporation has no legal obligation to
back those commitments.
AGL 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. AGL's membership in IMSA applies only to AGL and not its
products.
SEPARATE ACCOUNT VL-R
We hold the Mutual Fund shares in which any of your accumulation value is
invested in Separate Account VL-R. Separate Account 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 May 6, 1997 under Texas law.
For record keeping and financial reporting purposes, Separate Account VL-R is
divided into 41 separate "divisions," 18 of which correspond to the 18 variable
investment options available since the inception of the Policy. The remaining
23 divisions, and some of these 18 divisions, represent investment options
available under other variable life policies we offer. 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 Separate Account VL-R are our property. The assets in Separate
Account VL-R would be available only to satisfy the claims of owners of the
Policies, to the extent they have allocated their accumulation value to Separate
Account VL-R. Our other creditors could reach only those Separate Account VL-R
assets (if any) that are in excess of the amount of our reserves and other
contract liabilities under the Policies with respect to Separate Account VL-R.
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. The One VUL Solution 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 Policy 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
. 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.
23
<PAGE>
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" (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 contract 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. 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 the specified amount resulting from a
partial surrender). 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.
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 "basis" in your Policy. (Your 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 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 basis in the Policy, will be subject to federal income
24
<PAGE>
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 an "income-
first" 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 basis in the Policy. For modified endowment contracts, your 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 Treasury Department has authority
to prescribe additional rules to prevent avoidance of "income-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 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 basis in the Policy, will be subject to federal
income tax and, unless an exception applies, the 10% penalty tax.
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.
25
<PAGE>
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 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 Separate Account VL-R
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 Separate Account VL-R, 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 AGL, and not the owner of a Policy, would
be considered the owner of the assets of Separate Account VL-R.
Estate and generation skipping taxes. If the insured person is the Policy's
owner, the death benefit under The One VUL Solution 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 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
26
<PAGE>
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 a life insurance policy is 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.
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 VL-R in our federal
income tax return, but we currently pay no income tax on Separate Account VL-R'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 VL-R division for taxes. We reserve the right to
make a charge in the future for taxes incurred; for example, a charge to
Separate Account VL-R for income taxes we incur that are allocable to the
Policy.
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
Separate Account VL-R or allocable to the Policy.
Certain Mutual Funds in which your accumulation value is invested may elect to
pass through to AGL taxes withheld by foreign taxing jurisdictions on foreign
source income. Such an election will result in
27
<PAGE>
additional taxable income and income tax to AGL. 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 AGL.
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.
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 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 VL-R.
If you are asked to give us voting instructions, you will be sent 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. AGL reserves the
right to modify these procedures in any manner that the laws in effect from time
to time allow.
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<PAGE>
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.
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. 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 a complete notice of the assignment in good order. We
are also not responsible for the validity of the assignment. An absolute
assignment is a change of ownership. 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 Policy are designed to cover, in
total, our direct and indirect costs of selling, administering and providing
benefits under the Policy. They are also designed, in total, to compensate us
for the risks we assume and services that we provide under the Policy. 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 Policy requires us to provide will exceed what we currently
project).
If the charges that we collect from the Policy exceed our total costs in
connection with the Policy, we will earn a profit. Otherwise we will incur a
loss.
The current monthly insurance charge has been designed primarily to provide
funds out of which we can make payments of death benefits under the Policy as
insured persons die.
Any excess from the charges discussed above is primarily intended to:
29
<PAGE>
. 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 marketing and distribution
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 risk we assume under the Policies; or
. otherwise be retained by us as profit.
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 Policy. Our cost of insurance charge rates in Montana will not
be greater than the comparable male rates illustrated in this prospectus.
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 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 7.
Miscellaneous. Certain of the distributors or advisers of the Mutual Funds
listed on page 8 of this prospectus reimburse us, on a quarterly basis, for
certain administrative, Policy, and policy owner support expenses. 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. No payments have yet been made under these
arrangements, because the number of Policies issued does not require a payment.
EFFECTIVE DATE OF POLICY AND RELATED TRANSACTIONS
Valuation dates, times, and periods. We generally compute values under a
Policy on each day that the New York Stock Exchange is open for business. We
call each such day a "valuation date."
30
<PAGE>
We compute policy values as of 3:00 p.m., Central 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 at our Home Office. 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 initial 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 $500,000 provided the insured person meets
certain medical and risk requirements. The terms and conditions of this
coverage are described in our "Limited Temporary Life Insurance Agreement." You
can obtain a copy from our Home Office by writing to the address shown on the
first page of this prospectus or from your AGL 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 in the Home Office 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 you request in the specified amount of insurance, and
reinstatements of a Policy that has lapsed take effect on the Policy's
monthly deduction day on or next following our approval of the transaction;
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<PAGE>
. 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 or exceed the
maximum net amount at risk;
. 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 AGL 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 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.
DISTRIBUTION OF THE POLICIES
American General Securities Incorporated ("AGSI") is the principal underwriter
of the Policies. AGSI is a wholly-owned subsidiary of AGL. AGL, in turn, is a
wholly-owned subsidiary of American General Corporation ("American General").
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 AGL's Separate Accounts A and D, and
Separate Account E of American General Life Insurance Company of New York, which
is a wholly-owned subsidiary of AGL. These separate accounts are registered
investment companies. AGSI, as the principal underwriter, is not paid any fees
on the Policies.
We and AGSI have entered into an exclusive sales agreement with Banc One
Securities Corporation ("BOSC"). The Policies will be sold by registered
representatives of BOSC. These registered representatives are also required to
be authorized under applicable state regulations as life insurance agents to
sell variable life insurance and are appointed by AGL as an AGL representative
for the Policies. BOSC is a member of the NASD.
We pay compensation directly to BOSC for the promotion and sales of the
Policies. The compensation payable to BOSC for the sales of the Policies may
vary with the sales agreement, but is generally not expected to exceed the
amounts described below:
A. For a Policy issued based on simplified underwriting:
. 1.2% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 1 through 10; and
. .95% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 11 through 15.
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<PAGE>
B. For a Policy issued based on full underwriting:
. 2.5% of the Policy's accumulation value (reduced by any outstanding
loan) in Policy year 1;
. 1.0% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 2 through 10;
. 0.50% annually of the Policy's accumulation value (reduced by any
outstanding loan) in Policy years 11 through 20; and
. 0.25% annually of the Policy's accumulation value (reduced by any
outstanding loan) after Policy year 20.
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 BOSC compensation in a lump sum which will not exceed
the aggregate compensation described above.
We pay a comparable amount of compensation to BOSC with respect to any
increase in the specified amount of coverage that you request. In addition, we
may pay BOSC expense allowances, bonuses, wholesaler fees and training
allowances.
We pay the compensation directly to BOSC. We pay the compensation from our own
resources which does not result in any additional charge to you that is not
described on page 6 of the prospectus. BOSC 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 a 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 for check clearance. We reserve the right to defer payment of that
portion of your accumulation value that is attributable to a premium 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 VL-R 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 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;
33
<PAGE>
. 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 VL-R values for any of the foregoing reasons, all delayed
transactions will be processed at the next values that we do compute.
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. (Some states may require that we
measure this time in some other way.)
. 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.
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 loans 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. Some states require that we compute differently these periods
for non-contestability following a suicide.
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 in proportion to any other investment options
you then are using, if the accumulation value in an investment option is
below $500 for any other reason;
34
<PAGE>
. end the automatic rebalancing feature if your accumulation value falls
below $5,000;
. change the underlying Mutual Fund that any investment option uses;
. add, delete or limit investment options, combine two or more investment
options, or withdraw assets relating to The One VUL Solution from one
investment option and put them into another;
. operate Separate Account VL-R under the direction of a committee or
discharge such a committee at any time;
. change our guidelines for the simplified and full underwriting methods;
. operate Separate Account VL-R, or one or more investment options, in any
other form the law allows, including a form that allows us to make direct
investments. Separate Account VL-R 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
Separate Account 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 Funds in which it invests. The performance information shown may reflect
the deduction of one or more charges, such as the premium charge, and we
generally expect to exclude costs 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 AGL's financial strength or claims-paying ability as
determined by firms that analyze and rate insurance companies and by nationally
recognized statistical rating organizations.
35
<PAGE>
Performance information for any division reflects the performance of a
hypothetical Policy and are 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.
AGL'S MANAGEMENT
The directors, executive officers, and (to the extent responsible for variable
life operations) the other principal officers of AGL are listed below.
<TABLE>
<CAPTION>
NAME BUSINESS EXPERIENCE WITHIN PAST FIVE YEARS
- -------------------------------------------------------------------------------
<S> <C>
Rodney O. Martin, Jr. Senior Chairman of the Board of American General
Life Insurance Company since April 1999 and a
Director since August 1996. President and CEO
(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, Hartford,
Connecticut (1990-1995).
Donald W. Britton 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).
Ronald H. Ridlehuber Director, President and Chief Executive Officer of
American General Life Insurance Company since July
1998. Senior Vice President and Chief Marketing
Officer of Jefferson-Pilot Life Insurance Company in
Greensboro, North Carolina (1993-1998).
David A. Fravel Director of American General Life Insurance Company
since November 1996. Elected Executive Vice
President in April 1998. Previously held position of
Senior Vice President of American General Life
Insurance Company since November 1996. Senior Vice
President of Massachusetts Mutual, Springfield,
Missouri (March 1996-June 1996); Vice President, New
Business, Connecticut Mutual Life Insurance Company,
Hartford, Connecticut (December 1978-March 1996).
Robert F. Herbert, Jr. Director, Senior Vice President and Treasurer of
American General Life Insurance Company since May
1996, and Controller since February 1991.
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
Royce G. Imhoff, II Director, Senior Vice President and Chief Marketing
Officer for American General Life Insurance Company
since November 1997. Previously held various
positions with American General Life Insurance
Company including Vice President since August 1996
and Regional Director since 1992.
John V. LaGrasse Director and Chief Systems Officer of American
General Life Insurance Company since August 1996.
Elected Executive Vice President in July 1998.
Previously held position of Senior Vice President of
American General Life Insurance Company since August
1996. Director of Citicorp Insurance Services, Inc.,
Dover, Delaware (1986-1996).
Gary D. Reddick Director of American General Life Insurance Company
since October 1998. Elected Executive Vice President
in April 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 Director and Executive Vice President of American
General Life Insurance Company since April 1999.
Elected Secretary in July 1999 and General Counsel
in December 1998. Previously held various positions
with American General Life Insurance Company
including Senior Vice President since December 1998
and Vice President since October 1998. 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).
Paul L. Mistretta 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 American General Life
Insurance Company since July 1999. Previously held
position of Senior Vice President-Insurance
Operations of American General Life Insurance
Company since April 1998. 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). Various
positions with Mutual of New York, Syracuse, NY,
including Agent, Agency Manager, Marketing Life and
Disability Income Underwriting Management, (1978-
July 1994).
Wayne A. Barnard Senior Vice President of American General Life
Insurance Company since November 1997. Previously
held various positions with American General Life
Insurance Company including Vice President since
February 1991.
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
Robert M. Beuerlein 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).
David J. Dietz Senior Vice President - Corporate Markets Group of
American General Life Insurance Company since
January 1999. President and Chief Executive Officer -
Individual Insurance Operations of The United States
Life Insurance Company in the City of New York since
September, 1997. President of Prudential Select
Life, Newark, New Jersey (August 1990 - September
1997).
Barbara J. Fossum Senior Vice President of American General Life
Insurance Company since July 1999. Previously held
position of Vice President of American General Life
Insurance Company since 1988.
Ross D. Friend Senior Vice President and Chief Compliance Officer
of American General Life Insurance Company since
July 1998. 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 Guterding Senior Vice President of American General Life
Insurance Company since April 1999. Senior Vice
President and Chief Underwriting Officer of The
United States Life Insurance Company in the City of
New York since October, 1980.
F. Paul Kovach, Jr. Senior Vice President - Broker Dealers for American
General Life Insurance Company since August 1997.
President and Director of American General
Securities Incorporated since October 1994. Vice
President of Chubb Securities Corporation, Concord,
New Hampshire, (February 1990 - October 1994).
Simon J. Leech Senior Vice President - Houston Service Center for
American General Life Insurance Company since July
1997. Previously held 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.
JoAnn Waddell Senior Vice President - Human Resources for
American General Life Insurance Company since
October 1998. Vice President - Human Resources for
American General Corporation (1995 - October 1998)
and Director, Corporate Personnel of American
General Corporation (1993 - 1995).
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
Don M. Ward Senior Vice President - Variable Products -
Marketing of American General Life Insurance Company
since February 1998. Vice President of Pacific Life
Insurance Company, Newport Beach, CA (1991 -
February 1998).
</TABLE>
The principal business address of each person listed above is our Home
Office; except that the street number for Messrs. Ridlehuber, Fravel, LaGrasse,
Martin, Reddick, Britton, Mistretta and Zurek is 2929 Allen Parkway, the street
number for Messrs. Kovach, Ward and Friend is 2727 Allen Parkway, the street
number for Messrs. Dietz and Guterding is 125 Maiden Lane, New York, New York
and the street number for Ms. Fossum is #1 Franklin Square, Springfield,
Illinois.
PRINCIPAL UNDERWRITER'S MANAGEMENT
The directors and principal officers of the principal underwriter are:
<TABLE>
<CAPTION>
POSITION AND OFFICES
WITH UNDERWRITER,
NAME AND PRINCIPAL AMERICAN GENERAL
BUSINESS ADDRESS SECURITIES INCORPORATED
- ----------------- -----------------------
<S> <C>
F. Paul Kovach, Jr. Director and Chairman,
American General Securities Incorporated President and Chief Executive Officer
2727 Allen Parkway
Houston, TX 77019
Royce G. Imhoff, II Director
American General Life Companies
2727-A Allen Parkway
Houston, Texas 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
John A. Kalbaugh Vice President -
American General Life Companies Chief Marketing Officer
2727 Allen Parkway
Houston, TX 77019
</TABLE>
39
<PAGE>
<TABLE>
<S> <C>
Robert M. Roth Vice President -
American General Securities Incorporated Administration and Compliance,
2727 Allen Parkway Treasurer and Secretary
Houston, TX 77019
Don M. Ward Vice President
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
Julie A. Cotton Assistant Secretary
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
Robert F. Herbert Assistant Treasurer
American General Life Companies
2727-A Allen Parkway
Houston, Texas 77019
K. David Nunley Assistant Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
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 VL-R. Pauletta P.
Cohn, Esquire, Deputy General Counsel of the American General Life Companies, an
affiliate of AGL, has opined as to the validity of the Policies.
INDEPENDENT AUDITORS
The financial statements of AGL included in this prospectus have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
appearing elsewhere in this prospectus. Such financial statements have been
included in this prospectus in reliance upon the report of Ernst & Young LLP
given upon the authority of such firm as experts in accounting and auditing.
Ernst & Young LLP is located at One Houston Center, 1221 McKinney, Suite 2400,
Houston, Texas 77010-2007.
ACTUARIAL EXPERT
Actuarial matters have been examined by Robert M. Beuerlein, who is Senior
Vice President and Chief Actuary of AGL. 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.
40
<PAGE>
SERVICES AGREEMENT
American General Life Companies ("AGLC") is party to an existing general
services agreement with AGL. AGLC, an affiliate of AGL, is a corporation
incorporated in Delaware on November 24, 1997. Pursuant to this agreement, AGLC
provides services to AGL, including most of the administrative, data processing,
systems, customer services, product development, actuarial, auditing, accounting
and legal services for AGL and The One VUL Solution Policies.
CERTAIN POTENTIAL CONFLICTS
The Mutual Funds sell shares to separate accounts of insurance companies (and
may sell in the future, certain qualified plans), both affiliated and not
affiliated with AGL. 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 as well as report any material irreconcilable conflicts
that we know exist to each Mutual Fund as soon as a conflict arises. 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 and non-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 AGL, 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; and (5) return the systems to
operations. As of December 31, 1999, these activities have been completed,
making our critical systems Year 2000 ready.
We continued to test our systems throughout 1999 to maintain Year 2000
readiness. In addition, we implemented plans for the century transition. These
plans included a freeze on system modifications from November 1999 through
January 2000, the creation of rapid response teams to address problems and
limiting vacations for certain business and technical personnel and establishing
Y2K command centers. In addition, AGC established Y2K command centers in
Houston and each of its locations across the country. Each command center
monitored all major business processing activities during the century transition
and reported progress to the Houston command center which coordinated the
company's nationwide Year 2000 effort. The command centers continued to operate
24 hours a day until January 7, 2000.
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<PAGE>
On January 1, 2000, AGC announced that its Year 2000 command centers reported
that all major technology systems, programs, and applications were operating
smoothly following the transition into the 21st century. As of January 20, 2000,
we have experienced no interruptions to normal business operations, including
the processing of customer account data and transactions. We will continue to
monitor our technology systems and maintain quality customer service throughout
the transition period.
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 developed plans to assess and mitigate the risks associated with the
potential failure of third parties to achieve Year 2000 readiness. These plans
included 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, and, where feasible, we have taken reasonable precautions
to protect against the receipt of non-Year 2000 ready data. Where necessary,
critical third party dependencies have been included in our contingency plans.
Contingency Plans. Our contingency planning process was designed to reduce the
risk of Year 2000-related business failures related to both internal systems and
third party relationships. The contingency plans 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. The
contingency plans were 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,
contingency plans and the reports from the AGC command centers described above,
we believe that we will experience at most isolated and minor disruptions of
business processes due to the Year 2000 transition. 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 unforeseen circumstances in completing its plans, the Year
2000 issues could have a material adverse impact on our operations following the
turn of the century.
Costs. Through December 31, 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 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 AGL contained in this prospectus should be
considered to bear only upon the ability of AGL to meet its obligations under
The One VUL Solution Policies. They should not be considered as bearing upon the
investment experience of Separate Account VL-R. No financial statements of
Separate Account VL-R are included because, at the date of this prospectus, none
of the Divisions of Separate Account VL-R were available under The One VUL
Solution Policy.
<TABLE>
<CAPTION>
PAGE TO
CONSOLIDATED FINANCIAL STATEMENTS OF SEE IN THIS
AMERICAN GENERAL LIFE INSURANCE COMPANY PROSPECTUS
- --------------------------------------- -----------
<S> <C>
Unaudited consolidated Balance Sheets as of September 30, 1999... Q-1
Unaudited consolidated Income Statements for the nine months
ended September 30, 1999...................................... Q-3
Report of Ernst & Young, LLP Independent Auditors................ F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997..... F-2
Consolidated Income Statements for the years ended
December 31, 1998, 1997 and 1996............................ F-3
Consolidated Statements of Comprehensive Income
for the years ended December 31, 1998, 1997, and 1996........ F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1998, 1997 and 1996..................... F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996...................... F-6
Notes to Consolidated Financial Statements....................... F-7
</TABLE>
43
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheet
(Unaudited)
September 30
1999
--------------
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized
cost - $27,720,226) $27,539,065
Equity securities, at fair value (cost - $215,480) 245,837
Mortgage loans on real estate 1,703,850
Policy loans 1,224,130
Investment real estate 117,005
Other long-term investments 154,183
Short-term investments 484,721
-----------
Total investments 31,468,791
Cash 89,211
Investment in Parent Company (cost - $7,958) 44,254
Indebtedness from affiliates 53,756
Accrued investment income 477,429
Accounts receivable 505,368
Deferred policy acquisition costs 1,733,978
Property and equipment 74,683
Other assets 225,353
Assets held in separate accounts 18,734,868
-----------
Total assets $53,407,691
===========
Q-1
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheet
(Unaudited)
September 30
1999
--------------
(In Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $29,704,115
Other policy claims and benefits payable 45,955
Other policyholders' funds 379,623
Federal income taxes 414,324
Indebtedness to affiliates 3,053
Other liabilities 1,035,653
Liabilities related to separate accounts 18,734,868
-----------
Total liabilities 50,317,591
Shareholders' equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000
Preferred stock, $100 par value, 8,500 shares
authorized, issued, and outstanding 850
Additional paid-in capital 1,369,315
Accumulated other comprehensive income (15,046)
Retained earnings 1,728,981
-----------
Total shareholders' equity 3,090,100
-----------
Total liabilities and shareholders' equity $53,407,691
===========
Q-2
<PAGE>
American General Life Insurance Company
Consolidated Income Statement
(Unaudited)
Nine months
ended
September 30
1999
--------------
(In Thousands)
Revenues:
Premiums and other considerations $ 402,583
Net investment income 1,753,914
Net realized investment gains 3,899
Other 58,530
----------
Total revenues 2,218,926
Benefits and expenses:
Benefits 1,289,534
Operating costs and expenses 367,123
Total benefits and expenses 1,656,657
----------
Income before income tax expense 562,269
Income tax expense 190,143
----------
Net income $ 372,126
==========
Q-3
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD] . One Houston Center . Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors and Stockholder
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American General
Life Insurance Company (an indirectly wholly owned subsidiary of American
General Corporation) and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated 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 disclosure 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 consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their 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
---------------------
February 16, 1999
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-1
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
---------------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost-
$27,425,605 in 1998 and $26,131,207 in 1997) $28,906,261 $27,386,715
Equity securities, at fair value (cost - $193,368 in 1998
and $19,208 in 1997) 211,684 21,114
Mortgage loans on real estate 1,557,268 1,659,921
Policy loans 1,170,686 1,093,694
Investment real estate 119,520 129,364
Other long-term investments 86,194 55,118
Short-term investments 222,949 100,061
---------------------------------
Total investments 32,274,562 30,445,987
Cash 117,675 99,284
Investment in Parent Company (cost - $8,597 in 1998
and 1997) 54,570 37,823
Indebtedness from affiliates 161,096 96,519
Accrued investment income 459,961 433,111
Accounts receivable 196,596 208,209
Deferred policy acquisition costs 1,087,718 835,031
Property and equipment 66,197 33,827
Other assets 206,318 132,659
Assets held in separate accounts 15,616,020 11,242,270
---------------------------------
Total assets $50,240,713 $43,564,720
=================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits $29,353,022 $27,849,893
Other policy claims and benefits payable 54,278 42,677
Other policyholders' funds 398,587 398,314
Federal income taxes 677,315 543,379
Indebtedness to affiliates 18,173 4,712
Other liabilities 554,783 421,861
Liabilities related to separate accounts 15,616,020 11,242,270
---------------------------------
Total liabilities 46,672,178 40,503,106
Shareholder's equity:
Common stock, $10 par value, 600,000 shares
authorized, issued, and outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares authorized,
issued, and outstanding 850 850
Additional paid-in capital 1,368,089 1,184,743
Accumulated other comprehensive income 679,107 427,526
Retained earnings 1,514,489 1,442,495
---------------------------------
Total shareholder's equity 3,568,535 3,061,614
---------------------------------
Total liabilities and shareholder's equity $50,240,713 $43,564,720
=================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
American General Life Insurance Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Revenues:
Premiums and other considerations $ 470,238 $ 428,721 $ 382,923
Net investment income 2,316,933 2,198,623 2,095,072
Net realized investment gains (losses) (33,785) 29,865 28,502
Other 69,602 53,370 41,968
----------------------------------------------------------
Total revenues 2,822,988 2,710,579 2,548,465
Benefits and expenses:
Benefits 1,788,417 1,757,504 1,689,011
Operating costs and expenses 467,067 379,012 347,369
Interest expense 15 782 830
Litigation settlement 97,096 - -
----------------------------------------------------------
Total benefits and expenses 2,352,595 2,137,298 2,037,210
----------------------------------------------------------
Income before income tax expense 470,393 573,281 511,255
Income tax expense 153,719 198,724 176,660
----------------------------------------------------------
Net income $ 316,674 $ 374,557 $ 334,595
==========================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
American General Life Insurance Company
Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net income $316,674 $374,557 $ 334,595
Other comprehensive income:
Gross change in unrealized gains (losses)
on securities (pretax: $341,000;
$318,700; ($404,900)) 222,245 207,124 (263,181)
Less: gains (losses) realized in net income (29,336) (1,251) 11,262
--------------------------------------------------------
Change in net unrealized gains (losses) on
securities (pretax: $387,000; $320,600;
($422,200) 251,581 208,375 (274,443)
-------------------------------------------------------
Comprehensive income $568,255 $582,932 $ 60,152
========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
American General Life Insurance Company
Consolidated 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 $ 6,000 $ 6,000 $ 6,000
Change during year - - -
----------------------------------------------------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year 850 850 850
Change during year - - -
----------------------------------------------------------
Balance at end of year 850 850 850
Additional paid-in capital:
Balance at beginning of year 1,184,743 933,342 858,075
Capital contribution from Parent
Company 182,284 250,000 75,000
Other changes during year 1,062 1,401 267
----------------------------------------------------------
Balance at end of year 1,368,089 1,184,743 933,342
Accumulated other comprehensive income:
Balance at beginning of year 427,526 219,151 493,594
Change in unrealized gains (losses) on
securities 251,581 208,375 (274,443)
----------------------------------------------------------
Balance at end of year 679,107 427,526 219,151
Retained earnings:
Balance at beginning of year 1,442,495 1,469,618 1,324,703
Net income 316,674 374,557 334,595
Dividends paid (244,680) (401,680) (189,680)
----------------------------------------------------------
Balance at end of year 1,514,489 1,442,495 1,469,618
----------------------------------------------------------
Total shareholder's equity $3,568,535 $3,061,614 $2,628,961
==========================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net income $ 316,674 $ 374,557 $ 334,595
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 11,613 (37,752) 3,846
Change in future policy benefits and other policy
claims (866,428) (1,143,736) (543,193)
Amortization of policy acquisition costs 125,062 115,467 102,189
Policy acquisition costs deferred (244,196) (219,339) (188,001)
Change in other policyholders' funds 273 21,639 (69,126)
Provision for deferred income tax expense 15,872 13,264 12,388
Depreciation 19,418 16,893 16,993
Amortization (26,775) (28,276) (30,758)
Change in indebtedness to/from affiliates (51,116) (8,695) 4,432
Change in amounts payable to brokers (894) 31,769 (25,260)
Net (gain) loss on sale of investments 37,016 (29,865) (28,502)
Other, net 57,307 30,409 32,111
--------------------------------------------------------------------
Net cash used in operating activities (606,174) (863,665) (378,286)
INVESTING ACTIVITIES
Purchases of investments and loans made (28,231,615) (29,638,861) (27,245,453)
Sales or maturities of investments and receipts from
repayment of loans 26,656,897 28,300,238 25,889,422
Sales and purchases of property, equipment, and
software, net (105,907) (9,230) (8,057)
--------------------------------------------------------------------
Net cash used in investing activities (1,680,625) (1,347,853) (1,364,088)
FINANCING ACTIVITIES
Policyholder account deposits 4,688,831 4,187,191 3,593,380
Policyholder account withdrawals (2,322,307) (1,759,660) (1,746,987)
Dividends paid (244,680) (401,680) (189,680)
Capital contribution from Parent 182,284 250,000 75,000
Other 1,062 1,401 267
--------------------------------------------------------------------
Net cash provided by financing activities 2,305,190 2,277,252 1,731,980
--------------------------------------------------------------------
Increase (decrease) in cash 18,391 65,734 (10,394)
Cash at beginning of year 99,284 33,550 43,944
--------------------------------------------------------------------
Cash at end of year $ 117,675 $ 99,284 $ 33,550
====================================================================
</TABLE>
Interest paid amounted to approximately $420,000, $1,004,000, and $1,080,000 in
1998, 1997, and 1996, respectively.
See accompanying notes.
F-6
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1998
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary of
American General Corporation (the "Parent Company"). The Company's wholly owned
life insurance subsidiaries are American General Life Insurance Company of New
York ("AGNY") and The Variable Annuity Life Insurance Company ("VALIC"). During
1998, the Company formed a new wholly owned subsidiary, American General Life
Companies (AGLC), to provide management services to certain life insurance
subsidiaries of the Parent Company.
The Company offers a complete portfolio of the standard forms of universal life,
variable universal life, interest-sensitive whole life, term life, structured
settlements, and fixed and variable annuities throughout the United States. In
addition, a variety of equity products is sold through its wholly owned
broker/dealer, American General Securities, Inc. The Company serves the estate
planning needs of middle- and upper-income households and the insurance needs of
small- to medium-sized businesses. AGNY offers a broad array of traditional and
interest-sensitive insurance, in addition to individual annuity products. VALIC
provides tax-deferred retirement annuities and employer-sponsored retirement
plans to employees of health care, educational, public sector, and other not-
for-profit organizations throughout the United States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly owned subsidiaries. Transactions with the Parent
Company and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company. All other material intercompany
transactions have been eliminated in consolidation.
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.
F-7
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly owned life insurance
subsidiaries did not have a material effect on statutory equity at December 31,
1998.
Statutory financial statements differ from GAAP. Significant differences were as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1998 balance is
unaudited) $ 259,903 $ 327,813 $ 284,070
Deferred policy acquisition costs and cost
of insurance purchased 116,597 103,872 85,812
Deferred income taxes (53,358) (13,264) (12,388)
Adjustments to policy reserves 52,445 (30,162) (19,954)
Goodwill amortization (2,033) (2,067) (2,169)
Net realized gain on investments 41,488 20,139 14,140
Litigation settlement (63,112) -- --
Other, net (35,256) (31,774) (14,916)
-------------------------------------------------------
GAAP net income $ 316,674 $ 374,557 $ 334,595
=======================================================
Shareholders' equity:
Statutory capital and surplus (1998 balance
is unaudited) $1,670,412 $1,636,327 $1,441,768
Deferred policy acquisition costs 1,109,831 835,031 1,042,783
Deferred income taxes (698,350) (535,703) (410,007)
Adjustments to policy reserves (274,532) (319,680) (297,434)
Acquisition-related goodwill 54,754 51,424 55,626
Asset valuation reserve ("AVR") 310,564 255,975 291,205
Interest maintenance reserve ("IMR") 27,323 9,596 63
Investment valuation differences 1,487,658 1,272,339 643,289
Surplus from separate accounts (174,447) (150,928) (106,026)
Other, net 55,322 7,233 (32,306)
-------------------------------------------------------
Total GAAP shareholders' equity $3,568,535 $3,061,614 $2,628,961
=======================================================
</TABLE>
F-8
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience, which
may differ from those based on statutory mortality and interest requirements
without consideration of withdrawals; (c) 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; (d) certain assets
(principally furniture and equipment, agents' debit balances, computer software,
and certain other receivables) are reported as assets rather than being charged
to retained earnings; (e) acquisitions are accounted for using the purchase
method of accounting rather than being accounted for as equity investments; and
(f) fixed maturity investments are carried at fair value rather than amortized
cost. In addition, statutory accounting principles require life insurance
companies to establish an AVR and an IMR. The AVR is designed to address the
credit-related risk for bonds, preferred stocks, derivative instruments, and
mortgages and market risk for common stocks, real estate, and other invested
assets. The IMR is composed of investment- and liability-related realized gains
and losses that result from interest rate fluctuations. These realized gains and
losses, net of tax, are amortized into income over the expected remaining life
of the asset sold or the liability released.
1.3 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require the
performance of various functions and services over a period of more than one
year. 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.
F-9
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 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.
During 1998, the Company maintained a trading portfolio of certain fixed
maturity securities. Trading securities are recorded at fair value. Unrealized
gains (losses), as well as realized gains (losses), are included in net
investment income. The Company held no trading securities at December 31, 1998,
and trading securities did not have a material effect on net investment income
in 1998.
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.
POLICY LOANS
Policy loans are reported at unpaid principal balance.
F-10
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
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.
1.5 SEPARATE ACCOUNTS
Separate Accounts are assets and liabilities associated with certain contracts,
principally annuities; for which the investment risk lies solely with the
contract holder. Therefore, the Company's liability for these accounts equals
the value of the account assets. Investment income, realized investment gains
(losses), and policyholder account deposits and withdrawals related to separate
accounts are excluded from the consolidated statements of income, comprehensive
income, and cash flows. Assets held in Separate Accounts are primarily shares in
mutual funds, which are carried at fair value based on the quoted net asset
value per share.
F-11
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") AND COST OF INSURANCE PURCHASED
("CIP")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
CIP represents the cost assigned to insurance contracts in force that are
acquired through the purchase of a block of business. At December 31, 1998, CIP
of $22.1 million was reported within other assets.
DPAC and CIP associated with interest-sensitive life contracts, insurance
investment contracts, and participating life insurance contracts is charged to
expense in relation to the estimated gross profits of those contracts. DPAC and
CIP 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 and CIP are 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 and CIP on at least an annual
basis. Management considers estimated future gross profits or future premiums,
expected mortality, interest earned and credited rates, persistency, and
expenses in determining whether the carrying amount is recoverable.
1.7 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 1.6).
For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in a constant relationship to insurance in force. For all other
contracts, premiums are recognized when due.
F-12
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed by management for indicators of impairment in value. If facts
and circumstances suggest that goodwill is impaired, other than temporarily, the
Company assesses the fair value of the underlying assets and reduces goodwill
accordingly.
1.9 POLICY AND CONTRACT CLAIMS RESERVES
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts. The contracts normally cannot be changed or canceled by
the Company during the contract period.
For interest-sensitive life and insurance investment contracts, reserves equal
the sum of the policy account balance and deferred revenue charges. Reserves for
other 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 2.5% to 13.5% at December 31, 1998.
1.10 REINSURANCE
The Company limits its exposure to loss on any single insured to $2.5 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. If the reinsurer could not meet
its obligations, the Company would reassume the liability. The likelihood of a
material reinsurance liability being reassumed by the Company is considered to
be remote.
A receivable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. Reinsurance recoveries on ceded
reinsurance contracts were $63 million, $25 million, and $24 million during
1998, 1997, and 1996, respectively. 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.
F-13
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.10 REINSURANCE
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance receivables. 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.
1.11 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 2% of life insurance in
force at December 31, 1998 and 1997.
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 $4.9 million in 1998.
1.12 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a life/non-
life consolidated tax return with the Parent Company and its noninsurance
subsidiaries. The Company participates in a tax sharing agreement with other
companies included in the consolidated tax return. Under this agreement, tax
payments are made to the Parent Company as if the companies filed separate tax
returns; and companies incurring operating and/or capital losses are reimbursed
for the use of these losses by the consolidated return group.
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. State income taxes are included in income tax
expense.
F-14
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.12 INCOME TAXES (CONTINUED)
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 the
consolidated statements of comprehensive income and accumulated other
comprehensive income in shareholder's equity.
1.13 ACCOUNTING CHANGES
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 consolidated results of operations or
financial position.
Effective December 31, 1998, the Company adopted SFAS 131, Disclosures about
Segments of an Enterprise and Related Information, which changes the way
companies report segment information. With the adoption of SFAS 131, the Company
reports division earnings exclusive of goodwill amortization, net realized
investment gains, and nonrecurring items. This methodology is consistent with
the manner in which management reviews division results. Adoption of this
statement did not impact the Company's consolidated results of operations or
financial position.
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 consolidated results of
operations or financial position.
F-15
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $2,101,730 $1,966,528 $1,846,549
Equity securities 1,813 1,067 1,842
Mortgage loans on real estate 148,447 157,035 175,833
Investment real estate 23,139 22,157 22,752
Policy loans 66,573 62,939 58,211
Other long-term investments 3,837 3,135 2,328
Short-term investments 15,492 8,626 9,280
Investment income from affiliates 10,536 11,094 11,502
----------------------------------------------------------
Gross investment income 2,371,567 2,232,581 2,128,297
Investment expenses 54,634 33,958 33,225
----------------------------------------------------------
Net investment income $2,316,933 $2,198,623 $2,095,072
==========================================================
</TABLE>
The carrying value of investments that produced no investment income during 1998
was less than 0.2% of total invested assets. The ultimate disposition of these
investments is not expected to have a material effect on the Company's results
of operations and financial position.
F-16
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
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 $ 20,109 $ 42,966 $ 46,498
Gross losses (62,657) (34,456) (47,293)
--------------------------------------------------------
Total fixed maturities (42,548) 8,510 (795)
Equity securities 645 1,971 18,304
Other investments 8,118 19,384 10,993
--------------------------------------------------------
Net realized investment gains (losses)
before tax (33,785) 29,865 28,502
Income tax expense (benefit) (11,826) 10,452 9,976
--------------------------------------------------------
Net realized investment gains (losses)
after tax $(21,959) $ 19,413 $ 18,526
========================================================
</TABLE>
F-17
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 1.4). 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 $18,800,553 $1,129,504 $(26,353) $19,903,703
Below investment-grade 1,409,198 33,910 (45,789) 1,397,320
Mortgage-backed securities* 6,359,242 294,331 (870) 6,652,703
U.S. government obligations 417,822 69,321 (178) 486,965
Foreign governments 331,699 24,625 (2,437) 353,887
State and political subdivisions 86,778 4,796 (187) 91,387
Redeemable preferred stocks 20,313 - (17) 20,296
------------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $1,556,487 $(75,831) $28,906,261
==============================================================================
Equity securities $ 193,368 $ 19,426 $ (1,110) $ 211,684
==============================================================================
Investment in Parent Company $ 8,597 $ 45,973 $ - $ 54,570
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-18
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $17,913,942 $ 906,235 $(17,551) $18,802,626
Below investment-grade 950,438 34,290 (4,032) 980,696
Mortgage-backed securities* 6,614,704 278,143 (4,260) 6,888,587
U.S. government obligations 289,406 46,529 (74) 335,861
Foreign governments 318,212 18,076 (3,534) 332,754
State and political subdivisions 44,505 1,686 -- 46,191
------------------------------------------------------------------------------
Total fixed maturity securities $26,131,207 $1,284,959 $(29,451) $27,386,715
==============================================================================
Equity securities $ 19,208 $ 2,145 $ (239) $ 21,114
==============================================================================
Investment in Parent Company $ 8,597 $ 29,226 $ -- $ 37,823
==============================================================================
</TABLE>
* Primarily include pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
F-19
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $1,621,886 $1,316,330
Gross unrealized losses (76,941) (29,690)
DPAC and other fair value adjustments (488,120) (621,867)
Deferred federal income taxes (377,718) (237,247)
--------------------------------------------
Net unrealized gains on securities $ 679,107 $ 427,526
============================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1998
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 $ 531,496 $ 536,264 $ 205,719 $ 207,364
Due after one year
through five years 5,550,665 5,812,581 5,008,933 5,216,174
Due after five years
through ten years 9,229,980 9,747,761 9,163,681 9,604,447
Due after ten years 5,754,220 6,156,950 5,138,169 5,470,143
Mortgage-backed securities 6,359,244 6,652,705 6,614,705 6,888,587
-----------------------------------------------------------------------------
Total fixed maturity securities $27,425,605 $28,906,261 $26,131,207 $27,386,715
=============================================================================
</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 $5.4 billion,
$14.8 billion, and $16.2 billion during 1998, 1997, and 1996, respectively.
F-20
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $ 429 27.6% 0.2%
Pacific 320 20.6 10.4
Mid-Atlantic 326 20.9 4.1
East North Central 178 11.4 -
Mountain 95 6.1 -
West South Central 118 7.5 -
East South Central 46 3.0 -
West North Central 33 2.1 -
New England 25 1.6 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100.00% 3.1%
=====================================
Property type:
Office $ 593 38.1% 7.0%
Retail 423 27.1 0.2
Industrial 292 18.8 -
Apartments 178 11.4 2.9
Hotel/motel 38 2.4 -
Other 46 3.0 -
Allowance for losses (13) (0.8) -
-------------------------------------
Total $ 1,557 100% 3.1%
=====================================
</TABLE>
F-21
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 456 27.5% 1.8%
Pacific 340 20.5 14.4
Mid-Atlantic 288 17.3 -
East North Central 186 11.2 -
Mountain 151 9.1 2.7
West South Central 132 7.9 .1
East South Central 94 5.7 -
West North Central 19 1.1 -
New England 17 1.1 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
Property type:
Office $ 622 37.5% 4.6%
Retail 463 27.9 3.0
Industrial 324 19.5 1.8
Apartments 223 13.4 6.1
Hotel/motel 40 2.4 -
Other 11 .7 -
Allowance for losses (23) (1.4) -
-------------------------------------
Total $1,660 100.0% 3.6%
=====================================
</TABLE>
F-22
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
-----------------------------------------
(In Millions)
<S> <C> <C>
Impaired loans:
With allowance* $ 13 $ 35
Without allowance - -
-----------------------------------------
Total impaired loans $ 13 $ 35
=========================================
</TABLE>
* Represents gross amounts before allowance for mortgage loan losses of $1.8
million and $10 million, respectively.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------------------------
(In Millions)
<S> <C> <C> <C>
Average investment $ 24 $ 48 $ 72
Interest income earned $ - $ 3 $ 6
Interest income - cash basis $ - $ - $ 6
</TABLE>
F-23
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $ 417,822 $ 486,965 $ 486,965 $ 289,406 $ 335,861 $ 335,861
States, municipalities,
and political subdivisions 86,778 91,387 91,387 44,505 46,191 46,191
Foreign governments 331,699 353,887 353,887 318,212 332,754 332,754
Public utilities 1,777,172 1,895,326 1,895,326 1,848,546 1,952,724 1,952,724
Mortgage-backed securities 6,359,242 6,652,703 6,652,703 6,614,704 6,888,587 6,888,587
All other corporate bonds 18,432,579 19,405,697 19,405,697 17,015,834 17,830,598 17,830,598
Redeemable preferred stocks 20,313 20,296 20,296 - - -
--------------------------------------------------------------------------------------------------------
Total fixed maturities 27,425,605 28,906,261 28,906,261 26,131,207 27,386,715 27,386,715
Equity securities:
Common stocks:
Banks, trust, and insurance
companies - - - - - -
Industrial, miscellaneous,
and other 176,321 211,684 211,684 5,604 5,785 5,785
Nonredeemable preferred
stocks 17,047 - - 13,604 15,329 15,329
--------------------------------------------------------------------------------------------------------
Total equity securities 193,368 211,684 211,684 19,208 21,114 21,114
Mortgage loans on real
estate* 1,557,268 - 1,557,268 1,659,921 - 1,659,921
Investment real estate 119,520 - 119,520 129,364 - 129,364
Policy loans 1,170,686 - 1,170,686 1,093,694 - 1,093,694
Other long-term investments 86,194 - 86,194 55,118 - 55,118
Short-term investments 222,949 - 222,949 100,061 - 100,061
--------------------------------------------------------------------------------------------------------
Total investments $30,775,590 $ - $32,274,562 $29,188,573 $ - $30,445,987
========================================================================================================
</TABLE>
* Amount is net of allowance for losses of $13 million and $23 million at
December 31, 1996 and 1997, respectively.
F-24
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance at January 1 $ 835,031 $1,042,783 $ 605,501
Capitalization 244,196 219,339 188,001
Amortization (125,062) (115,467) (102,189)
Effect of unrealized gains (losses) on
securities 133,553 (311,624) 351,470
----------------------------------------------------------
Balance at December 31 $1,087,718 $ 835,031 $1,042,783
==========================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------------
(In Thousands)
<S> <C> <C>
Goodwill $ 54,754 $ 51,424
American General Corporation CBO (Collateralized Bond
Obligation) 98-1 Ltd. 9,740 -
Cost of insurance purchased ("CIP") 22,113 -
Other 119,711 81,235
------------------------------------
Total other assets $206,318 $132,659
====================================
</TABLE>
F-25
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
4. OTHER ASSETS (CONTINUED)
A rollforward of CIP for the year ended December 31, 1998, was as follows:
<TABLE>
<CAPTION>
1998
--------------------
(In Thousands)
<S> <C>
Balance at January 1 $ --
Acquisition of business 23,915
Accretion of interest at 5.88% 733
Amortization (2,535)
--------------------
Balance at December 31 $ 22,113
====================
</TABLE>
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
--------------------------------------
(In Thousands)
<S> <C> <C>
Current tax (receivable) payable $ (21,035) $ 7,676
Deferred tax liabilities, applicable to:
Net income 320,632 298,456
Net unrealized investment gains 377,718 237,247
-----------------------------------------
Total deferred tax liabilities 698,350 535,703
-----------------------------------------
Total current and deferred tax liabilities $ 677,315 $ 543,379
=========================================
</TABLE>
F-26
<PAGE>
American General Life Insurance Company
Notes to Consolidated 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 $ 307,025 $ 226,653
Basis differential of investments 590,661 486,194
Other 150,189 139,298
------------------------------------------
Total deferred tax liabilities 1,047,875 852,145
Deferred tax assets applicable to:
Policy reserves (212,459) (232,539)
Other (137,066) (83,903)
------------------------------------------
Total deferred tax assets before valuation
allowance (349,525) (316,442)
Valuation allowance - -
------------------------------------------
Total deferred tax assets, net of valuation
allowance (349,525) (316,442)
------------------------------------------
Net deferred tax liabilities $ 698,350 $ 535,703
==========================================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations, is distributed as dividends, or unless
the income tax deferred status of such amount is modified by future tax
legislation. Such income, accumulated in policyholders' surplus accounts,
totaled $87.1 million at December 31, 1998. At current corporate rates, the
maximum amount of tax on such income is approximately $30.5 million. Deferred
income taxes on these accumulations are not required because no distributions
are expected.
F-27
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.2 TAX EXPENSE
Components of income tax expense for the years were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Current expense $134,344 $185,460 $164,272
Deferred expense (benefit):
Deferred policy acquisition cost 33,230 27,644 21,628
Policy reserves 2,189 (27,496) (27,460)
Basis differential of investments 11,969 3,769 4,129
Litigation settlement (33,983) -- --
Year 2000 (9,653) -- --
Other, net 15,623 9,347 14,091
--------------------------------------------------------
Total deferred expense 19,375 13,264 12,388
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
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.
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP
pretax income $164,638 $200,649 $178,939
Tax-exempt investment income (11,278) (9,493) (9,347)
Goodwill 712 723 759
Other (353) 6,845 6,309
--------------------------------------------------------
Income tax expense $153,719 $198,724 $176,660
========================================================
</TABLE>
F-28
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $159 million, $168 million, and $182
million in 1998, 1997, and 1996, respectively.
5.4 TAX RETURN EXAMINATIONS
The Parent Company and the majority of its subsidiaries file a consolidated
federal income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the Parent Company's tax returns through 1988. The IRS is
currently examining tax returns for 1989 through 1996. In addition, the tax
returns of companies recently acquired are also being examined. Although the
final outcome of any issues raised in examination is uncertain, the Parent
Company believes that the ultimate liability, including interest, will not
materially exceed amounts recorded in the consolidated financial statements.
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
American General Corporation,
9-3/8%, due 2008 $ 4,725 $ 3,345 $ 4,725 $ 3,288
American General Corporation,
Promissory notes, due 2004 14,679 14,679 17,125 17,125
American General Corporation,
Restricted Subordinated
Note, 13-1/2%, due 2002 29,435 29,435 31,494 31,494
------------------------------------------------------------------------
Total notes receivable from
affiliates 48,839 47,459 53,344 51,907
Accounts receivable from
affiliates - 113,637 - 44,612
------------------------------------------------------------------------
Indebtedness from affiliates $48,839 $161,096 $53,344 $96,519
========================================================================
</TABLE>
F-29
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Various American General companies provide services to the Company, principally
mortgage servicing and investment management services, provided by American
General Investment Management Corporation on a fee basis. The Company paid
approximately $46,921,000, $33,916,000, and $22,083,000 for such services in
1998, 1997, and 1996, respectively. Accounts payable for such services at
December 31, 1998 and 1997 were not material. The Company rents facilities and
provides services on an allocated cost basis to various American General
companies. Beginning in 1998, amounts received by the Company from affiliates
include amounts received by its wholly-owned, non-life insurance subsidiary,
American General Life Companies (AGLC). AGLC provides shared services, including
technology and Year 2000-readiness, to a number of American General
Corporation's life insurance subsidiaries. The Company received approximately
$66,550,000, $6,455,000, and $1,255,000 for such services and rent in 1998,
1997, and 1996, respectively. Accounts receivable for rent and services at
December 31, 1998 and 1997 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, The Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance, Inc., at carrying value plus accrued
interest.
7. STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense related
to stock options is measured as the excess of the market price of the stock at
the measurement date over the exercise price. The measurement date is the first
date on which both the number of shares that the employee is entitled to receive
and the exercise price are known. Under the stock option plans, no expense is
recognized, since the market price equals the exercise price at the measurement
date.
F-30
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. STOCK-BASED COMPENSATION (CONTINUED)
Under an alternative accounting method, compensation expense arising from stock
options would be measured at the estimated fair value of the options at the date
of grant. Had compensation expense for the stock options been determined using
this method, net income would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Net income as reported $316,674 $374,557 $334,595
Net income pro forma $315,078 $373,328 $334,029
</TABLE>
The average fair values of the options granted during 1998, 1997, and 1996 were
$15.38, $10.33, and $7.07, respectively. The fair value of each option was
estimated at the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions used to estimate the fair value of the stock
options were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------
<S> <C> <C> <C>
Dividend yield 2.5% 3.0% 4.0%
Expected volatility 23.0% 22.0% 22.3%
Risk-free interest rate 5.76% 6.4% 6.2%
Expected life 6 YEARS 6 years 6 years
</TABLE>
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.
F-31
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
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:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Service cost (benefits earned) $ 3,693 $ 1,891 $ 1,826
Interest cost 6,289 2,929 2,660
Expected return on plan assets (9,322) (5,469) (5,027)
Amortization (557) 195 4
--------------------------------------------------------
Pension (income) expense $ 103 $ (454) $ (537)
========================================================
Discount rate on benefit obligation 7.00% 7.25% 7.50%
Rate of increase in compensation levels 4.25% 4.00% 4.00%
Expected long-term rate of return on plan
assets 10.25% 10.00% 10.00%
</TABLE>
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:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(In Thousands)
<S> <C> <C>
Projected benefit obligation (PBO) $ 96,554 $ 43,393
Plan assets at fair value 120,898 80,102
Plan assets at fair value in excess of PBO 24,344 36,709
Other unrecognized items, net (10,176) (23,470)
-----------------------------------
Prepaid pension expense $ 14,168 $ 13,239
===================================
</TABLE>
F-32
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The change in PBO was as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------------------
(In Thousands)
<S> <C> <C>
PBO at January 1 $43,393 $37,389
Service and interest costs 9,982 4,820
Benefits paid (1,954) (673)
Actuarial loss 17,089 1,810
Amendments, transfers, and acquisitions 28,044 47
---------------------------------
PBO at December 31 $96,554 $43,393
=================================
</TABLE>
The change in the fair value of plan assets was as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(In Thousands)
<S> <C> <C>
Fair value of plan assets at January 1 $ 80,102 $65,158
Actual return on plan assets 12,269 14,990
Benefits paid (1,954) (673)
Acquisitions and other 30,481 627
----------------------------------
Fair value of plan assets at December 31 $120,898 $80,102
==================================
</TABLE>
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, which 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.
F-33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
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 in 1998, 1997, and 1996 was $60,000, $601,000,
and $844,000, respectively. The accrued liability for postretirement benefits
was $19.2 million and $3.8 million at December 31, 1998 and 1997, respectively.
These liabilities were discounted at the same rates used for the pension plans.
9. DERIVATIVE FINANCIAL INSTRUMENTS
9.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is generally limited to
reducing its exposure to interest rate and currency exchange risk by utilizing
interest rate and currency swap agreements, and options to enter into interest
rate swap agreements (called swaptions). The Company accounts for these
derivative and financial instruments as hedges. Hedge accounting requires a high
correlation between changes in fair values or cash flows of the derivative
financial instrument and the specific item being hedged, both at inception and
throughout the life of the hedge.
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS
Interest rate swap agreements are used to convert specific investment securities
from a floating to a fixed rate basis, or vice versa, and to hedge against the
risk of declining interest rates on anticipated security purchases. Interest
rate swap agreements are also used to convert a portion of floating-rate
borrowings to a fixed rate and to hedge against the risk of rising interest
rates on anticipated debt issuances.
Currency swap agreements are used to convert cash flows from specific investment
securities denominated in foreign currencies into U.S. dollars at specific
exchange rates, and to hedge against currency rate fluctuation on anticipated
security purchases.
F-34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
The difference between amounts paid and received on swap agreements is recorded
on an accrual basis as an adjustment to net investment income or interest
expense, as appropriate, over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets.
The fair values of swap agreements are recognized in the consolidated balance
sheet if the hedge investments are carried at fair value or if they hedge
anticipated purchases of such investments. In this event, changes in the fair
value of a swap agreement are reported in net unrealized gains on securities
included in other accumulated comprehensive income in shareholders' equity,
consistent with the treatment of the related investment security. The fair
values of swap agreements hedging debt are not recognized in the consolidated
balance sheet.
For swap agreements hedging anticipated investment purchases or debt issuances,
the net swap settlement amount or unrealized gain or loss is deferred and
included in the measurement of the anticipated transaction when it occurs.
Swap agreements generally have terms of two to ten years. Any gain or loss from
early termination of a swap agreement is deferred and amortized into income over
the remaining term of the related investment or debt. If the underlying
investment or debt is extinguished or sold, any related gain or loss on swap
agreements is recognized in income.
F-35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.2 INTEREST RATE AND CURRENCY SWAP AGREEMENTS (CONTINUED)
Interest rate and currency swap agreements related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------
(Dollars in Millions)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $ - $ 15
Average receive rate - 6.74%
Average pay rate - 6.48%
Interest rate swap agreements to receive fixed rate:
Notional amount $ 369 $ 144
Average receive rate 6.06% 6.89%
Average pay rate 5.48% 6.37%
Currency swap agreements (receive U.S. dollars/pay
Canadian dollars):
Notional amount (in U.S. dollars) $ 124 $ 139
Average exchange rate 1.50 1.50
</TABLE>
9.3 CALL SWAPTIONS
Options to enter into interest rate swap agreements are used to limit the
Company's exposure to reduced spreads between investment yields and interest
crediting rates should interest rates decline significantly over prolonged
periods. During such periods, the spread between investment yields and interest
crediting rates may be reduced as a result of certain limitations on the
Company's ability to manage interest crediting rates. Call swaptions allow the
Company to enter into interest rate swap agreements to receive fixed rates and
pay lower floating rates, effectively increasing the spread between investment
yields and interest crediting rates.
Premiums paid to purchase call swaptions are included in investments and are
amortized to net investment income over the exercise period of the swaptions. If
a call swaption is terminated, any gain is deferred and amortized to insurance
and annuity benefits over the expected life of the insurance and annuity
contracts and any unamortized premium is charged to income. If a call swaption
ceases to be an effective hedge, any related gain or loss is recognized in
income.
F-36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
9.3 CALL SWAPTIONS (CONTINUED)
Swaptions at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
(Dollars in Billions)
<S> <C> <C>
Call swaptions:
Notional amount $1.76 $1.35
Average strike rate 3.97% 4.81%
Put swaptions:
Notional amount $1.05 $ -
Average strike rate 8.33% -
</TABLE>
9.4 CREDIT AND MARKET RISK
Derivative financial instruments expose the Company to credit risk in the event
of non-performance by counterparties. The Company limits this exposure by
entering into agreements with counterparties having high credit ratings and by
regularly monitoring the ratings. The Company does not expect any counterparty
to fail to meet its obligation; however, non-performance would not have a
material impact on the Company's consolidated results of operations or financial
position.
The Company's exposure to market risk is mitigated by the offsetting effects of
changes in the value of the agreements and the related items being hedged.
F-37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. 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.
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
--------------------------------------------------------------------------------
(In Millions) (In Millions)
<S> <C> <C> <C> <C>
Assets:
Fixed maturity and equity
securities * $29,118 $29,118 $27,408 $27,408
Mortgage loans on real
estate $ 1,608 $ 1,557 $ 1,702 $ 1,660
Policy loans $ 1,252 $ 1,171 $ 1,127 $ 1,094
Investment in parent
company $ 55 $ 55 $ 38 $ 38
Indebtedness from
affiliates $ 161 $ 161 $ 97 $ 97
Liabilities:
Insurance investment
contracts $25,852 $25,675 $24,011 $24,497
</TABLE>
* Includes derivative financial instruments with negative fair values of $1.0
million and $4.2 million and positive fair values of $24.3 million and $7.2
million at December 31, 1998 and 1997, respectively.
F-38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. 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.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and notes
receivable from affiliates. Due to the short-term nature of accounts
receivable, fair value is assumed to equal carrying value. Fair value of
notes receivable was estimated using discounted cash flows based on
contractual maturities and discount rates that were based on U.S. Treasury
rates for similar maturity ranges.
11. DIVIDENDS PAID
American General Life Insurance Company paid $244 million, $401 million, and
$189 million in dividends on common stock to AGC Life Insurance Company in 1998,
1997, and 1996, respectively. The Company also paid $680 thousand per year in
dividends on preferred stock to an affiliate, The Franklin Life Insurance
Company, in 1998, 1997, and 1996.
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1998,
approximately $3.3 billion of consolidated shareholder's equity represents net
assets of the Company which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $2.5 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's statutory
net gain from operations.
The Company has various leases, substantially all of which are for office space
and facilities. Rentals under financing leases, contingent rentals, and future
minimum rental commitments and rental expense under operating leases are not
material.
F-40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
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.
In conjunction with the proposed settlements, the Company recorded a charge of
$97.1 million ($63.1 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.
On December 31, 1998, the Company entered into an agreement with the Parent
Company whereby the Company assigned, and the Parent Company assumed, $80.1
million of the liabilities of the Company related to the proposed resolution.
The liabilities of American General Life Insurance Company of New York, which
totaled $17.0 million, were not assumed by the Parent Company. As consideration
for the assumption of the liabilities, the Company paid the Parent Company an
amount equal to the liabilities recorded with respect to the proposed resolution
of the litigation. The assignment of the liabilities was not a novation, and
accordingly, the Company retains a contingent liability related to the
litigation. The litigation liabilities were reduced by payments of $2.7 million,
and the remaining balance of $94.4 million was included in other liabilities on
the Company's balance sheet at December 31, 1998.
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 consolidated 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.
F-41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
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 $6.0 million and
$7.6 million, respectively, for guaranty fund assessments, net of $3.7 million
and $4.3 million, respectively, of premium tax deductions. The Company has
recorded receivables of $6.2 million and $9.7 million at December 31, 1998 and
1997, respectively, for expected recoveries against the payment of future
premium taxes. Expenses incurred for guaranty fund assessments were $3.6
million, $2.1 million, and $6.0 million in 1998, 1997, and 1996, respectively.
F-42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996
were as follows:
<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE OF
GROSS OTHER FROM OTHER AMOUNT
AMOUNT COMPANIES COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Life insurance in force $46,057,031 $13,288,183 $629,791 $33,398,639 1.89%
====================================================================
Premiums:
Life insurance and annuities $ 90,298 $ 42,235 $ 117 $ 48,180 0.24%
Accident and health insurance 1,134 87 - 1,047 0.00%
--------------------------------------------------------------------
Total premiums $ 91,432 $ 42,322 $ 117 $ 49,227 0.24%
====================================================================
DECEMBER 31, 1997
Life insurance in force $45,963,710 $10,926,255 $ 4,997 $35,042,452 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 100,357 $ 37,294 $ 75 $ 63,138 0.12%
Accident and health insurance 1,208 172 - 1,036 0.00%
--------------------------------------------------------------------
Total premiums $ 101,565 $ 37,466 $ 75 $ 64,174 0.12%
====================================================================
DECEMBER 31, 1996
Life insurance in force $44,535,841 $ 8,625,465 $ 5,081 $35,915,457 0.01%
====================================================================
Premiums:
Life insurance and annuities $ 104,225 $ 34,451 $ 36 $ 69,810 0.05%
Accident and health insurance 1,426 64 - 1,362 0.00%
--------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 0.05%
====================================================================
</TABLE>
Reinsurance recoverable on paid losses was approximately $7.7 million, $2.3
million, and $6.9 million at December 31, 1998, 1997, and 1996, respectively.
Reinsurance recoverable on unpaid losses was approximately $2.5 million, $3.2
million, and $4.3 million at December 31, 1998, 1997, and 1996, respectively.
F-43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
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, substantially all
of the Company's critical systems are Year 2000 ready and have been returned to
operations. However, activities (3) through (5) for certain systems are ongoing,
with vendor upgrades expected to be received during the first half of 1999.
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 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 December 31,
1998, AGC has identified and assessed more approximately 700 critical third
party dependencies, including those related to the Company. A more detailed
evaluation will be completed during the first quarter 1999 as part of the
Company's contingency planning efforts. Due to the various stages of third
parties' Year 2000 readiness, the Company's testing activities will extend
through 1999.
F-44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
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 business processes with significant
exposure to Year 2000 risk; (2) determine the probability of a Year 2000 related
failure for those processes that have a high consequence of failure; (3) develop
an action plan to complete contingency plans for those processes that rank high
in consequence and probability of failure; and (4) complete the applicable
actions plans. The Company is currently developing action plans and expects to
substantially complete all contingency planning activities by April 30, 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 action, 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 conversion of
the Company's internal systems is not completed on a timely basis (due to non-
performance by significant third party vendors, lack of qualified personnel to
perform the Year 2000 work, or other unforeseen circumstances in completing the
Company's plans), or if critical third parties fail to achieve Year 2000
readiness on a timely basis, the Year 2000 issue could have a material adverse
impact on the Company's operation following the turn of the century.
COSTS
Through December 31, 1998, the 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's 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-45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS
15.1 NATURE OF OPERATIONS
The Company manages its business operation through two divisions, which are
based on products and services offered.
RETIREMENT SERVICES
The Retirement Services Division provides tax-deferred retirement annuities and
employer-sponsored retirement plans to employees of educational, health care,
public sector, and other not-for-profit organizations marketed nationwide
through exclusive sales representatives.
LIFE INSURANCE
The Life Insurance division provides traditional, interest-sensitive, and
variable life insurance and annuities to a broad spectrum of customers through
multiple distribution channels focused on specific market segments.
15.2 DIVISION RESULTS
Results of each division exclude goodwill amortization, net realized investment
gains, and non-recurring items.
Division earnings information was as follows:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES EARNINGS
------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------------------------------------------------------------------------------------------------------------
(In Millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retirement Services $1,987 $1,859 $1,745 $ 469 $398 $343 $315 $261 $226
Life Insurance 870 822 774 162 147 141 107 97 92
------------------------------------------------------------------------------------------------------------
Total divisions 2,857 2,681 2,519 631 545 484 422 358 318
Goodwill
amortization - - - (2) (2) (2) (2) (2) (2)
RG (L) (34) 30 29 (34) 30 29 (22) 19 19
Nonrecurring items - - - (125)(a) - - (81)(a) - -
------------------------------------------------------------------------------------------------------------
Total consolidated $2,823 $2,711 $2,548 $ 470 $573 $511 $317 $375 $335
============================================================================================================
</TABLE>
(a) Includes $97 million pretax ($63 million after-tax) in litigation
settlements and $28 million pretax ($18 million after-tax) in Year 2000
costs.
F-46
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
15. DIVISION OPERATIONS (CONTINUED)
15.2 DIVISION RESULTS (CONTINUED)
Division balance sheet information was as follows:
<TABLE>
<CAPTION>
ASSETS LIABILITIES
-------------------------------------------------------------------
DECEMBER 31
-------------------------------------------------------------------
IN MILLIONS 1998 1997 1998 1997
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirement Services $41,347 $35,195 $38,841 $33,136
Life Insurance 8,894 8,370 7,831 7,367
-------------------------------------------------------------------
Total consolidated $50,241 $43,565 $46,672 $40,503
===================================================================
</TABLE>
F-47
<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.
<TABLE>
<CAPTION>
PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
- ---------------------------------------------- -----------
<S> <C>
accumulation value 5
AGLC 41
AGL 1
amount at risk 7
automatic rebalancing 5
basis 24
beneficiary 29
cash surrender value 12
close of business 31
Code 23
cost of insurance rates 7
daily charge 7
date of issue 31
death benefit 5
dollar cost averaging 4
full surrender 12
Fund 2
investment option 1
lapse 10
The One VUL Solution 1
loan, loan interest 12
maturity, maturity date 13
modified endowment contract 24
monthly deduction day 31
monthly insurance charge 7
Mutual Fund 2
option 1, 2 5
partial surrender 12
payment option 13
planned periodic premium 10
Policy 1
Policy loan 12
Policy month, year 31
preferred loan interest 13
premium payments 4
premiums 4
prospectus 1
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
PAGE TO
SEE IN THIS
DEFINED TERM PROSPECTUS
- ---------------------------------------------- -----------
<S> <C>
reinstate, reinstatement 10
SEC 2
separate account 1
Separate Account VL-R 23
seven-pay test 24
specified amount 5
surrender 12
telephone transactions 16
transfers 10
valuation date, period 30
</TABLE>
We have filed a registration statement relating to Separate Account 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.
45
<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
American General Life Insurance Company's Bylaws provide in Article VII,
Section 1 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
American General Life Insurance Company 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 American General Life Insurance Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
The facing sheet.
Cross-Reference Table.
Prospectus, consisting of 45 pages of text, plus 50 financial pages of American
General Life Insurance Company.
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, Deputy General Counsel of
American General Life Companies
(b) American General Life Insurance Company's actuary
(c) Independent Auditors
Independent Auditors
The following exhibits:
1. Exhibits required by Article IX, paragraph A of Form N-8B-2:
(1)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)
(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable life
insurance standards of suitability and conduct. (1)
(2) Not applicable.
(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)
(3)(b) Form of Selling Group Agreement. (Filed herewith)
(3)(c) 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 amended Registration
Statement).
(4) Not applicable.
(5) Specimen form of the "One VUL Solution" Variable Universal
Life Insurance Policy (Policy Form No. 99615). (11)
II-2
<PAGE>
(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991.
(2)
(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)
(6)(c) Amendment to the Amended and Restated Articles of
Incorporation of American General Life Insurance Company,
effective July 13, 1995. (5)
(7) Not applicable.
(8)(a)(i) Form of Participation Agreement by and Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., American
General Life Insurance Company, on Behalf of Itself and its
Separate Accounts, and American General Securities
Incorporated. (6)
(8)(a)(ii) Form of Amendment Three to Participation Agreement by and
among AIM Variable Insurance Funds, Inc., A I M Distributors,
Inc., American General Life Insurance Company, on Behalf of
Itself and its Separate Accounts, and American General
Securities Incorporated dated as of February 1, 2000. (Filed
herewith)
(8)(b)(i) Form of Participation Agreement by and between The Variable
Annuity Life Insurance Company and American General Life
Insurance Company. (10)
(8)(b)(ii) Amendment One to Participation Agreement by and between The
Variable Annuity Life Insurance Company and American General
Life Insurance Company dated as of July 21, 1998. (8)
(8)(c)(i) Form of Participation Agreement Among MFS Variable Insurance
Trust, American General Life Insurance Company and
Massachusetts Financial Services Company. (6)
(8)(c)(ii) Form of Amendment Three to Participation Agreement Among MFS
Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company dated as
of February 1, 2000. (Filed herewith)
(8)(d)(i) Form of Participation Agreement Among Putnam Variable Trust,
Putnam Mutual Funds Corp., and American General Life
Insurance Company. (6)
(8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among
Putnam Variable Trust, Putnam Mutual Funds Corp., and
American General Life Insurance Company. (Filed herewith)
(8)(e)(i) Amended and Restated Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen
II-3
<PAGE>
American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc. (9)
(8)(e)(ii) Amendment One to Amended and Restated Participation Agreement
by and among American General Life Insurance Company,
American General Securities Incorporated, Van Kampen American
Capital Life Investment Trust, Van Kampen American Capital
Asset Management, Inc., and Van Kampen American Capital
Distributors, Inc. (8)
(8)(e)(iii) Form of Amendment Five to Amended and Restated Participation
Agreement by and among American General Life Insurance
Company, American General Securities Incorporated, Van Kampen
Life Investment Trust, Van Kampen Asset Management Inc. and
Van Kampen Funds Inc. (Filed herewith)
(8)(f) Form of Participation Agreement by and among American General
Life Insurance Company, Kemper Variable Series, Scudder
Kemper Investments, Inc. and Kemper Distributors, Inc. (Filed
herewith)
(8)(g) Form of Participation Agreement by and among American General
Life Insurance Company, Oppenheimer Variable Account Funds,
and OppenheimerFunds, Inc. (Filed herewith)
(8)(h) Form of Fund Participation Agreement by and among American
General Life Insurance Company, Banc One Investment Advisors
Corporation, One Group Investment Trust, and One Group
Administrative Services, Inc. dated February 1, 2000. (Filed
herewith)
(8)(i)(i) Participation Agreement by and among American General Life
Insurance Company, Templeton Variable Products Series Fund,
and Franklin Templeton Distributors, Inc. (8)
(8)(i)(ii) Form of Amendment to Participation Agreement by and among
American General Life Insurance Company, Templeton Variable
Products Series Fund, Franklin Templeton Variable Insurance
Products Trust, and Franklin Templeton Distributors, Inc.
dated February 1, 2000. (Filed herewith)
(8)(j) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)
(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset
Management Inc. dated January 1, 2000. (Filed herewith)
(8)(l) Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3) among
various affiliates of American General Corporation, including
American General Life Insurance Company and American General
Life Companies. (7)
II-4
<PAGE>
(8)(m) Administrative Services Agreement dated as of June 1, 1998,
between American General Life Insurance Company and AIM
Advisors, Inc. (4)
(8)(n) Form of Administrative Services Agreement by and between
American General Life Insurance Company and OppenheimerFunds,
Inc. (Filed herewith).
(8)(o) Form of Administrative Services Agreement between American
General Life Insurance Company and Scudder Kemper
Investments. (Filed herewith)
(8)(p) Administrative Services Agreement by and between American
General Life Insurance Company and Franklin Templeton
Services, Inc. dated as of March 9, 1999. (8)
(9) Not applicable.
(10)(a) Single Insured Life Insurance Application - Part A. (12)
(10)(b) Single Insured Life Insurance Application - Part B. (12)
(10)(c) Medical Exam Form Life Insurance Application. (12)
(10)(d) Single Insured Simplified Life Insurance Application. (Filed
herewith)
(10)(e) Variable Universal Life Insurance Supplemental Application.
(Filed herewith)
(10)(f) Service Request Form. (Filed herewith)
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General
Counsel of American General Life Companies. (Filed herewith)
2(b) Opinion and Consent of American General Life Insurance
Company's actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable)
6 Consent of Independent Auditors. (Filed herewith)
7 Powers of Attorney. (11)
II-5
<PAGE>
27 Financial Data Schedule. (Inapplicable, because no financial
statements of the Separate Account are being )
/1/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-42567) of American General Life Insurance
Company Separate Account VL-R on December 18, 1997.
/2/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 33-43390) of Separate Account D of American
General Life Insurance Company on October 16, 1991.
/3/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 30, 1992.
/4/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-70667) of American General Life Insurance
Company Separate Account D on January 15, 1999.
/5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of
the Form S-6 Registration Statement (File No. 333-53909) of American General
Life Insurance Company Separate Account VL-R on August 19, 1998.
/6/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form S-6 Registration Statement (File No. 333-42567) of American General
Life Insurance Company Separate Account VL-R on March 23, 1998.
/7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23
to the Form N-4 Registration Statement of American General Life Insurance
Company's Separate Account A (File No. 33-44745) on April 24, 1998.
/8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-70667) of American General Life
Insurance Company Separate Account D on March 18, 1999.
/9/Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997.
/10/Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4
Registration Statement (File No. 333-40637) of Separate Account D of American
General Life Insurance Company filed on February 12, 1998.
/11/Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-87307) of American General Life Insurance
Company Separate Account VL-R on September 17, 1999.
/12/Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-89897) of American General Life Insurance
Company Separate Account VL-R on October 29, 1999.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
American General Life Insurance Company Separate Account 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 19/th/ day of
January, 2000.
AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT VL-R
(Registrant)
BY: AMERICAN GENERAL LIFE
INSURANCE COMPANY
(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/ RONALD H. RIDLEHUBER* Principal Executive Officer January 19, 2000
- ---------------------------- and Director
(Ronald H. Ridlehuber)
/s/ ROBERT F. HERBERT, JR.* Principal Financial and January 19, 2000
- ------------------------------- Accounting Officer
(Robert F. Herbert, Jr.) and Director
II-7
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ DONALD W. BRITTON* Director January 19, 2000
- ------------------------------
(Donald W. Britton)
/s/ DAVID A. FRAVEL* Director January 19, 2000
- ------------------------------
(David A. Fravel)
/s/ ROYCE G. IMHOFF, II* Director January 19, 2000
- ------------------------------
(Royce G. Imhoff, II)
/s/ JOHN V. LAGRASSE* Director January 19, 2000
- ------------------------------
(John V. LaGrasse)
/s/ RODNEY O. MARTIN, JR.* Director January 19, 2000
- -------------------------------
(Rodney O. Martin, Jr.)
/s/ GARY D. REDDICK* Director January 19, 2000
- -------------------------------
(Gary D. Reddick)
/s/ THOMAS M. ZUREK* Director January 19, 2000
- -------------------------------
(Thomas M. Zurek)
*/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)(a) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of Separate
Account VL-R. (1)
(1)(b) Resolutions of Board of Directors of American General Life
Insurance Company authorizing the establishment of variable life
insurance standards of suitability and conduct. (1)
(2) Not applicable.
(3)(a) Amended and Restated Distribution Agreement between American
General Securities Incorporated and American General Life
Insurance Company effective October 15, 1998. (4)
(3)(b) Form of Selling Group Agreement. (Filed herewith)
(3)(c) 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 amended Registration
Statement).
(4) Not applicable.
(5) Specimen form of the "One VUL Solution" Variable Universal
Life Insurance Policy (Policy Form No. 99615). (11)
(6)(a) Amended and Restated Articles of Incorporation of American
General Life Insurance Company, effective December 31, 1991. (2)
(6)(b) Bylaws of American General Life Insurance Company, adopted
January 22, 1992. (3)
(6)(c) Amendment to the Amended and Restated Articles of Incorporation
of American General Life Insurance Company, effective July 13,
1995. (5)
(7) Not applicable.
(8)(a)(i) Form of Participation Agreement by and Among AIM Variable
Insurance Funds, Inc., AIM Distributors, Inc., American General
Life Insurance
E-1
<PAGE>
Company, on Behalf of Itself and its Separate Accounts, and
American General Securities Incorporated. (6)
(8)(a)(ii) Form of Amendment Three to Participation Agreement by and
among AIM Variable Insurance Funds, Inc., A I M Distributors,
Inc., American General Life Insurance Company, on Behalf of
Itself and its Separate Accounts, and American General Securities
Incorporated dated as of February 1, 2000. (Filed herewith)
(8)(b)(i) Form of Participation Agreement by and between The Variable
Annuity Life Insurance Company and American General Life
Insurance Company. (10)
(8)(b)(ii) Amendment One to Participation Agreement by and between The
Variable Annuity Life Insurance Company and American General Life
Insurance Company dated as of July 21, 1998. (8)
(8)(c)(i) Form of Participation Agreement Among MFS Variable Insurance
Trust, American General Life Insurance Company and Massachusetts
Financial Services Company. (6)
(8)(c)(ii) Form of Amendment Three to Participation Agreement Among
MFS Variable Insurance Trust, American General Life Insurance
Company and Massachusetts Financial Services Company dated as of
February 1, 2000. (Filed herewith)
(8)(d)(i) Form of Participation Agreement Among Putnam Variable Trust,
Putnam Mutual Funds Corp., and American General Life Insurance
Company. (6)
(8)(d)(ii) Form of Amendment No. 1 to Participation Agreement among
Putnam Variable Trust, Putnam Mutual Funds Corp., and American
General Life Insurance Company. (Filed herewith)
(8)(e)(i) Amended and Restated Participation Agreement by and among
American General Life Insurance Company, American General
Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen American Capital Asset Management,
Inc., and Van Kampen American Capital Distributors, Inc. (9)
(8)(e)(ii) Amendment One to Amended and Restated Participation Agreement by
and among American General Life Insurance Company, American
General Securities Incorporated, Van Kampen American Capital Life
Investment Trust, Van Kampen American Capital Asset Management,
Inc., and Van Kampen American Capital Distributors, Inc. (8)
E-2
<PAGE>
(8)(e)(iii) Form of Amendment Five to Amended and Restated Participation
Agreement by and among American General Life Insurance Company,
American General Securities Incorporated, Van Kampen Life
Investment Trust, Van Kampen Asset Management Inc. and Van Kampen
Funds Inc. (Filed herewith)
(8)(f) Form of Participation Agreement by and among American General
Life Insurance Company, Kemper Variable Series, Scudder Kemper
Investments, Inc. and Kemper Distributors, Inc. (Filed herewith)
(8)(g) Form of Participation Agreement by and among American General
Life Insurance Company, Oppenheimer Variable Account Funds, and
OppenheimerFunds, Inc. (Filed herewith)
(8)(h) Form of Fund Participation Agreement by and among American
General Life Insurance Company, Banc One Investment Advisors
Corporation, One Group Investment Trust, and One Group
Administrative Services, Inc. dated February 1, 2000. (Filed
herewith)
(8)(i)(i) Participation Agreement by and among American General Life
Insurance Company, Templeton Variable Products Series Fund, and
Franklin Templeton Distributors, Inc. (8)
(8)(i)(ii) Form of Amendment to Participation Agreement by and among
American General Life Insurance Company, Templeton Variable
Products Series Fund, Franklin Templeton Variable Insurance
Products Trust, and Franklin Templeton Distributors, Inc. dated
February 1, 2000. (Filed herewith)
(8)(j) Form of Administrative Services Agreement between American
General Life Insurance Company and fund distributor. (5)
(8)(k) Form of Administrative Services Agreement between American
General Life Insurance Company and Van Kampen Asset Management
Inc. dated January 1, 2000. (Filed herewith)
(8)(l) Form of services agreement dated July 31, 1975, (limited to
introduction and first two recitals, and sections 1-3) among
various affiliates of American General Corporation, including
American General Life Insurance Company and American General Life
Companies. (7)
(8)(m) Administrative Services Agreement dated as of June 1, 1998,
between American General Life Insurance Company and AIM Advisors,
Inc. (4)
E-3
<PAGE>
(8)(n) Form of Administrative Services Agreement by and between
American General Life Insurance Company and OppenheimerFunds,
Inc. (Filed herewith).
(8)(o) Form of Administrative Services Agreement between American
General Life Insurance Company and Scudder Kemper Investments.
(Filed herewith)
(8)(p) Administrative Services Agreement by and between American
General Life Insurance Company and Franklin Templeton Services,
Inc. dated as of March 9, 1999. (8)
(9) Not applicable.
(10)(a) Single Insured Life Insurance Application - Part A. (12)
(10)(b) Single Insured Life Insurance Application - Part B. (12)
(10)(c) Medical Exam Form Life Insurance Application. (12)
(10)(d) Single Insured Simplified Life Insurance Application. (Filed
herewith)
(10)(e) Variable Universal Life Insurance Supplemental Application.
(Filed herewith)
(10)(f) Service Request Form. (Filed herewith)
Other Exhibits
2(a) Opinion and Consent of Pauletta P. Cohn, Deputy General Counsel
of American General Life Companies. (Filed herewith)
2(b) Opinion and Consent of American General Life Insurance Company's
actuary. (Filed herewith)
3 Not applicable.
4 Not applicable.
5 Financial Data Schedule. (Not applicable)
6 Consent of Independent Auditors. (Filed herewith)
7 Powers of Attorney. (11)
E-4
<PAGE>
27 Financial Data Schedule. (Inapplicable, because no financial
statements of the Separate Account are being )
/1/ Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-42567) of American General Life Insurance
Company Separate Account VL-R on December 18, 1997.
/2/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 33-43390) of Separate Account D of American
General Life Insurance Company on October 16, 1991.
/3/ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 1 of the Form N-4 Registration Statement (File No. 33-43390) of Separate
Account D of American General Life Insurance Company on April 30, 1992.
/4/ Incorporated herein by reference to the initial filing of the Form N-4
Registration Statement (File No. 333-70667) of American General Life Insurance
Company Separate Account D on January 15, 1999.
/5/ Incorporated by reference to the filing of Pre-Effective Amendment No. 3 of
the Form S-6 Registration Statement (File No. 333-53909) of American General
Life Insurance Company Separate Account VL-R on August 19, 1998.
/6/ Incorporated by reference to the filing of Pre-Effective Amendment No. 1 of
the Form S-6 Registration Statement (File No. 333-42567) of American General
Life Insurance Company Separate Account VL-R on March 23, 1998.
/7/ Incorporated by reference to the filing of Pre-Effective Amendment No. 23
to the Form N-4 Registration Statement of American General Life Insurance
Company's Separate Account A (File No. 33-44745) on April 24, 1998.
/8/ Incorporated by reference to the filing of the Pre-Effective Amendment No. 1
to Form N-4 Registration Statement (File No. 333-70667) of American General Life
Insurance Company Separate Account D on March 18, 1999.
/9/ Incorporated by reference to Post-Effective Amendment No. 12 to Registrant's
Form N-4 Registration Statement (File No. 33-43390) filed on April 30, 1997.
/10/Incorporated by reference to Pre-Effective Amendment No. 1 of the Form N-4
Registration Statement (File No. 333-40637) of Separate Account D of American
General Life Insurance Company filed on February 12, 1998.
E-5
<PAGE>
/11/Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-87307) of American General Life Insurance
Company Separate Account VL-R on September 17, 1999.
/12/Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-89897) of American General Life Insurance
Company Separate Account VL-R on October 29, 1999.
E-6
<PAGE>
EXHIBIT 3(B)
VARIABLE UNIVERSAL LIFE
SELLING AGREEMENT
This Agreement is made and entered into this __ day of ________, 1999, by and
among American General Life Insurance Company, a Texas domiciled insurance
company ("Company"); American General Securities Incorporated, a Texas
corporation ("AGSI"); Banc One Securities Corporation ("Broker/Dealer"), of
Greencrest, State of Ohio; and Banc One Insurance Services Corporation
("Insurance Agent"), of Milwaukee, State of Wisconsin.
RECITALS:
A. AGSI is a registered broker/dealer and the distributor of the policies
identified in Schedule A of this Agreement. Company is a life insurance
company.
B. Pursuant to a Distribution Agreement with AGSI ("Distribution Agreement"),
Company has appointed AGSI as the principal underwriter of the class or
classes of variable universal life insurance policies identified in Schedule
A to this Agreement at the time that this Agreement is executed, and such
other class or classes of variable universal life policies or variable life
insurance policies that may be added to Schedule A from time to time in
accordance with Section 2(g) of this Agreement (each, a "Class of Policies").
Such Class of Policies together with any additional policies shown on
Schedule A shall be referred to herein as "Policies". Each Class of Policies
will be issued by Company through one or more separate accounts ("Separate
Accounts") and each Class of Policies will be funded by (i) shares of
beneficial interest in certain investment companies (each series of shares of
beneficial interest, a "Fund" and, together, the "Funds") and/or (ii) a fixed
account option(s). Company has authorized AGSI to enter into separate written
agreements with broker/dealers pursuant to which such broker/dealers would be
authorized to participate in the distribution of the Policies and would agree
to use their best efforts to solicit applications for the Policies.
C. The parties to this Agreement desire that Broker/Dealer and Insurance Agent
be authorized to solicit applications for the sale of the Policies to the
general public subject to the terms and conditions set forth herein.
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the mutual promises and
covenants hereinafter set forth, the parties agree as follows:
1. ADDITIONAL DEFINITIONS
(a) Registration Statement - With respect to each Class of Policies, the
most recent effective registration statement(s) filed with the SEC or
the most recent effective post-effective amendment(s) thereto with
respect to such Class of Policies, including financial statements
included therein and all exhibits thereto. There may be more than one
Registration Statement in effect at a time for a Class of Policies; in
such case, any reference to "the Registration Statement" for a Class
of Policies shall refer to any or all, depending on the context, of
the Registration Statements for such Class of Policies.
(b) Prospectus - With respect to each Class of Policies, the prospectus
for such Class of Policies included within the Registration Statement
for such Class of Policies; provided, however, that, if the most
recently filed prospectus filed pursuant to Rule 497 under the 1933
Act subsequent to the date on which the Registration Statement became
effective differs from the prospectus on file at the time the
Registration Statement became effective, the term "Prospectus" shall
refer to the most recently filed prospectus filed under Rule 497 from
and after the date on which it shall have been filed.
(c) 1933 Act - The Securities Act of 1933, as amended.
(d) 1934 Act - The Securities and Exchange Act of 1934, as amended.
(e) 1940 Act - The Investment Company Act of 1940, as amended.
(f) Agent - An individual associated with Insurance Agent and
Broker/Dealer who is appointed by Company as an agent for the purpose
of soliciting applications.
(g) Premium - A payment made under a Policy to purchase benefits under
such Policy.
(h) Service Center - American General Life Insurance Company Variable
Universal Life Administration Center, P. O. Box 4880, Houston, Texas
77210-4880, or such other address as may be designated from time to
time by Company and provided to Insurance Agent and Broker/Dealer.
(i) Operations Manual - The manual prepared and other written rules and
procedures provided by Company to Agents, as revised from time to
time.
(j) SEC - The Securities and Exchange Commission.
(k) NASD - The National Association of Securities Dealers, Inc.
(l) Affiliate - With respect to a person, any other person controlling,
controlled by, under common control with or licensed to use the
tradename/trademark of such person.
2
<PAGE>
(m) Broker of Record - Generally, the person or entity designated in
Company's records as the person or entity, with respect to a Policy,
that is entitled to receive compensation payable with respect to such
Policy and is able to contact directly the owner of such Policy. In
the case of compensation payable with respect to a Premium, the Broker
of Record shall be the party designated as such in Company's records,
at the time such Premium is accepted by Company. In the case of any
payment of compensation payable with respect to Policy value, the
Broker of Record shall be the party designated as such in Company's
records.
2. AUTHORIZATION OF BROKER/DEALER AND INSURANCE AGENT
(a) AGSI hereby authorizes Broker/Dealer under the securities laws, and
Company hereby authorizes and appoints Insurance Agent under the
insurance laws, in a non-exclusive capacity, to distribute or
facilitate distribution of the Policies. Broker/Dealer and Insurance
Agent accept such authorization and appointment and shall use their
best efforts to find purchasers for the Policies, in each case
acceptable to Company.
(b) AGSI and Company shall notify Broker/Dealer and Insurance Agent in
writing of all states and jurisdictions in which Company is licensed
to sell the Policies.
(c) Broker/Dealer and Insurance Agent acknowledge that no territory is
exclusively assigned hereunder, and Company reserves the right in its
sole discretion to establish or appoint one or more agencies in any
jurisdiction in which Insurance Agent transacts business hereunder.
(d) Insurance Agent is vested under this Agreement with power and
authority to select and recommend individuals associated with
Insurance Agent for appointment as Agents of Company, and individuals
so recommended by Insurance Agent may become Agents, provided that
Company reserves the right in its good faith discretion to refuse to
appoint any proposed agent or, once appointed, to terminate the same
at any time.
(e) Neither Broker/Dealer nor Insurance Agent shall expend or contract for
the expenditure of the funds of AGSI or Company. Broker/Dealer and
Insurance Agent each shall pay all expenses incurred by each of them
in the performance of this Agreement, unless otherwise specifically
provided for in this Agreement or unless AGSI and Company shall have
agreed in advance in writing to share the cost of certain expenses.
Initial and renewal state appointment fees for Agents of Company shall
be paid by Company. Broker/Dealer will be obligated to pay all other
fees, including, but not limited to, transfer fees and termination
fees, and any other fees required to be paid to obtain state insurance
licenses for Insurance Agent or appointees of Insurance Agent. Neither
Broker/Dealer nor Insurance Agent shall possess or exercise any
authority on behalf of AGSI or Company other than that expressly
conferred on Broker/Dealer or Insurance Agent by this Agreement. In
3
<PAGE>
particular, and without limiting the foregoing, neither Broker/Dealer
nor Insurance Agent shall have any authority, nor shall either grant
such authority to any Agent, on behalf of AGSI or Company: to make,
alter or discharge any Policy or other contract entered into pursuant
to a Policy; to waive any Policy forfeiture provision; to extend the
time of paying any Premiums; or to receive any monies or Premiums due
to Company from applicants for or purchasers of the Policies (except
for the sole purpose of forwarding monies or premiums to Company).
(f) Broker/Dealer and Insurance Agent acknowledge that Company has the
right in its good faith discretion to reject any applications or
Premiums received by it and to return or refund to an applicant such
applicant's Premium.
(g) Except as otherwise provided in Section 6 herein, Schedule A to this
Agreement may not be amended by AGSI and Company without the prior
written consent of Insurance Agent.
(h) AGSI and Company acknowledge that Broker/Dealer and Insurance Agent
are each an independent contractor. Accordingly, Broker/Dealer and
Insurance Agent are not obliged or expected to give full time and
energies to the performance of their obligations hereunder, nor are
Broker/Dealer and Insurance Agent obliged or expected to represent
AGSI or Company exclusively. Nothing herein contained shall
constitute Broker/Dealer, Insurance Agent, Agents or any agents or
representatives of Broker/Dealer or Insurance Agent as employees of
Company or AGSI in connection with solicitation of applications for
the Policies.
3. LICENSING AND REGISTRATION OF BROKER/DEALER, INSURANCE AGENT AND AGENTS
(a) Broker/Dealer represents that it is a broker/dealer registered with
the SEC under the 1934 Act, and is a member in good standing of the
NASD. Broker/Dealer must, at all times when performing its functions
and fulfilling its obligations under this Agreement, be duly
registered as a broker/dealer under the 1934 Act and as required by
applicable law, in each state or other jurisdiction in which
Broker/Dealer intends to perform its functions and fulfill its
obligations hereunder, and be a member in good standing of the NASD.
(b) Insurance Agent represents that it is a licensed life insurance
agent as required to solicit applications, except that if Insurance
Agent cannot be qualified to be a licensed life insurance agent until
appointed by an insurer, the Insurance Agent represents that it is
qualified to be a licensed insurance agent but for the appointment by
an insurer. Insurance Agent must, at all times when performing its
functions and fulfilling its obligations under this Agreement, be duly
licensed and appointed by Company to sell the Policies in each state
or other jurisdiction in which Insurance Agent intends to perform its
functions and fulfill its obligations hereunder.
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(c) Broker/Dealer shall ensure that no individual shall offer or sell the
Policies on behalf of Broker/Dealer in any state or other jurisdiction
in which the Policies may lawfully be sold unless such individual is
an associated person of Broker/Dealer (as that term is defined in
Section 3(a)(18) of the 1934 Act) and duly registered with the NASD
and any applicable state securities regulatory authority as a
registered person of Broker/Dealer qualified to distribute the
Policies in such state or jurisdiction.
(d) Insurance Agent shall ensure that no individual shall offer or sell
the Policies in any state or other jurisdiction unless such individual
is duly licensed and appointed as an Agent of Company, and
appropriately licensed, registered or otherwise qualified to offer and
sell the Policies to be offered and sold by such individual under the
insurance laws of such state or jurisdiction. All matters concerning
the licensing of any individuals recommended for appointment by
Insurance Agent under any applicable state insurance law shall be a
matter directly between Insurance Agent and such individual, and the
Insurance Agent shall furnish Company, upon Company's request, with
proof of proper licensing of such individual or other proof,
reasonably acceptable to Company, of satisfaction by such individual
of licensing or appointment requirements including: (i) certificate by
the Insurance Agent of the character and fitness of such
individual; (ii) a copy of the most recent third party credit check or
character report obtained pursuant to the licensing requirements of
applicable state insurance law prior to Company's appointing any such
individual as an Agent of Company; and (iii) a copy of such
individual's state insurance license. Insurance Agent agrees to
maintain documentation regarding the background investigation of
individuals conducted prior to appointment during the period the
individual is appointed by Company and shall provide such information
to Company as may be required by valid request of any regulatory
authority.
4. BROKER/DEALER, INSURANCE AGENT, COMPANY AND AGSI'S RIGHTS AND
RESPONSIBILITIES
(a) Broker/Dealer and Insurance Agent hereby represent and warrant that
they are duly in compliance with all applicable federal and state
securities laws and regulations, and all applicable insurance laws and
regulations. Broker/Dealer and Insurance Agent each shall carry out
their respective obligations under this Agreement in continued
compliance with such regulations. Broker/Dealer shall be responsible
for securities training, supervision and control of Agents in
connection with their solicitation activities with respect to the
policies and shall supervise Agents' compliance with applicable
federal and state
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securities law and NASD requirements in connection with such
solicitation activities. Broker/Dealer and Insurance Agent shall use
reasonable best efforts to comply and ensure that Agents comply with
the rules and procedures set forth in the Operations Manual, and the
rules set forth below, and Broker/Dealer and Insurance Agent shall be
responsible for such compliance. Insurance Agent shall train,
supervise and be responsible for the conduct of Agents in their
solicitation activities in connection with the Policies, and shall
supervise Agents' strict compliance with the applicable rules and
regulations of any governmental or other insurance agencies that have
jurisdiction over variable policies activities, as well as the rules
and procedures of Company pertaining to the solicitation, sale and
submission of applications for the Policies, which are set forth in
Company's Operations Manual, as they may be amended from time to time
in Company's good faith discretion. However, changes to Company's
Operations Manual will not be effective as they relate to Insurance
Agent, Broker/Dealer and Agents, unless Company provides thirty (30)
days' written notice to Insurance Agent. In the event of a
contradiction between the provisions of this Agreement and Company's
Operations Manual, the provisions of this Agreement shall prevail.
Broker/Dealer shall be solely responsible for background
investigations of Agents to determine their qualifications, good
character, and moral fitness to sell the Policies.
(b) Broker/Dealer and Insurance Agent shall comply with the Principles and
Code of Ethical Market Conduct (the "Principles and Code") adopted by
Company and set forth in Schedule B, which is made a part hereof.
Insurance Agent agrees to make available training regarding the
Principles and Code to Agents and to assure compliance with the
Principles and Code by Agents. Company will provide materials that
may be used in such training. Schedule B may be amended or modified
by Company at any time, in any manner, and without prior notice.
(c) Broker/Dealer, Insurance Agent and Agents shall not offer or attempt
to offer the Policies, nor solicit applications for the Policies, nor
deliver Policies, in any state or jurisdiction in which the Policies
may not lawfully be sold or offered for sale. For purposes of
determining where the Policies may be offered and applications
solicited, Insurance Agent may rely on written notification, as
revised from time to time, that Insurance Agent receives from Company.
However, changes to the Principles and Code will not be effective as
to Insurance Agent, Broker/Dealer and Agents without thirty days'
written notice to Insurance Agent. In the event of a contradiction
between the provisions of this Agreement and the Principles and Code,
the provisions of this Agreement shall prevail.
(d) Broker/Dealer, Insurance Agent and Agents shall not solicit
applications for the Policies without delivering the then-currently
effective Prospectus for the Policies, the then-currently
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effective prospectus(es) for the underlying fund(s) and, where
required by state insurance law, the then-currently effective
statement of additional information for the Policies.
(e) Broker/Dealer, Insurance Agent and Agents shall not recommend the
purchase of a Policy to an applicant unless each has reasonable
grounds to believe that such purchase is suitable for the applicant in
accordance with, among other things, applicable regulations of any
state insurance commission, the SEC and the NASD.
(f) Insurance Agent shall return promptly or facilitate the return to
Company all receipts for delivered Policies, all undelivered Policies
and all receipts for cancellation. Upon issuance of a Policy by
Company and delivery of such Policy to Insurance Agent or its
designee, Insurance Agent shall promptly deliver or facilitate
delivery of such Policy to its purchaser. For purposes of this
provision "promptly" shall be deemed to mean not later than five (5)
calendar days. Company will assume that a Policy issued by Company
will be delivered by Insurance Agent or its designee to the purchaser
of such Policy within five (5) calendar days for purposes of
determining when to transfer Premiums initially allocated to the Money
Market Account available under such Policy to the particular
investment options specified by such purchaser. As a result, if a
purchaser exercises the free look provisions under a Policy,
Broker/Dealer shall indemnify Company for any loss incurred by Company
that results from Insurance Agent's failure to deliver or facilitate
delivery of such Policy to its purchaser within the contemplated five
(5) calendar day period.
(g) Neither Broker/Dealer nor Insurance Agent, nor any of their directors,
partners, officers, employees, registered persons, associated persons,
agents or affiliated persons, in connection with the offer or sale of
the Policies, shall give any information or make any representations
or statements, written or oral, concerning the Policies, a Fund or
Fund Shares, other than information or representations contained in
the Prospectuses, statements of additional information and
Registration Statements for the Policies, or a Fund, or in reports or
proxy statements therefore, or in promotional, sales or advertising
material or other information supplied and approved in writing by AGSI
and Company.
(h) Broker/Dealer and Insurance Agent shall not use or implement any
promotional, sales or advertising material relating to the Policies
without the prior written approval of AGSI and Company.
(i) Broker/Dealer and Insurance Agent shall be solely responsible under
applicable tax laws for the reporting of compensation paid to Agents.
(j) Insurance Agent represents that it maintains and shall maintain such
books and records concerning the activities of Agents as may be
required by the appropriate insurance regulatory agencies that have
jurisdiction and that may be reasonably required by Company
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to adequately reflect the Policies processed through Insurance Agent.
Insurance Agent shall make such books and records available to
Company.
(k) Broker/Dealer represents that it maintains and shall maintain
appropriate books and records concerning the activities of Agents as
are required by the SEC, the NASD and other agencies having
jurisdiction and that may be reasonably required by AGSI to reflect
adequately the Policies processed through Insurance Agent.
Broker/Dealer shall make such books and records available to AGSI
and/or Company at any reasonable time upon written request by AGSI
and/or Company.
(l) Company and AGSI's Books and Records and Broker/Dealer and Insurance
Agent's Right to Accounting.
(i) During the term of this Agreement, Company and AGSI shall keep
accurate books of account and records covering all transactions
relating to this Agreement at Company's and AGSI's principal place
of business for not less than two (2) years after the expiration, or
earlier termination, of this Agreement and to allow Insurance Agent,
Broker/Dealer and their representatives to audit those books of
account and records and to make copies of them at Insurance Agent's
or Broker/Dealer's expense, provided Insurance Agent or
Broker/Dealer has a good faith reason to believe that the
recordkeeping is inaccurate, and provided Company or AGSI receives
ten (10) days' prior written notice. If the audit reveals payments
and commission fees or other payments due to Insurance Agent or
Broker/Dealer in excess of 10 percent more than the payments paid to
Insurance Agent or Broker/Dealer for the period covered by the
audit, all audit fees, costs and expenses shall be borne by Company
or AGSI, in addition to interest on the amount discovered to be due,
from the first dollar more than the payments actually paid.
Interest charged shall be in the amount of two percentage points
above the prime rate as established by Bank One Wisconsin.
(ii) If Insurance Agent's or Broker/Dealer's and Company's or AGSI's
auditors shall disagree on whether the amount owed exceeds 10
percent, Insurance Agent's or Broker/Dealer's auditor(s) and
Company's or AGSI's auditor(s) shall jointly select a third auditor
whose determination of the amount owed shall be final and binding
upon the parties.
(iii) Insurance Agent's or Broker/Dealer's receipt and deposit of
monies shall not prevent or limit Insurance Agent's or
Broker/Dealer's right to contest the accuracy of correctness of any
statement for those monies.
(m) Both parties shall promptly furnish to each other or its authorized
agent any reports and information that it may reasonably request for
the purpose of meeting its reporting and
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record keeping requirements under the insurance laws of any state,
under any applicable federal and state securities laws, rules and
regulations, and the rules of the NASD.
(n) Broker/Dealer shall secure and maintain a fidelity bond (including
coverage for larceny, embezzlement and other defalcation), issued by a
reputable bonding company, covering all of its directors, officers,
agents and employees who have access to funds of Company. This bond
shall be maintained at Broker/Dealer's expense in at least the amount
prescribed under Rule 3020 of the NASD Conduct Rules. Upon request,
Broker/Dealer shall provide AGSI with a copy of said bond.
Broker/Dealer shall also self-insure or secure and maintain errors and
omissions insurance and shall provide evidence of same acceptable to
AGSI in its good faith discretion and covering Broker/Dealer,
Insurance Agent, and Agents. Broker/Dealer hereby assigns any
proceeds received from any fidelity bonding company, errors and
omissions or other liability coverage, to AGSI or Company as their
interests may appear, to the extent of their loss due to activities
covered by the bond, policy or other liability coverage. If there is
any deficiency amount, whether due to a deductible or otherwise,
Broker/Dealer shall promptly pay such amount on demand. Broker/Dealer
hereby indemnifies and holds harmless AGSI and Company from any such
deficiency and from the costs of collection thereof, including
reasonable attorney's fees.
5. SALES MATERIALS
(a) During the term of this Agreement, AGSI and Company will provide
Broker/Dealer and Insurance Agent, without charge, with as many copies
of Prospectuses (and any supplements thereto), current Fund
prospectus(es) (and any supplements thereto) except for the One Group
Investment Trust materials, as Broker/Dealer or Insurance Agent may
reasonably request. Upon termination of this Agreement, Broker/Dealer
and Insurance Agent will promptly return to AGSI any Prospectuses,
Fund prospectuses, and other materials and supplies furnished by AGSI
or Company to Broker/Dealer or Insurance Agent or to Agents.
(b) During the term of this Agreement, Insurance Agent will be responsible
for providing or having provided all promotional, sales and
advertising material to be used by Broker/Dealer and Insurance Agent,
subject to Company's prior written approval. Insurance Agent will
file such materials or will cause such materials to be filed with the
SEC, the NASD, and/or with any state securities regulatory
authorities, as appropriate.
(c) During the term of this Agreement, Broker/Dealer and Insurance Agent
will comply with Company advertising procedures set forth in Schedule
C to this Agreement for any
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advertising material pertaining to Company's products. Schedule C may
be amended or modified at any time by Company, in any manner, with
prior notice.
(d) Neither Company nor AGSI shall use any advertising material,
prospectus, proposal, or representation either in general or in
relation to a Policy of Company referring to Insurance Agent,
Broker/Dealer or its Affiliates or the Policies written under this
Agreement unless furnished by Insurance Agent or until the consent of
Insurance Agent shall have been first secured. Neither Broker/Dealer
nor Insurance Agent shall use any advertising material, prospectus,
proposal, or representation either in general or in relation to a
Policy of Company referring to Company, AGSI, or the Policies written
under this Agreement unless furnished by Company or until Company's
consent shall have been first secured. The consideration for and the
giving of consent as described above shall relate to only one specific
request and shall not be construed to have applied to any subsequent
materials or programs. Company and/or A.G. Distributors shall be
responsible for the cost of development, marketing fees, printing and
advertising costs related to this Agreement, except as otherwise
provided in Section 5 hereof
(e) All requests for written consent shall contain direct reproductions of
all material; i.e. art work, copy, script, photographs, videotape,
magnetic recording tape, etc. to be used in the reproduction of the
advertisement in the printed or electronic media. In addition, all
requests shall include the schedule(s) for the commencement and
duration of the advertising campaign for which the subject material
will be used.
6. COMMISSION AGREEMENT
(a) During the term of this Agreement, AGSI and Company shall pay to
Insurance Agent as compensation for Policies for which Broker/Dealer
is the Broker of Record, the commissions and fees set forth in
Schedule A to this Agreement, as such Schedule A may be amended or
modified at any time, with prior written consent of Insurance Agent,
by AGSI or Company, and subject to the other provisions of this
Agreement. The payment of such commissions and fees shall be subject
to the terms and conditions of this Agreement and those set forth on
Schedule A. Any amendment to Schedule A will be applicable to any
Policy for which an initial application or premium is received by the
Service Center on or after the effective date of such amendment.
Compensation with respect to any Policy shall be paid to Insurance
Agent only for so long as Insurance Agent appointed on the
recommendation of and affiliated with Broker/Dealer is the Broker of
Record for such Policy.
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(b) All commissions or fees payable under this Agreement shall be vested
and will continue to be paid on Policies in force even after
termination of this Agreement, except as otherwise provided in this
subsection. No compensation shall be payable, and Insurance Agent
agrees to reimburse AGSI and Company for any compensation that may
have been paid to Insurance Agent or any Agents in any of the
following situations: (i) Company, in its good faith discretion,
determines not to issue the Policy applied for; (ii) Company refunds
the premiums upon the applicant's surrender or withdrawal pursuant to
any "free-look" privilege; (iii) Company refunds the premiums paid by
applicant as a result of a complaint by applicant; (iv) Company
determines that any person soliciting an application who is required
to be licensed or any other person or entity receiving compensation
for soliciting applications or premiums for the Policies is not or was
not duly licensed as an insurance agent; or (v) any other situation
listed in Section 8, subsections (a) (i), (ii), (iv), (vi) and (vii)
of this Agreement.
7. INTERESTS IN AGREEMENT. Agents shall have no interest in this Agreement or
right to any commissions to be paid by AGSI, Company, Insurance Agent or
Broker/Dealer. Insurance Agent and Broker/Dealer shall be jointly
responsible for the payment of any commission or consideration of any kind to
Agents. Insurance Agent and Broker/Dealer shall have no right to withhold or
deduct any commission from any Premiums which it may collect unless and only
to the extent that Schedule D to this Agreement permits Insurance Agent or
Broker/Dealer to net commissions against Premiums collected. Unless
otherwise provided in this Agreement, Schedule D may not be modified at any
time by Company, in any manner, without the prior written consent of
Insurance Agent. Insurance Agent or Broker/Dealer shall have no interest
in any compensation paid by Company to AGSI or any affiliate, now or
hereafter, in connection with the sale of any Policies hereunder.
8. TERMINATION OF AGREEMENT. This Agreement may be terminated by any party
hereto without cause upon thirty (30) days' prior written notice to the other
parties stating the date and time of termination.
(a) Company may also terminate this Agreement for cause:
(i) License Suspension or Revocation. In the event of any order of
suspension or revocation of Insurance Agent's license by any
insurance regulatory authority or of Broker/Dealer's ceasing to
be a registered broker/dealer or a member of the NASD,
termination shall be effective on the date of such suspension,
revocation or cessation; or
(ii) Misapplication of Funds. In the event of Broker/Dealer or
Insurance Agent's misapplication, misdirection or
misappropriation of funds or property received under
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this Agreement or in the event of their failure to remit
promptly funds due to Company, Policy-holders or applicants,
after written demand thereof, termination shall be effective
immediately upon written notice; or
(iii) Default. In the event of breach of this Agreement or
Broker/Dealer or Insurance Agent's failure to timely and fully
comply with Company's directives, rules, regulations or manuals,
including the Operations Manual; or
(iv) Conviction. In the event of conviction of Broker/Dealer, or
Insurance Agent or any of their principal officers of a felony
or of violation of the securities or insurance laws or
regulations of any jurisdiction or of any law the violation of
which reflects adversely upon the honesty and integrity of
Broker/Dealer, or Insurance Agent or any of their principal
officers, whether or not classified as a felony, termination
shall be effective immediately upon written notice; or
(v) Bankruptcy. In the event Broker/Dealer or Insurance Agent
submits to or becomes subjected to bankruptcy, receivership or
common law composition of creditors, termination shall be
effective immediately upon notice; or
(vi) Prejudice. In the event Broker/Dealer or Insurance Agent has
otherwise acted to prejudice materially the interests of Company
or AGSI in breach of this Agreement, termination shall be
effective immediately upon written notice; or
(vii) Replacement. In the event Broker/Dealer or Insurance Agent
endeavors to induce agents of Company or AGSI to leave its
services or Policy-owners of Company to relinquish their
Policies, termination shall be effective immediately upon
notice.
(b) Broker Dealer or Insurance Agent may terminate this Agreement for
cause:
(i) Failure of Company or AGSI to timely pay any fees or commissions
due and payable to Insurance Agent under this Agreement; or
(ii) Failure of Company or AGSI to comply with its obligations under
this Agreement.
(c) Cure Period. In the event of termination for Cause pursuant to
Section 8, subsections (a) (iii) or (b) (i) or (ii), and upon request,
the other party has the right to a sixty (60) day cure period for the
Breach. If the party is able to cure the Breach to the good faith
satisfaction of the other party within the cure period, this Agreement
will continue in effect as though it were never terminated.
(d) Right To Terminate Due to Law. Notwithstanding the above, Company and
AGSI reserve the right to discontinue offering any Policy or product
at any time with written notice to Insurance Agent if it is prevented
by law, rule or regulation from offering the product or Policy in a
particular state or in its current form.
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(e) Right to Modify Underwriting/Pricing: Company and AGSI agree that they
will not modify underwriting standards or pricing for the Policies
without the prior written consent of Insurance Agent, unless such
modification to the underwriting standards or pricing is: (i) due to a
state and/or federal law, rule, regulation or ruling; (ii) due to an
action taken by a third party, which neither the Company nor AGSI has
control over; or (iii) due to the Company not meeting its profit
targets as a result of actual business experience. Such written
consent of Insurance Agent, shall be given in good faith, and not be
unreasonably withheld. In the event that the Company and AGSI modifies
the underwriting standards or pricing on the Policies due to (i), (ii)
or (iii), as stated herein, then the Company or AGSI shall give sixty
days written notice to the Insurance Agent.
Upon termination of this Agreement, all authorizations, rights and
obligations shall cease, except the agreements in Sections 4 (f), 4
(k), 4 (l) and 4(m), 6, 9, 10, 12, 15, 16, 17, Schedule E, Standard 2
(last two bullet points), and the payment of any accrued and unpaid
compensation to Insurance Agent. In the event of termination of this
Agreement for any violation as set forth in sections 8(a), (b), (d),
(f) or (g) above, no compensation of any kind shall thereafter be
payable to Broker/Dealer or Insurance Agent.
9. COMPLAINTS AND INVESTIGATIONS
(a) Complaint Log. Company, AGSI , Insurance Agent and Broker/Dealer
shall each develop and maintain their own log containing Policyholder
complaints arising out of the policies contemplated by this Agreement,
in a form and substance acceptable to each other (except
that affiliated companies may develop a joint log rather than two
separate logs). The log will record the date and substance of each
oral and written Policyholder complaint and date and substance of
resolution of each such complaint. Entries in Company and AGSI's log
that pertain to complaints arising out of the policies contemplated by
this Agreement shall be provided to Insurance Agent by Company upon
reasonable request.
(b) Notification of Complaints. Each party will notify the other party
upon receipt of any Policyholder complaint or other complaint against
that party or its agents or producers or third party vendors arising
from performance, or lack thereof, of this Agreement. For purposes of
this Agreement, a Policyholder complaint includes, but is not limited
to, a verbal or written notification that: (1) alleges
misrepresentation of information, improper sales practices or
confusion over the Policy's status as a non-FDIC insured product; or
(2) unfair
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treatment by former or current employees or agents of Insurance Agent,
Broker/Dealer, Company, AGSI or Affiliates of each. Each party will,
upon receipt of any summons, complaint, or notice of suit, forward
such notice to the other party by facsimile transmission or by express
or overnight mail. Each party will upon receipt of any inquiry from an
insurance department or other regulatory body with respect to activity
under this Agreement, forward such inquiry to the other party by
facsimile transmission or by express or overnight mail.
(c) AGSI, Company, Broker/Dealer and Insurance Agent shall cooperate fully
in any insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the Policies marketed under this
Agreement. In addition, AGSI, Company, Broker/Dealer and Insurance
Agent shall cooperate fully in any securities regulatory investigation
or proceeding or judicial proceeding with respect to AGSI,
Broker/Dealer, their Affiliates and their agents, to the extent that
such investigation or proceeding is in connection with the Policies
marketed under this Agreement. Without limiting the foregoing:
(i) Broker/Dealer and Insurance Agent will be notified promptly of
any customer complaint or notice of any regulatory investigation
or proceeding or judicial proceeding received by AGSI or Company
with respect to Insurance Agent or any Agent or which may affect
the issuance of any Policy marketed under this Agreement.
(ii) Broker/Dealer and Insurance Agent will promptly notify AGSI and
Company of any written customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding
received by Broker/Dealer, Insurance Agent or their Affiliates
with respect to themselves, their Affiliates, or any Agent in
connection with any Policy marketed under this Agreement or any
activity in connection with any such Policy.
(d) In the case of a customer complaint, AGSI, Company, Broker/Dealer and
Insurance Agent will cooperate in investigating such complaint and any
response by Broker/Dealer or Insurance Agent to such complaint will be
sent to AGSI and Company for approval not less than (5) five business
days prior to its being sent to the customer or regulatory authority,
except that if a more prompt response is required, the proposed
response shall be communicated by telephone or facsimile. Upon receipt
of all required information needed to reasonably evaluate the
response, AGSI and Company agree to review and reply in a timely
manner.
10. CONFIDENTIAL INFORMATION.
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(a) Information Defined. Company, AGSI, Broker/Dealer and Insurance Agent
each possess certain information, including, without limitation,
pricing information, computer and operational systems, marketing
strategies and intellectual property rights that attach to products
and services, customer lists and customer account information prepared
or furnished by each party ("Information"). However, Information
shall not include any portion of Information:
(i) which, at the time of disclosure, is known to the receiving
party or is generally available to the public;
(ii) which, after disclosure, through no act on the part of the
receiving party becomes generally available to the public; or
(iii) which is furnished to the receiving party on a non-
confidential basis by any third party having a bona fide right
to do so; or
(iv) that is required to be furnished to any governmental agency, by
law or regulation or by order of a court of law.
(b) Exchange of Confidential Information. All Information provided by
Company or AGSI to Insurance Agent or Broker/Dealer or by
Broker/Dealer or Insurance Agent to Company or AGSI pursuant to this
Agreement is the confidential Information of the party providing such
Information. The party receiving such Information agrees to hold such
Information in confidence for the term of this Agreement and for a
period of two (2) years thereafter, upon the following conditions,
which are understood to be acceptable by each party:
(i) The receiving party will receive and hold in confidence
Information disclosed and will not use it except for the
purposes stated in this Agreement. Accordingly, without limiting
the foregoing, each party agrees that it will not use this
Information in connection with any other person, firm, or
corporation.
(ii) The receiving party will take such steps as may be reasonably
necessary to prevent the disclosure of Information to any third
party.
(iii) Each party will confine Information to those employees or agents
(including employees of affiliates) who are directly concerned
with the evaluation or use of the same, and will make
disclosures only after informing the employee or agent
(including employees of affiliates) of the obligations under
this Agreement.
(iv) Neither party shall analyze, reverse engineer or otherwise use
for independent development any Information submitted to it by
the other party. Any written materials submitted to Insurance
Agent or Broker/Dealer by Company or AGSI or by Company or AGSI
to Insurance Agent or Broker/Dealer shall, at the written
request of the other, be returned to the other party within ten
days, by secure delivery
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means.
11. MODIFICATION OF AGREEMENT. This Agreement supersedes all prior agreements,
either oral or written, between the parties relating to the Policies and,
except as otherwise provided herein, may not be modified in any way unless
by written agreement signed by all of the parties hereto.
12. INDEMNIFICATION.
(a) Broker/Dealer and Insurance Agent, jointly and severally, shall
indemnify and hold harmless AGSI and Company and each person who
controls or is associated with AGSI or Company within the meaning of
such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including
any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of
them may become subject under any statute or regulation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon any actual or alleged:
(i) violation(s) by Broker/Dealer, Insurance Agent, or an Agent of
federal or state securities law or regulation(s), insurance law
or regulation(s), or any rule or requirement of the NASD;
(ii) unauthorized use of sales or advertising material, any oral or
written misrepresentations, or any unlawful sales practices
concerning the Policies, by Broker/Dealer, Insurance Agent or an
Agent;
(iii) claims by Agents or other agents or representatives of Insurance
Agent or Broker/Dealer for commissions or other compensation or
remuneration of any type;
(iv) any failure on the part of Broker/Dealer, Insurance Agent, or an
Agent to submit Premiums or applications to Company, or to
submit the correct amount of a Premium, on a timely basis and in
accordance with Schedule D of this Agreement and the Operations
Manual;
(v) any failure on the part of Broker/Dealer, Insurance Agent, or an
Agent to deliver Policies to purchasers thereof on a timely
basis and in accordance with Section 4 of this Agreement and the
Operations Manual; or
(vi) a breach by Broker/Dealer or Insurance Agent of any provision of
this Agreement;
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(vii) the gross negligence or intentional act or omissions of
Insurance Agent or Broker/Dealer.
This indemnification will be in addition to any liability which
Broker/Dealer and Insurance Agent may otherwise have.
(b) AGSI and Company, jointly and severally, shall indemnify and hold
harmless Broker/Dealer and Insurance Agent and each person who
controls or is associated with Broker/Dealer or Insurance Agent within
the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of,
any action, suit or proceeding or any claim asserted), to which they
or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon:
(i) violation(s) by AGSI or Company of federal or state securities
law or regulation(s), insurance law or regulation(s), or any
rule or requirement of the NASD;
(ii) unauthorized use of sales or advertising material, any oral or
written misrepresentations, or any unlawful sales practices
concerning the Policies, by AGSI or Company;
(iii) claims for unpaid commissions or other compensation or
remuneration of any type due to Broker/Dealer or Insurance
Agent;
(iv) a breach by AGSI or Company of any provision of this Agreement;
(v) the gross negligence or intentional acts or omissions of AGSI or
Company.
This indemnification will be in addition to any liability which AGSI
and Company, jointly and severally, may otherwise have.
(C) WARRANTY OF 21ST CENTURY COMPLIANCE. Company and AGSI warrant to use
their best efforts to ensure all software and hardware utilized by
Company or AGSI which affect the offering and servicing of the
Policies under this Agreement will be 21st Century Compliant.
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"21st Century Compliant" shall be defined as software and hardware
systems and services that (i) correctly processed date fields and
internal date field dependent logic to accurately process and utilize
dates beyond December 31, 1999; and (ii) store and represent dates in
a manner which enables Company and AGSI (or Insurance Agent or
Broker/Dealer, if necessary) to easily identify or use the century
portion of any date fields without any special processing; (iii)
otherwise performs all 21st Century Compliant functions in regular
processing as required in order to perform the regular processing and
servicing of the Policies hereunder. Company and AGSI will indemnify
Insurance Agent and Broker/Dealer for any loss, cost, or liability
incurred by either or both arising from a failure to provide such 21st
Century Compliant software and hardware systems as required in this
Agreement. Notwithstanding the foregoing, Insurance Agent and
Broker/Dealer shall not be entitled to any recovery herein to the
extent that the damages are solely caused by Insurance Agent or
Broker/Dealer's failure to be 21st Century Compliant.
(d) TIME OF COMPLETION
(i) The parties to this Agreement desire that the Broker/Dealer and
Insurance Agent be authorized to solicit applications for the
sale of the Class of Policies relating to the One VUL Solution
product Policy to the general public at the earliest possible
time, subject to the terms and conditions set forth herein;
therefore, the parties hereto agree as follows:
(A) The Insurance Agent and the Broker/Dealer have approved all
of the terms and conditions of the One VUL Solution Product
Policy in the form that such policy exists as of September
20, 1999 and understand that any changes to such terms and
conditions requested by Insurance Agent, Broker/Dealer or as
required by law would cause a delay in the approval of
the Policy with the various state departments of insurance;
(B) The Company will file the appropriate pre-effective
registration statement regarding the One VUL Solution
product with the Securities and Exchange Commission no later
than September 20, 1999 and will use its best efforts to
have such registration statement declared effective within
120 days of filing;
(C) The Company will begin filing the One VUL Solution product
Policy with the appropriate state departments of insurance
no later than October 1, 1999 and will have completed all
initial filings by October 20, 1999, and will use its best
efforts
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<PAGE>
to obtain approvals of the Policy from the various state
departments of insurance as soon as possible;
(D) The One VUL Solution product will be issue ready at the
earliest possible time and in accordance with this
Agreement, but in no event later than February 15, 2000;
provided,however, that the Company and AGSI obtain all
necessary federal and state regulatory authority approvals
before February 8, 2000; that Insurance Agent and
Broker/Dealer use their best efforts in assisting the
Company in the development and implementation of the One VUL
Solution product; and that no other event beyond the
reasonable control of the Company and which has a material
effect on the ability of Company to carry out the terms of
the Agreement occurs that would delay the One VUL Solution
product from being issue ready on February 15, 2000.
(ii) The parties hereto understand and agree that Insurance Agent
will suffer damages in the event that the One VUL Solution
product is not issue ready on February 15, 2000; therefore, in
the event that the One VUL Solution product is not issue ready
on February 15, 2000, the Company will pay Insurance Agent, as
liquidated damages, an amount equal to $250,000 per Month
("Month" to be defined as each thirty day period) for such delay
(the "Delay Payment"); provided however, that the Company shall
not owe to Insurance Agent any Delay Payment if such delay is as
a result of (x) changes to the terms and conditions of the form
of the One VUL Solution product policy that exists as of
September 20, 1999 if such changes were requested by Insurance
Agent, Broker/Dealer or as required by law; (y) the Company's
inability to obtain all necessary federal and state regulatory
authority approvals before February 8, 2000; or (z) an event
that is beyond the reasonable control of the Company and which
has a material effect on the ability of Company to carry out the
terms of the Agreement has occurred.
(iii) The Delay Payment shall be pro-rated, if necessary, and the
total amount due for any one Month, including any pro-rated
amounts, shall be due and payable within five days after the end
of each Month. This provision for liquidated damages is solely
applicable to the failure by the Company to complete the work in
a timely manner and is not applicable to a breach or default by
the Company of any other provision of this Agreement.
(iv) The parties agree to use reasonable good faith efforts to
continue development of the One VUL Solution product as well as
modifications thereof which would enable Insurance
19
<PAGE>
Agent to offer simplified issue to a greater number of
Customers, and as otherwise agreed to by the parties from time
to time.
(e) After receipt by a party entitled to indemnification ("indemnified
party") under this Section 12 of notice of the commencement of any
action, if a claim in respect thereof is to be made against any person
obligated to provide indemnification under this Section 12
("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission so as to notify the
indemnifying party will not relieve it from any liability under this
Section 12, except to the extent that the omission results in a
failure of actual notice to the indemnifying party and such
indemnifying party is damaged as a result of the failure to give such
notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the
fees and disbursements of such counsel related to such proceedings. In
any such proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. The indemnifying party
shall not be liable for any settlement of any proceeding effected
without its written consent, but if such proceeding is settled with
such consent or if final judgment is entered in such proceeding for
the plaintiff, the indemnifying party shall indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment.
13. Rights, Remedies, etc. are Cumulative. The rights, remedies and obligations
contained in this Agreement are cumulative and are in addition to any and
all rights, remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws. Failure of either party
to insist upon strict compliance with any of the conditions of this
Agreement shall not be construed as a waiver of any of the conditions, but
the same shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver
of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
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14. NOTICES. All notices hereunder are to be made in writing and shall be given:
if to AGSI, to:
American General Securities Incorporated
Attention: Chief Compliance Officer
2727 Allen Parkway
Houston, Texas 77019
if to Company, to:
American General Life Insurance Company
Attention: General Counsel
2929 Allen Parkway
Houston, Texas 77019
if to Broker/Dealer, to: if to Insurance Agent, to:
Banc One Securities Corp. Banc One Insurance Services Corp
733 Greencrest Drive 111 East Wisconsin Avenue
Westerville, OH 43081 Milwaukee, WI 53202
Attention: _________________ Attention: Glen J. Milesko,
President & CEO
or such other address as such party may hereafter specify in writing. Each
such notice to a party shall be either hand delivered or transmitted by
registered or certified United States mail with return receipt requested,
and shall be effective upon delivery.
15. INTERPRETATION, JURISDICTION, ETC. This Agreement and any proprietary
variable universal life agreement constitute the whole agreement between the
parties hereto with respect to the subject matter hereof, and supersede all
prior oral or written understandings, agreements or negotiations between the
parties with respect to the subject matter hereof. No prior writings by or
between the parties hereto with respect to the subject matter hereof shall
be used by either party in connection with the
21
<PAGE>
interpretation of any provision of this Agreement. Time is of the essence
with respect to any time periods or dates agreed upon in the Agreement. This
Agreement shall be construed and its provisions interpreted under and in
accordance with the internal laws of the State of Wisconsin without giving
effect to principles of conflict of laws.
16. CUSTOMER CONFIDENTIALITY:
(a) Company and AGSI agree that the names and addresses of all customers
and prospective customers of the Insurance Agent, Broker/Dealer, and
of Insurance Agent and Broker/Dealer's parent company and of any
Affiliated company which may come to the attention of the Company or
AGSI as the result of disclosure by Insurance Agent or Broker/Dealer
are confidential and will remain confidential for a period of two
years following termination of this Agreement, regardless of the cause
of termination. Such customer information shall not be used during
such time period, without the prior written consent of the Insurance
Agent, by Company or AGSI for any purpose whatsoever except as may be
necessary in connection with the administration and servicing of the
Policies sold by or through the Insurance Agent or Broker/Dealer
pursuant to this Agreement.
(b) In no event shall the names and addresses of such customers and
prospective customers be furnished by Company or AGSI to any other
company or person including, but not limited to: (1) any of its
managers, agents or brokers which are not associated with the
Insurance Agent or Broker/Dealer, (2) any company affiliated with
Company or AGSI or any manager, agent or broker of such company, or
(3) any securities broker-dealer or any insurance agent affiliated
with such broker-dealer, except as is necessary to effectuate the
terms of this Agreement (the parties referred to in subsections (1)-
(3) are hereinafter referred to as "Company Affiliates"). If such
information is furnished by Company or AGSI to Company Affiliates
pursuant to this section, the Company Affiliates must agree to treat
this information as confidential and will not use this information
except in accordance with this section. Company and AGSI and Company
Affiliates agree that they shall not solicit any customers whose names
it is agreed constitute confidential information pursuant to this
Section, except where this business is solicited for Insurance Agent
or Broker/Dealer, and is agreed to by Insurance Agent.
(c) The intent of this paragraph is that Company, AGSI and Company
Affiliates shall not utilize, or knowingly permit to be utilized, the
information, gained through this Agreement, of Insurance Agent,
Broker/Dealer or of its parent company or of any Affiliates or of the
customers of any of the foregoing for the solicitation of sales of any
product or service.
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<PAGE>
(d) Notwithstanding the above, Company and AGSI and Company Affiliates
shall be free to comply with any proper regulatory demand for
information which relates to this Agreement and Insurance Agent and
Broker/Dealer and to provide on a customary and routine basis,
communications which are sent, generally, by Company, AGSI or Company
Affiliates to its Policyholders.
(e) This section 16 shall survive termination of this Agreement.
17. SETOFFS; CHARGEBACKS. Broker/Dealer and Insurance Agent hereby authorize
AGSI and Company to set off from all amounts otherwise payable to
Broker/Dealer and Insurance Agent all liabilities of Broker/Dealer,
Insurance Agent or Agents. Broker/Dealer and Insurance Agent shall be
jointly and severally liable for the payment of all monies due to AGSI
and/or Company which may arise out of this Agreement or any other agreement
between Broker/Dealer, Insurance Agent and AGSI or Company including, but
not limited to, any liability for any chargebacks or for any amounts
advanced by or otherwise due AGSI or Company hereunder. AGSI and Company do
not waive any of their rights to pursue collection of any indebtedness owed
by Broker/Dealer or Insurance Agent or its Agents to AGSI or Company. In the
event AGSI or Company initiates legal action to collect any indebtedness of
Broker/Dealer, Insurance Agent or its Agents, Broker/Dealer and Insurance
Agent shall reimburse AGSI and Company for reasonable attorney fees and
expenses in connection therewith. [Neither AGSI nor the Company shall be
required to pay any commissions as compensation for the Policies in advance
of such compensation becoming due to Insurance Agent.
18. HEADINGS. The headings 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.
19. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
20. SEVERABILITY. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited
by applicable federal or state law or prohibit a party from taking action
required by applicable federal or state law, then it is the intention of the
parties hereto that such provision shall be enforced to the extent permitted
under the law, and, in any event, that all other provisions of this
Agreement shall remain valid and duly enforceable as if the provision at
issue had never been a part hereof.
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<PAGE>
21.MOST FAVORED CUSTOMER/EXCLUSIVITY.
(a) For the period covered by this Agreement, Company and AGSI agree to
treat Insurance Agent and Broker/Dealer as a most favored bank-
related insurance agency and broker/dealer. Company and AGSI agree
that they will not reassign staff to work on any other project to the
detriment of Insurance Agent or Broker/Dealer without consulting with
Insurance Agent or Broker/Dealer.
(b) Company and AGSI represent that the prices, terms, benefits,
warranties and payments, structures and features of the variable
universal life products authorized herein under this Agreement are
comparable to or better than terms of a similar nature offered by
Company or AGSI to any current bank-related insurance agency or
broker/dealer for a similar class of variable universal life products.
If, during the term of this Agreement, Company or AGSI offer an
arrangement not included in this Agreement for a similar class of
variable universal life products authorized herein to any other bank-
related insurance agent or broker/dealer which is similarly situated
to Insurance Agent providing such bank-related agency or broker/dealer
with more favorable terms, Company and AGSI agree the same or similar
arrangement will be offered if Insurance Agent and/or Broker/Dealer
meet or exceed the same criteria and this Agreement shall thereupon be
deemed amended to provide the same or similar terms or arrangement to
Insurance Agent and/or Broker/Dealer.
(c) Company and AGSI agree that the product design, features, benefits and
structure of the variable universal life product hereunder is
confidential to and proprietary to Insurance Agent. Accordingly,
Company and AGSI agree that they will not market and distribute the
variable universal life product designed under the program pursuant
to this Agreement either by themselves or through Company Affiliates,
associations and business partners. Insurance Agent and Broker/Dealer,
in turn, agree to use reasonable best efforts to promote the variable
universal life products available under this Agreement to generate
reasonable annual sales based on agreed upon production objectives.
22. The parties agree that the attached Schedule E shall be incorporated herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
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BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES
"Broker/Dealer" CORPORATION "INSURANCE AGENT"
By: By:
----------------------------- ------------------------------
Name: Name: Glen J. Milesko
---------------------------
(Printed Name)
Title: Title: President and CEO
--------------------------
Date: Date:
--------------------------- ----------------------------
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES
COMPANY INCORPORATED
By: By:
----------------------------- ------------------------------
Name: Name:
--------------------------- ----------------------------
(Printed Name) (Printed Name)
Title: Title:
-------------------------- ---------------------------
25
<PAGE>
EXHIBITS FOR VARIABLE UNIVERSAL LIFE
SELLING AGREEMENT
Schedule A - Commissions Schedule
Schedule B - Principles and Code
Schedule C - Advertising Procedures
Schedule D - Net Premiums
Schedule E - Marketing and Customer Service Compliance Standards
26
<PAGE>
SCHEDULE A
TO THE VARIABLE UNIVERSAL LIFE
SELLING AGREEMENT DATED ____________________AMONG BANC ONE SECURITIES
CORPORATION ("BROKER/DEALER"), BANC ONE INSURANCE SERVICES
CORPORATION ("INSURANCE AGENT"), AMERICAN GENERAL LIFE INSURANCE
COMPANY ("COMPANY")
AND
AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI")
The Selling Agreement described above is hereby supplemented as provided in the
section titled "Commission Agreement," to define the current rate of gross
commissions payable on the authorized products shown below.
PRODUCTS
Insurance Agent's authority as a soliciting agent of the Company shall be for
the following product(s):
The One(R) VUL Solution/(SM)/
(Policy Form No. 99615)
COMMISSIONS
The Commissions Schedule below is subject to the terms and conditions of the
Agreement to which it is attached. In no event shall the Company be liable for
payment of any commissions with respect to any solicitation made, in whole or in
part, by any person not appropriately licensed and appointed prior to the
commencement of the solicitation.
1. ANNUAL COMMISSIONS TO BE PAID TO INSURANCE AGENCY.
(a) FOR A POLICY ISSUED BASED ON SIMPLIFIED UNDERWRITING.
For a Policy issued based on simplified underwriting, compensation
will be paid based on either (i) Percent of Premium or (ii) Policy
Accumulation Value (Trail).
(i) Compensation based on Percent of Premium.
. 6% of premiums paid
(ii) Compensation based on Accumulation Value.
. Non-Modified Endowment Contract Policies. Beginning with
1
<PAGE>
the first Policy year, a trail commission of 1.20% of each
Policy's accumulation value (reduced by any outstanding
loans), in the variable investment options. The trail
commission will be reduced by 0.25% beginning in Policy Year
11. Thus, the schedule in effect is as follows: (i) 1.20% of
each Policy's accumulation value (reduced by any outstanding
loans) in the variable investment options for Policy years 1
through 10; and (2) 0.95% of each Policy's accumulation value
(reduced by any outstanding loans) in the variable investment
options for Policy years 11 through 15.
. Modified Endowment Contract Policies. Beginning with the
first Policy year, a trail commission of 1.20% of each
Policy's accumulation value (reduced by any outstanding
loans), in the variable investment options. The trail
commission will be reduced by 0.15% beginning in Policy Year
6. Thus, the schedule in effect is as follows: (i) 1.20% of
each Policy's accumulation value (reduced by any outstanding
loans) in the variable investment options for Policy years 1
through 5; and (2) 1.05% of each Policy's accumulation value
(reduced by any outstanding loans) in the variable investment
options for Policy years 6 through 10.
(b) FOR A POLICY ISSUED BASED ON FULL UNDERWRITING.
For a Policy issued based on full underwriting, compensation will be paid
based on either (i) Percent of Premium or (ii) Policy Accumulation Value
(Trail),
(i) Compensation based on Percent of Premium.
. 6% of premiums paid in the first Policy year through Policy
Year 3 up to the Target Premium; and
. 3% of premiums paid in Policy years 4+ up to the Target
Premium.
(ii) Compensation based on Accumulation Value. Beginning with the
first Policy year, a trail commission of 2.50% of each Policy's
accumulation value (reduced by any outstanding loans), in the
variable investment options. The trail commission will be reduced by
1.50% beginning in Policy year 2, with further reductions of 0.50% in
Policy year 11 and 0.25% in Policy year 21. Thus, the schedule in
effect is as follows: (i) 2.50% of each Policy's accumulation value
(reduced by any outstanding loans) in the variable investment options
for Policy year 1; (ii) 1.00% of each Policy's accumulation value
(reduced by any outstanding loans) in the variable investment options
for Policy years 2 through 10; (iii) 0.50% of each Policy's
accumulation value (reduced by any outstanding loans) in the variable
investment options for Policy years 11
2
<PAGE>
through 20; and (iv) 0.25% of each Policy's accumulation value
(reduced by any outstanding loans) in the variable investment options
for Policy years 21+.
2. CHARGEBACKS.
The following commission chargebacks shall apply on Policy surrender:
. 100% of commissions paid on a Policy surrendered during the first Policy
year; and
. 75% of commissions paid on a Policy surrendered during the second Policy
year.
This commission chargeback schedule shall only apply to compensation paid based
on percent of premium.
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 American General Life Target Premium schedules. The Company 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 the Company.
4. TRAIL COMMISSIONS: WHEN PAID.
The annual trail commissions, as set forth in above, are calculated on a
quarterly basis and are 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 November 1, 1999, the first
trail payment is based on the unloaned accumulation value as of February 1,
2000, but is not payable until the calendar quarter ending March 31, 2000,
and mailed shortly thereafter.
5. CHANGE OF BROKER-DEALER.
A Policy owner may elect to change representation to another broker-dealer
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 broker-dealer.
6. GUIDELINES AND COMMISSIONS ON INTERNAL EXCHANGES.
Generally, no commissions will be earned on the initial exchange of any
Company contract or any contract issued by a company which is affiliated
with the Company for The One(R) VUL Solution/(sM)./ All subsequent premium
payments will receive commissions calculated in accordance with the
administrative rules established by the Company in its sole discretion and
in effect at the time of the exchange.
EFFECTIVE DATE:
This SCHEDULE A shall be effective for authorized products sold on and after
__________________________, and shall continue in effect until amended,
supplemented, or superseded by written agreement of all the parties.
Acknowledged and Agreed:
3
<PAGE>
BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES, INC.
By: By:
----------------------------- ------------------------------
Name: Name:
--------------------------- ----------------------------
(Printed Name) (Printed Name)
Title: Title:
-------------------------- ---------------------------
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES
COMPANY INCORPORATED
By: By:
----------------------------- ------------------------------
Name: Name:
--------------------------- ----------------------------
(Printed Name) (Printed Name)
Title: Title:
-------------------------- ---------------------------
4
<PAGE>
SCHEDULE B
AMERICAN GENERAL LIFE INSURANCE COMPANY
PRINCIPLES AND CODE OF ETHICAL MARKET CONDUCT
DATED JUNE 24, 1997
NOTE: The principles appear in bold. The remaining text constitutes the code.
1. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL CONDUCT BUSINESS ACCORDING TO
HIGH STANDARDS OF HONESTY AND FAIRNESS AND WILL RENDER THAT SERVICE TO THEIR
CUSTOMERS WHICH, IN THE SAME CIRCUMSTANCES, THEY WOULD APPLY TO OR DEMAND FOR
THEMSELVES.
To conduct business according to high standards of honesty and fairness,
American General Life Insurance Company will implement policies and
procedures designed to provide reasonable assurance that:
a. Insofar as individual products or those marketed on an individual basis
are concerned, American General's distributors make reasonable efforts to
determine the insurable needs or financial objectives of American
General's customers based upon relevant information obtained from the
customer and enter into transactions which assist the customer in meeting
his or her insurable needs or financial objectives.
b. American General maintains compliance with applicable laws and
regulations.
c. In cooperation with consumers, regulators and others, American General
affirmatively seeks to improve the practices for sales and marketing of
life and annuity products.
d. The Principles of Ethical Market Conduct are reflected in American
General's policies and practices.
2. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE COMPETENT AND CUSTOMER-
FOCUSED SALES AND SERVICE.
To provide for competent sales and services of life and annuity products,
American General Life Insurance Company will develop policies and procedures
designed to provide reasonable assurance that:
a. American General's distributors are of good character and business
repute, and have appropriate qualifications and training.
b. American General's distributors are duly licensed or otherwise qualified
under state law.
c. American General's distributors and employees involved in the sales
process are adequately trained, as appropriate to American General's
distribution system, to focus on customers' needs and objectives.
<PAGE>
d. American General's distributors have adequate knowledge of American
General's products and their operation.
e. American General's distributors and employees involved in the sales
process are trained, as appropriate to its distribution system, in the
need to comply with applicable insurance laws and regulations and the
concepts in the Principles and Code of Ethical Market Conduct.
f. American General's distributors and employees involved in the sales
process participate, as appropriate to American General's distribution
system, in continuing education.
3. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL ENGAGE IN ACTIVE AND FAIR
COMPETITION.
American General Life Insurance Company is committed to competition as the
most effective and efficient means of providing products and services to
customers. Competition is also the most efficient regulator of activities. To
maintain and enhance competition in the marketplace for life and annuity
products, American General will develop policies and procedures designed to
provide reasonable assurance that:
a. American General maintains compliance with applicable state and federal
laws fostering fair competition.
b. American General's distributors do not replace existing life insurance
policies and annuity policies without first communicating to the
customer, in a manner consistent with Principle 4, information that he or
she needs in order to ascertain whether such replacement of existing
policies or contracts may or may not be in his or her best interest.
c. American General's distributors and employees involved in the sales
process refrain from disparaging competitor insurers.
4. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE ADVERTISING AND SALES
MATERIALS THAT ARE CLEAR AS TO PURPOSE AND HONEST AND FAIR AS TO CONTENT.
To provide sales and advertising materials which are clear as to purpose and
honest and fair as to content, American General Life Insurance Company will
develop policies and procedures designed to provide reasonable assurance
that:
a. Presentation of any material designed to lead to sales or solicitation of
life and annuity products is done in a manner consistent with the best
interests of the customer. All such sales or solicitation communications
should be based upon the principles of fair dealing and good faith, and
will have a sound basis in fact.
b. Materials presented as part of a sale are comprehensible in light of the
complexity of the product being sold.
c. American General maintains compliance with applicable laws and
regulations related to advertising, unfair trade practices, sales
illustrations, and other similar provisions.
d. Illustrations of premiums and considerations, costs, values, and benefits
are accurate and fair, and contain appropriate disclosure of amounts
which are not guaranteed and those which are guaranteed in the policy or
contract.
2
<PAGE>
5. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL PROVIDE FOR FAIR AND EXPEDITIOUS
HANDLING OF CUSTOMER COMPLAINTS AND DISPUTES.
To resolve any complaints and disputes that may arise concerning market
conduct, American General Life Insurance Company will develop policies and
procedures designed to provide reasonable assurance that:
a. Complaints are identified, evaluated, and handled in compliance with
applicable state law and regulations related to consumer complaint
handling.
b. Good faith efforts are made to resolve complaints and disputes without
resorting to civil litigation.
6. AMERICAN GENERAL LIFE INSURANCE COMPANY WILL MAINTAIN A SYSTEM OF SUPERVISION
AND REVIEW THAT IS REASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH THESE
PRINCIPLES OF ETHICAL MARKET CONDUCT.
American General Life Insurance Company will develop or assign
responsibilities designed to provide reasonable assurance, as appropriate to
American General's size and distribution system, that:
a. American General establishes and enforces policies and procedures
reasonably designed to comply with the Principles and Code of Ethical
Market Conduct.
b. There is an adequate system of supervision of the market activities of
its distributors and employees involved in the sales process in order to
monitor their compliance with these Principles and Code and applicable
laws and regulations.
c. Compliance training sessions are conducted for employees involved in the
sales process and instruction on American General's compliance
requirements is made available to all distributors.
d. Policies and procedures provide for auditing and monitoring of
information related to sales practices of its employees involved in the
sales process and distributors.
3
<PAGE>
SCHEDULE C
AMERICAN GENERAL LIFE INSURANCE COMPANY ("COMPANY")
ADVERTISING PROCEDURES
ADVERTISING GENERALLY INCLUDES:
(a) printed or published materials;
(b) audiovisual material and descriptive literature;
(c) newspaper, radio, television, and billboard ads;
(d) prepared sales talks;
(e) sales presentations;
(f) illustrations and form letters;
(g) representations made by agents;
(h) circulars and leaflets;
(i) letters of solicitation;
(j) direct mail solicitations;
(k) telephone solicitation, both inbound and outbound;
(l) web sites;
(m) any material used to sell, retain, or modify an insurance policy; and
(n) material used for the recruitment, training, and education of Company's
personnel and agents that is designed to be used or is used to induce the
public to purchase, increase, modify, reinstate, borrow on, surrender,
replace or retain a policy.
ADVERTISING GENERALLY DOES NOT INCLUDE:
(a) interorganizational materials used by an insurer and not for public
distribution;
(b) communications with policyholders other than materials urging policyholders
to purchase, increase, modify, or retain a policy;
(c) a general announcement sent by a group policyholder to members of the
eligible group that a policy has been written or arranged;
(d) correspondence between a prospective group policyholder and an insurer in
the course of negotiating a group Policy;
(e) materials used solely for the recruitment, training, and education of an
insurer's personnel and agents provided that the material does not induce
the public to purchase, increase, modify or retain a policy of insurance.
ALL ADVERTISEMENTS MUST:
(a) Not be misleading, confusing, or deceptive;
(b) Must be factually accurate;
(c) Clearly identify the full name of the insurer;
(d) Make clear that insurance is the subject of the solicitation;
(e) Clearly identify the type of insurance being sold;
(f) Not give the appearance of selling stock or other securities;
(g) Except for variable products, not give the appearance of being a
solicitation of or by an investment department;
(h) Not state that the policy is available for a limited time only, unless such
is truly the case;
1
<PAGE>
(i) Include policy form numbers if a specific policy is advertised (place in
bottom right corner);
(j) Include a Control Number designation with blank to be completed by Company,
in bottom left corner. (This indicates Company's approval of the ad.);
(k) Conform to Associated Press (AP) style;
(l) Indicate that available endorsements and/or riders may be subject to
additional costs, if such is true;
(m) Verify that all testimonials, appraisals and analyses are genuine;
(n) Not state, imply or create an impression that the insurer is recommended by
U. S. Government or any state or other governmental agency;
(o) Not advertise benefits that do not match the policy benefits contained in
the Policy;
(p) Not disparage competitors, their policies, services, business methods, or
practices;
(q) Not make inaccurate comparisons with competitors;
(r) Not make unfair or incomplete comparisons of policies, benefits, dividends,
or rates;
(s) Not include the term "savings," "investment," "investment plan," "savings
plan," "interest plan," "founders plan," "dividends," "cash dividends,"
"surplus," "units of participation," "profit sharing," or "charter plan" to
imply that the product advertised is something other than insurance;
(t) Not refer to premiums as deposits, savings, or contributions, unless the
use of these terms is not misleading in the context in which they are used;
(u) Not imply that policyholders are part of an introductory, initial or
special offer, unless such is truly the case;
(v) Not indicate that the agent is a financial planner, investment adviser, or
other expert unless the agent has appropriate credentials to support such a
statement;
REQUIRED DISCLOSURES:
(a) All policy benefits advertised must include limitations and exclusions;
(b) The guaranteed rate must be disclosed with EQUAL PROMINENCE if the current
rate is displayed, if advertising is to be used in states that require
equal prominence (see attached list for current list of states);
(c) If rates are advertised, the time period during which they will be offered
must be included;
(d) Ads which are invitations to contract or which describe the policy features
must disclose all expenses and policy fees (including but not limited to
surrender charges and 10% federal income tax penalty for withdrawals of
interest prior to age 59 1/2);
(e) Ads for products offered through financial institutions must include the
OCC disclosure:
----------------------------
|NOT | MAY LOSE VALUE|
|FDIC- | NO BANK |
|INSURED | GUARANTEE |
----------------------------
This disclosure should be at least as large as the text describing the
financial institution's investment products. The disclosure should appear
on the cover of the brochure or on the first part of the relevant written
text;
(f) Ads must clearly identify the company selling the insurance product and not
suggest that a financial institution or other entity is the seller;
(g) Advertisements containing insurer ratings must identify the scope/extent of
the ratings;
(h) Any use of the word "guaranteed" must be accompanied by a statement that
clearly identifies what is guaranteed and by whom;
2
<PAGE>
(i) Printed product advertisements that will be distributed exclusively in
California must include the individual agent's or the agency's California
license number. The license number must be the same size as the telephone
or fax number or address printed on the advertisement;
(j) Advertisements that will be distributed in Florida must include the name of
the Florida licensed soliciting agent. This requirement may be satisfied by
attaching the agent's business card to the advertisement.
APPROVAL AND SUBMISSION PROCEDURES:
All advertising materials referencing Company or an annuity or insurance product
issued by Company must be approved in writing by Company prior to use. All
requests for written consent of advertisement must be forwarded to:
American General Life Insurance Company
Attn: Theresa Jacoby
2929 Allen Parkway
Houston, TX 77019
Please allow for 10 business days' turnaround from the time that the request for
written consent is received by Company.
STATES THAT REQUIRE EQUAL PROMINENCE IN ADVERTISING:
Alabama Maryland North Carolina
Florida Michigan North Dakota
Georgia Missouri Oklahoma
Indiana Nebraska South Dakota
Iowa Nevada Texas
Kansas New Mexico Washington
Louisiana New York Wisconsin
Note: In Minnesota, you cannot advertise the interest rate unless the effective
net annual yield is disclosed in an equally prominent manner.
3
<PAGE>
SCHEDULE D
TO THE
VARIABLE UNIVERSAL LIFE
SELLING AGREEMENT
DATED ____________________
AMONG
BANC ONE SECURITIES CORPORATION ("BROKER/DEALER"),
BANC ONE INSURANCE SERVICES CORPORATION ("INSURANCE AGENT"),
AMERICAN GENERAL LIFE INSURANCE COMPANY ("COMPANY")
AND
AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI ")
The Selling Agreement described above is hereby supplemented as provided in the
section titled "Interests in Agreement," to define the current method of
accounting and payment requirements of the Company.
Insurance Agent and/or Broker/Dealer agrees to render to Company or its
designated third-party administrator ("TPA") detailed policy transaction reports
identifying the insured, Policy number, premium amount, and such other specific
data as Company may request.
Insurance Agent and/or Broker/Dealer agrees to provide Company or its TPA with
Policy transaction reports via submission of properly completed Daily Premium
Reports and copies of applications for all Policies issued.
Insurance Agent and/or Broker/Dealer agrees to deposit the gross premiums
hereunder in Company's designated accounts established at Banc One branches no
later than the close of each business day for business issued on the business
day last preceding the date of the Daily Premium Report. Such Company
designated accounts shall be established solely for the Company products on
Schedule A to the Selling Agreement described herein, and shall be separate from
any accounts set up by any affiliates of the Company.
Insurance Agent and Broker/Dealer agree that no maintenance fees, service
charges, or any other fees or charges will be assessed against Company by Agent
and Broker/Dealer; however any applicable fees from other affiliates of
Insurance Agent and Broker/Dealer will not be waived.
<PAGE>
Insurance Agent and Broker/Dealer agree that neither Insurance Agent nor
Broker/Dealer is authorized to issue checks on Company's account.
This Schedule D shall in no way provide for gross premiums received, hereunder,
in Company's designated accounts to be netted against any payable compensation
as set forth in Schedule A to the Selling Agreement described herein.
EFFECTIVE DATE:
This SCHEDULE D shall be effective for authorized products sold on and after
___________________________, and shall continue in effect until amended,
supplemented, or superseded.
Acknowledged and Agreed:
"BROKER/DEALER" "INSURANCE AGENT"
BANC ONE SECURITIES CORPORATION BANC ONE INSURANCE SERVICES CORPORATION
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
(Printed Name) (Printed Name)
Title: Title:
--------------------------- ----------------------------
AMERICAN GENERAL LIFE INSURANCE AMERICAN GENERAL SECURITIES
COMPANY INCORPORATED
By: By:
------------------------------ -------------------------------
Name: Name:
---------------------------- -----------------------------
(Printed Name) (Printed Name)
Title: Title:
--------------------------- ----------------------------
2
<PAGE>
INSERT
<PAGE>
SCHEDULE E
MARKETING AND CUSTOMER SERVICE
COMPLIANCE STANDARDS
American General Life Insurance Company ("Company"), Banc One Securities
Corporation ("Broker/Dealer"), and Banc One Insurance Services Corporation
("Insurance Agent") acknowledge that marketing insurance products through
financial institutions presents unique customer service and compliance
challenges. Primarily, in marketing insurance products through financial
institutions the Company, Broker/Dealer and Insurance Agent must ensure that
their clients understand that they are purchasing an insurance product
underwritten by the Company and not an FDIC insured financial institution
product. Secondly, the Company, Broker/Dealer and Insurance Agent recognize
that the insurance products made available in the financial institution market
are typically purchased by older consumers. The Company, Broker/Dealer and
Insurance Agent must ensure that their insurance purchasing clients understand
the nature and terms of the insurance product they are considering. Further,
the Company, Broker/Dealer and Insurance Agent must exercise reasonable care to
ensure that the insurance product purchased by the client is suitable for that
particular client. The Company, Broker/Dealer and Insurance Agent recognize and
understand these compliance and customer services challenges. Company,
Broker/Dealer and Insurance Agent accept the responsibility of appropriately
servicing the financial institution markets and have established the following
compliance and customer service standards ("Standards").
The Standards discussed below are intended to establish a criteria to allow the
Company, Broker/Dealer and Insurance Agent to present a level of customer
service and compliance to their customers that should be expected of insurance
product providers in the financial institution market.
These Standards have been established consistent with and in furtherance of
Company's commitment to conducting itself with the highest standards of
responsibility and upholding its values: people make the difference,
straightforward communication, commitment to integrity, and energy and drive to
succeed.
These Standards should be read as supplementary to the terms and conditions of
the Variable Universal Life Selling Agreement ("Agreement") and the schedules
attached thereto. If there is any conflict between the language in the
Standards and the terms and conditions of the Agreement, the terms and
conditions of the Agreement will control, specifically the Insurance Agents'
Duties and Responsibilities in Section 4 of the Agreement.
STANDARD 1: COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL PROVIDE EFFECTIVE
AND EFFICIENT CUSTOMER SERVICE.
. Company, Broker/Dealer and Insurance Agent acknowledge that they must
provide exemplary customer service to customers.
. Company, Broker/Dealer and Insurance Agent will respond to all customer
inquiries and complaints as quickly as practical so to provide customers with
a meaningful response.
. Company, Broker/Dealer and Insurance Agent will, in responding to customer
inquiries and complaints, utilize straightforward communication in addressing
that customers' inquiry or complaint.
. Insurance Agent will, when appropriate, direct customer inquiries and
complaints directly to Company for response and not advise customers to
address inquiries or complaints to state or federal
2
<PAGE>
regulators.
. Insurance Agent will work with Company to promptly obtain and remit all
information required to provide a complete response to a customer complaint
or inquiry.
STANDARD 2: COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY SELL A
CUSTOMER PRODUCTS THAT MEET THE CUSTOMER'S FINANCIAL AND INSURANCE NEEDS.
. Company, Broker/Dealer and Insurance Agent will sell an insurance product
to a customer only after conducting a thorough review of the customers'
insurance needs and determining that the insurance product recommended meets
that customer's need.
. Insurance Agent will establish procedures to ensure that its selling
representative utilizes appropriate suitability tools to determine if an
insurance product is acceptable for the customer.
. Company will refund to the customer all premium payments received by
Company if it is later determined that an insurance product sold to a
customer did not meet the customer's stated needs. Such refunds shall be made
under applicable Company policies and procedures.
. If the Company refunds the customer's premium payments because it is
determined that the insurance product did not meet the customer's stated
needs the Insurance Agent will refund to Company all commissions earned by
Insurance Agent for the sale of that insurance product in compliance with the
Company's chargeback policies and procedures which shall not be contrary to
the terms of this Agreement.
STANDARD 3: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY MARKET
THROUGH QUALIFIED SALES REPRESENTATIVES.
. Insurance Agent will provide to Company a certification that it has
conducted background checks of each individual selling representative to
verify that they are qualified to be appointed to the Company pursuant to all
state and federal requirements including, the Federal Violent Crime Control
and Law Enforcement Act of 1994.
STANDARD 4: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL ONLY MARKET
THROUGH TRAINED SALES REPRESENTATIVES.
. Insurance Agent will provide to Company a certification that it has
provided to its sales representatives sufficient and adequate training with
regard to the insurance products the Insurance Agent markets and compliance
issues relevant to those insurance products and the financial institution
market. Included in this training will be instruction addressing issues
specifically relating to insurance sales to older customers.
STANDARD 5: THE COMPANY, BROKER/DEALER AND INSURANCE AGENT WILL MONITOR THE
SALES PROCESS.
To ensure compliance with Company and state and federal regulatory and IMSA
requirements:
. Company, Broker/Dealer and Insurance Agent will allow each other to
conduct reasonable audits of their respective marketing and operations area.
3
<PAGE>
EXHIBIT (8)(a)(ii)
AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated June 1, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation, American General Life Insurance
Company, a Texas Life Insurance Company and American General Securities
Incorporated, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C> <C>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity American General Life Insurance . Platinum Investor I Flexible Premium
Fund Company Separate Account VL-R Variable Life Insurance Policy
AIM V.I. Value Fund Established: May 1, 1997 - Policy Form No. 97600
. Platinum Investor II Flexible Premium
Variable Life Insurance Policy
- Policy Form No. 97610
. Corporate America - Variable Flexible
Premium Variable Life Insurance
- Policy Form No. 99301
. Platinum Investor Survivor Last
Survivor Flexible Premium Variable Life
Insurance Policy
- Policy Form No. 99206
- -------------------------------- ----------------------------------------------
AIM V.I. Value Fund . Legacy Plus Flexible Premium Variable
Life Insurance Policy
- Policy Form No. 98615
AIM V.I. Capital Appreciation
Fund . The One VUL Solution Flexible Premium
AIM V.I. Government Securities Variable Life Insurance Policy
Fund - Policy Form No. 99615
AIM V.I. High Yield Fund
AIM V.I. International Equity
Fund
. Key Legacy Plus Flexible Premium
AIM V.I. International Equity Variable Life Insurance Policy
Fund - Policy Form No. 99616
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity American General Life Insurance . Platinum Investor Variable Annuity
Fund Company Separate Account D - Policy Form No. 98020
AIM V.I. Value Fund Established: November 19, 1973
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: February 1, 2000
1
<PAGE>
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
______________________ ___________________________
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: By:
______________________ ___________________________
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
AMERICAN GENERAL LIFE INSURANCE COMPANY
Attest:______________________ By:___________________________
Name:________________________ Name:_________________________
Title:_______________________ Title:________________________
(SEAL)
AMERICAN GENERAL SECURITIES INCORPORATED
Attest:______________________ By:___________________________
Name:________________________ Name:_________________________
Title:_______________________ Title:________________________
(SEAL)
2
<PAGE>
EXHIBIT (8)(c)(ii)
AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
13th day of April, 1998 by and among MFS Variable Insurance Trust, American
General Life Insurance Company and Massachusetts Financial Company, the parties
do hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
the Participation Agreement to be executed in its name and on its behalf by its
duly authorized representative. The Amendment shall take effect on February 1,
2000.
AMERICAN GENERAL LIFE
INSURANCE COMPANY
By its authorized officer,
By: ______________________________________
Title: ____________________________________
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,
By: ______________________________________
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By: ______________________________________
Jeffrey L. Shames
Chairman and Chief Executive Officer
#30480
<PAGE>
As of February 1, 2000
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>
American General Life Insurance Platinum Investor I Flexible Premium MFS Emerging Growth
Company Separate Account VL-R Life Insurance Policy Series
(May 1, 1997) Policy Form No. 97600
Platinum Investor II Flexible Premium
Life Insurance Policy
Policy Form No. 97610
Legacy Plus Variable
Life Insurance Policy
Policy Form No. 98615
Corporate America-Variable
Life Insurance Policy
Policy Form No. 99301
Platinum Investor Survivor Variable
Life Insurance Policy
Policy Form No. 90787
The One VUL Solution MFS Growth With Income
Variable Life Insurance Policy Series
Policy Form No. 99615
Key Legacy Plus MFS Total Return Series
Variable Life Insurance Policy
Policy Form No. 99616
American General Life Insurance Platinum Investor Variable Annuity MFS Emerging Growth
Company Policy Form No. 98020 Series
Separate Account D
(November 19, 193)
- -----------------------------------------------------------------------------------------------------
</TABLE>
#30480
<PAGE>
Exhibit (8)(d)(ii)
FIRST AMENDMENT
TO
AMONG
PARTICIPATION AGREEMENT
PUTNAM VARIABLE TRUST,
PUTNAM MUTUAL FUNDS CORP., AND
AMERICAN GENERAL LIFE INSURANCE COMPANY,
THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT ("Amendment") dated as of
February 1, 2000, amends the Participation Agreement dated as of June 1, 1998
(the "Agreement") among AMERICAN GENERAL LIFE INSURANCE COMPANY ("Company"), a
Texas corporation, on its own behalf and on behalf of each separate account of
the Company set forth on Schedule A, 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.
WITNESSETH THAT:
WHEREAS, pursuant to the Agreement, the Trust authorizes certain of its Funds,
as set forth in Schedule B hereto, as such schedule may be amended from time to
time, to be made available to serve as underlying investment media for the
Contracts;
WHEREAS, the Trust desires that shares of additional Fund be made available to
the Company to serve as underlying investment media for the Contracts; and
NOW, THEREFORE, in consideration of the mutual promises herein, the Company, the
Trust and the Underwriter agree as follows:
1. The Agreement shall be amended to include Schedule B in the form attached
hereto and incorporated herein.
2. Except as amended hereby, the Agreement dated as of June 1, 1998 is hereby
ratified in all respects. 2.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed
in its name and on its behalf by its duly authorized representative hereto as of
the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY
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:
<PAGE>
SCHEDULE B
Authorized Funds
(AS OF FEBRUARY 1, 2000)
Fund Service Fee Rate
(per annum rate)
PVT Diversified Income Fund 0.15%
PVT Growth & Income Fund 0.15%
PVT International Growth & Income Fund 0.15%
PVT Vista Fund 0.15%
<PAGE>
Exhibit (8)(e)(iii)
AMENDMENT NUMBER 5 TO
AMENDED AND RESTATED PARTICIPATION AGREEMENT
AMONG VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY, AND
AMERICAN GENERAL SECURITIES INCORPORATED
This Amendment No. 5 ("Amendment No. 5") executed as of the 1st day of
February, 2000 to the Amended and Restated Participation Agreement dated as of
January 24, 1997, as amended (the "Agreement"), among Van Kampen Life Investment
Trust (the "Fund"), Van Kampen Funds Inc., Van Kampen Asset Management Inc.,
American General Life Insurance Company (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 Survivor VUL, Form No. 99236, The One VUL Solution, Form No. 99615, and
Key Legacy Plus VUL, Form No. 99616 (collectively, the "AVUL Policies"); and
(ii) solely to the extent the Agreement relates to the VUL Policies, 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 VUL Policies; and
2. Solely to the extent the Agreement relates to the VUL Policies,
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 Company. For
prospectuses and statements of additional information
<PAGE>
and statements of additional information shall be the expense of
the Company. For prospectuses and statements of additional
information provided by the Company to its existing owners of
Contracts in order to update disclosure 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.
<PAGE>
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 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. 5 as of
the date first written above.
AMERICAN GENERAL LIFE INSURANCE
COMPANY
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: _______________________________
VAN KAMPEN LIFE INVESTMENT TRUST
By: _______________________________
VAN KAMPEN FUNDS INC.
By: _______________________________
VAN KAMPEN ASSET MANAGEMENT INC.
By: _______________________________
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
American General Life Insurance Contract Form Nos.:
Company Separate Account D -------------------
Established: November 19, 1973 95020 Rev 896
95021 Rev 896
Name of Contract:
-----------------
Generations Combination Fixed and
Variable Annuity Contract
Contract Form Nos.:
-------------------
91010
91011
93020
93021
Name of Contract:
-----------------
Variety Plus Combination Fixed and
Variable Annuity Contract
Contract Form Nos.:
-------------------
74010
74011
76010
76011
80010
80011
81010
81011
83010
83011
Name of Contract: None
-----------------
Contract Form Nos.:
-------------------
98020
Name of Contract:
-----------------
Platinum Investor Variable Annuity
Contract
<PAGE>
SCHEDULE A
(CONTINUED)
Name of Separate Account and Form Numbers and Names of Contracts
Date Established by Board of Directors Funded by Separate Account
- -------------------------------------- ---------------------------------
American General Life Insurance Contract Form Nos.:
Company Separate Account VL-R -------------------
Established: May 6, 1997 97600
97610
Name of Contract:
-----------------
Platinum I and Platinum II Flexible
Premium Variable Life Insurance
Policies
Contract Form Number:
--------------------
99301
Name of Contract:
----------------
Corporate America - Variable Life
Insurance Policy
Contract Form Number:
---------------------
99206
Name of Contract:
-----------------
Platinum Investor Survivor VUL
Contract Form Number:
---------------------
99615
Name of Contract:
-----------------
The One VUL Solution
Contract Form Number:
---------------------
99616
Name of Contract:
-----------------
Key Legacy Plus VUL
<PAGE>
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
----------------------------------------------
Asset Allocation Portfolio
Comstock Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Growth and Income Portfolio
Domestic Income Portfolio
Government Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
<PAGE>
EXHIBIT (8)(f)
PARTICIPATION AGREEMENT
AMONG
KEMPER VARIABLE SERIES
SCUDDER KEMPER INVESTMENTS, INC.
KEMPER DISTRIBUTORS, INC.
and
AMERICAN GENERAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this ___ day of _______, 1999 by and
among American General Life Insurance Company (hereinafter, the "Company"), a
Texas insurance company, on its own behalf and on behalf of each separate
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as an "Account"), Kemper
Variable Series, a business trust organized under the laws of the Commonwealth
of Massachusetts (hereinafter the "Fund"), Scudder Kemper Investments, Inc.
(hereinafter the "Adviser"), a Delaware corporation, and Kemper Distributors,
Inc. (hereinafter the "Underwriter"), a Delaware corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance and variable annuity contracts
(hereinafter the "Variable Insurance Products") offered by insurance companies
that have entered into participation agreements with the Fund (hereinafter
"Participating Insurance Companies");
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(SEC Release No. IC-17164; File No. 812-7345; hereinafter the "Shared Funding
Exemption Order");
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act");
<PAGE>
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;
WHEREAS, the Company has registered or will register certain variable life
insurance and variable annuity contracts supported wholly or partially by the
Accounts (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement;
WHEREAS, each Account is duly established and maintained as a 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 the aforesaid Contracts;
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act;
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement
("Designated Portfolios"), on behalf of the Accounts to fund the aforesaid
Contracts, and the Underwriter is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company also intends to purchase shares in other open-end investment
companies or series thereof not affiliated with the Fund ("Unaffiliated Funds")
on behalf of the Accounts to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Adviser and the Underwriter agree as follows:
1ARTICLE
Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios that the Accounts order, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of each Designated Portfolio available for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Fund calculates such Designated Portfolio's
net asset value pursuant to rules of the SEC, and the Fund shall use reasonable
efforts to calculate such net asset value on each day when the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Fund ("Board") may refuse to sell shares of any Designated
Portfolio to any person, or
<PAGE>
suspend or terminate the offering of shares of any Designated Portfolio if such
action is required by law or by regulatory authorities having jurisdiction, or
is, in the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary in the
best interest of the shareholders of such Designated Portfolio.
1.3
1.4 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies or their separate accounts. No shares
of any Designated Portfolios will be sold to the general public. The Fund and
the Underwriter will not sell shares of any Designated Portfolio to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Sections 2.1, 3.4, 3.5 and 3.6 and Article VII of this
Agreement is in effect to govern such sales.
1.5
1.6 The Fund agrees to redeem, on the Company's request, any full or fractional
shares of the Designated Portfolios held by the Company, executing such requests
on a daily basis at the net asset value next computed after receipt by the Fund
or its designee of the request for redemption, except that the Fund reserves the
right to suspend the right of redemption or postpone the date of payment or
satisfaction upon redemption consistent with Section 22(e) of the 1940 Act and
any rules thereunder, and in accordance with the procedures and policies of the
Fund as described in the Fund's then current prospectus.
1.7
1.8 For purposes of Sections 1.1 and 1.4, the Company shall be the designee of
the Fund for receipt of purchase and redemption orders from the Accounts, and
receipt by such designee shall constitute receipt by the Fund; provided that the
Company receives the order prior to the determination of net asset value as set
forth in the Fund's then current prospectus and the Fund receives notice of such
order by 10:00 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.9
1.10 The Company agrees to purchase and redeem the shares of each Designated
Portfolio offered by the Fund's then current prospectus in accordance with the
provisions of such prospectus.
1.11
1.12 The Company shall pay for shares of a Designated Portfolio on the next
Business Day after receipt of an order to purchase shares of such Designated
Portfolio. Payment shall be in federal funds transmitted by wire by 11:00 a.m.
New York time. If payment in federal funds for any purchase is not received or
is received by the Fund after 11:00 a.m. New York time on such Business Day, the
Company shall promptly, upon the Fund's request, reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by, the Fund, or any
similar expenses incurred by the Fund, as a result of portfolio transactions
effected by the Fund based upon such purchase request. For purposes of Section
2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund. The Fund shall normally pay for redemptions of a
Designated
<PAGE>
Portfolio on the next Business Day after receipt of an order to redeem shares of
such Designated Portfolio.
1.13 Issuance and transfer of the shares of a Designated Portfolio will be by
book entry only. Stock certificates will not be issued to the Company or any
Account. Shares of a Designated Portfolio ordered from the Fund will be
recorded in an appropriate title for each Account or the appropriate subaccount
of each Account.
1.14
1.15 The Fund shall furnish same-day notice (by wire or telephone, followed by
written confirmation) to the Company of any income, dividends or capital gain
distributions payable on shares of the Designated Portfolios. The Company
hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on shares of a Designated Portfolio in additional
shares of that Designated Portfolio. The Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions. The Fund shall
use its best efforts to furnish advance notice of the day such dividends and
distributions are expected to be paid.
1.16
1.17 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. New York time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. New York 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 a corresponding amount of additional time to notify the
Fund of purchase or redemption orders pursuant to Section 1.1 and 1.4,
respectively above.
1.18
1.19 The Parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the shares of the Designated Portfolios (and other
Portfolios of the Fund) may be sold to other insurance companies (subject to
Section 1.3 and Article VII hereof) and the cash value of the Contracts may be
invested in other investment companies.
1.20
1.21 The Fund shall provide written confirmation to the Company of the amount
of shares traded and the associated cost per share (NAV) total trade amount and
the outstanding share balances held by the Account in each Designated Portfolio
as of the end of each Business Day provided that the Company's orders for the
purchase and redemption of shares are in a form reasonably acceptable to the
Fund. Such confirmation will normally be furnished by 1:00 p.m. Eastern time on
the next Business Day.
<PAGE>
1ARTICLE
Representations and Warranties
1.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be continually issued,
offered for sale and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Contracts shall
comply in all material respects with state insurance suitability requirements.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
separate account under the Texas Insurance Law and the regulations thereunder,
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 separate account for the Contracts.
1.1 The Fund represents and warrants that shares of the Designated Portfolios
sold pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with all applicable federal
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 of the Designated Portfolios for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund after
taking into consideration any state insurance law requirements that the Company
advises the Fund may be applicable.
1.2
1.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future subject to applicable law, including the
requirements of Rule 12b-1.
1.4
1.5 The Fund makes no representations as to whether any aspect of its
operation, including but not limited to, investments policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the investment policies, fees and
expenses of the Designated Portfolios are and shall at all times remain in
compliance with the Texas Insurance Law to the extent required to perform this
Agreement. The Company will advise the Fund in writing as to any requirements
of Texas Insurance Law that affect the Designated Portfolios, and the Fund will
be deemed to be in compliance with this Section 2.4 so long as the Fund complies
with such advice of the Company.
1.6
1.7 The Fund represents that it is lawfully organized and validly existing as a
business trust under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act.
1.8
1.9 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will
<PAGE>
sell and distribute the shares of the Designated Portfolios in accordance with
any applicable state and federal securities laws.
1.10
1.11 The Adviser represents and warrants that it is and shall remain duly
registered as an investment adviser under all applicable federal and state
securities laws and that the Adviser shall perform its obligations for the Fund
in compliance in all material respects with any applicable state and federal
securities laws.
1.12
1.13 The Fund, the Adviser and the Underwriter represent and warrant that all
their directors, officers, employees, investment advisers, and other individuals
or entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage required currently by Rule 17g-1 of the 1940 Act or such 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.
1.14
1.15 The Company represents and warrants that all its directors, officers,
employees, investment advisers, and other individuals or entities employed or
controlled by the Company dealing with the money and/or securities of the Fund
are covered by a blanket fidelity bond or similar coverage in an amount not less
than $20 million. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company agrees
that this bond or another bond containing these provisions will always be in
effect, and agrees to notify the Fund, the Adviser and the Underwriter in the
event that such coverage no longer applies.
1.16
1.172.10 The Company represents and warrants that all shares of the
Designated Portfolios purchased by the Company will be purchased on behalf of
one or more unmanaged separate accounts that offer interests therein that are
registered under the 1933 Act and upon which a registration fee has been or will
be paid; and the Company acknowledges that the Fund intends to rely upon this
representation and warranty for purposes of calculating SEC registration fees
payable with respect to such shares of the Designated Portfolios pursuant to
Instruction B.5 to Form 24F-2 or any similar form or SEC registration fee
calculation procedure that allows the Fund to exclude shares so sold for
purposes of calculating its SEC registration fee. The Company agrees to
cooperate with the Fund on no less than an annual basis to certify as to its
continuing compliance with this representation and warranty.
<PAGE>
1ARTICLE
Prospectuses, Statements of Additional
Information, and Proxy Statements; Voting
1.1 The Fund shall provide the Company with as many copies of the Fund's
current prospectus for the Designated Portfolios as the Company may reasonably
request. If requested by the Company in lieu thereof, the Fund shall provide
such documentation (including a final copy of the new prospectus) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for a Designated Portfolio is amended) to
have the prospectus for the Contracts and the prospectus for the Designated
Portfolios printed together in one document. Expenses with respect to the
foregoing shall be borne as provided under Article V.
1.1 The Fund's prospectus shall disclose that (a) the Fund is intended to be a
funding vehicle for all types of variable annuity and variable life insurance
contracts offered by Participating Insurance Companies, (b) material
irreconcilable conflicts of interest may arise, and (c) the Fund's Board will
monitor events in order to identify the existence of any material irreconcilable
conflicts and determine what action, if any, should be taken in response to such
conflicts. The Fund hereby notifies the Company that disclosure in the
prospectus for the Contracts regarding the potential risks of mixed and shared
funding may be appropriate. Further, the Fund's prospectus shall state that the
current Statement of Additional Information ("SAI") for the Fund is available
from the Company (or, in the Fund's discretion, from the Fund), and the Fund
shall provide a copy of such SAI to any owner of a Contract who requests such
SAI and to the Company in such quantities as the Company may reasonably request.
Expenses with respect to the foregoing shall be borne as provided under
Article V.
1.2
1.3 The Fund shall provide the Company with copies of its proxy material,
reports to shareholders, and other communications to shareholders for the
Designated Portfolios in such quantity as the Company shall reasonably require
for distributing to Contract owners. Expenses with respect to the foregoing
shall be borne as provided under Article V.
1.1 The Company shall:
1.2
(i) solicit voting instructions from Contract owners;
(i) vote the shares of each Designated Portfolio in accordance with
instructions received from Contract owners; and
(i) vote shares of each Designated Portfolio for which no instructions have
been received in the same proportion as shares of such Designated Portfolio
for which instructions have been received,
<PAGE>
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote shares
of each Designated Portfolio held in any separate account in its own right, to
the extent permitted by law.
1.1 The Company shall be responsible for assuring that each of its separate
accounts participating in a Designated Portfolio calculates voting privileges as
required by the Shared Funding Exemption Order and consistent with any
reasonable standards that the Fund has adopted or may adopt.
1.2 The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular the Fund will either provide for annual
meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not
one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, Section 16(b). Further, the Fund
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors or trustees and
with whatever rules the SEC may promulgate from time to time with respect
thereto. The Fund reserves the right, upon prior written notice to the Company
(given at the earliest practicable time), to take all actions, including but not
limited to, the dissolution, termination, merger and sale of all assets of the
Fund or any Designated Portfolio upon the sole authorization of the Board, to
the extent permitted by the laws of the Commonwealth of Massachusetts and the
1940 Act.
1.3
1.4 It is understood and agreed that, except with respect to information
regarding the Fund, the Underwriter, the Adviser or Designated Portfolios
provided in writing by the Fund, the Underwriter or the Adviser, none of the
Fund, the Underwriter or the Adviser is responsible for the content of the
prospectus or statement of additional information for the Contracts.
1ARTICLE
Sales Material and Information
1.1 The Company shall furnish, or shall cause to be furnished, to the Fund or
the Underwriter, each piece of sales literature or other promotional material
("sales literature") that the Company develops or uses and in which the Fund (or
a Designated Portfolio thereof) or the Adviser or the Underwriter is named, at
least eight business days prior to its use. No such material shall be used if
the Fund or its designee reasonably objects to such use within eight business
days after receipt of such material. The Fund or its designee reserves the
right to reasonably object to the continued use of such material, and no such
material shall be used if the Fund or its designee so object.
1.1 The Company shall not give any information or make any representation or
statement 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, prospectus or SAI for the shares of the Designated
Portfolios, as such registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in
<PAGE>
sales literature approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the designee of
either.
1.2
1.3 The Fund or the Underwriter shall furnish, or shall cause to be furnished,
to the Company, each piece of sales literature that the Fund or Underwriter
develops or uses in which the Company and/or its Account is named, at least
eight business days prior to its use. No such material shall be used if the
Company reasonably objects to such use within eight business days after receipt
of such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
1.4
1.5 The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account,
or the Contracts other than the information or representations contained in a
registration statement, prospectus, or statement of additional information for
the Contracts, as such registration statement, prospectus or statement of
additional information may be amended or supplemented from time to time, or in
published reports for the Accounts which are the public domain or approved by
the Company for distribution to Contract owners, or in sales literature approved
by the Company or its designee, except with the permission of the Company.
1.6
1.7 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, reports, proxy statements, sales
literature, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Designated Portfolios,
contemporaneously with the filing of such document(s) with the SEC or other
regulatory authorities.
1.8
1.9 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
shareholder reports, solicitations for voting instructions, sales literature,
applications for exemptions, request for no-action letters, and all amendments
to any of the above, that relate to the Contracts or the Accounts,
contemporaneously with the filing of such document(s) with the SEC or other
regulatory authorities.
1.10
1.11 For purposes of this Agreement, the phrase "sales literature" 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, electronic media, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article) and educational or
training materials or other communications distributed or made generally
available to some or all agents or employees.
1.12
1.13 At the request of any party to this Agreement, any other party will make
available to the requesting party's independent auditors all records, data and
access to operating procedures that
<PAGE>
may reasonably be requested in connection with compliance and regulatory
requirements related to this Agreement or any party's obligations under this
Agreement.
1.14
1.15 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for the Fund, and of any material change
in the Fund's registration statement or prospectus, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract owners, or to mark changes to its registration
statement a prospectus, in an orderly manner.
2ARTICLE
Fees and Expenses
1.1 All expenses incident to performance by the Fund under this Agreement shall
be paid by the Fund, except and as further provided in Schedule B. The Fund
shall see to it that all shares of the Designated Portfolios are registered,
duly authorized for issuance and sold in compliance with applicable federal
securities laws and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state securities laws prior to their sale.
1.2
1.3 The parties hereto shall bear the expenses of typesetting, printing and
distributing the Fund's prospectus, SAI, proxy materials and reports as provided
in Schedule B.
1.4
1.5 Administrative services to variable Contract owners shall be the
responsibility of the Company and shall not be the responsibility of the Fund,
Underwriter or Adviser. The Fund recognizes the Company as the sole shareholder
of shares of the Designated Portfolios issued under the Agreement.
1.6
1.7 The Fund shall not pay and neither the Adviser nor the Underwriter shall
pay any fee or other compensation to the Company under this Agreement, although
the parties will bear certain expenses in accordance with Schedule B and other
provisions of this Agreement.
1ARTICLE
Diversification and Qualification
1.1 The Fund will invest the assets of each Designated Portfolio in such a
manner as to ensure that the Contracts will be treated as annuity or life
insurance contracts, whichever is appropriate, under the Internal Revenue Code
of 1986, as amended ("Code") and the regulations issued thereunder (or any
successor provisions). Without limiting the scope of the foregoing, the Fund
will, with respect to each Designated Portfolio, comply with Section 817(h) of
the Code and Treasury Regulation (S)1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI, the Fund will take all reasonable steps
(a) to notify the Company of such breach and (b) to adequately diversify the
affected Designated Portfolio so as to achieve compliance within the grace
period afforded by Treasury Regulation (S)1.817-5.
<PAGE>
1.1 The Fund represents that each Designated Portfolio is currently qualified
(and for new Designated Portfolios, intends to qualify) as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that a Designated Portfolio has ceased to so
qualify or that a Designated Portfolio might not so qualify in the future.
1.2
1.3 The Company represents that the Contracts are currently, and at the time of
issuance shall be, treated as life insurance or annuity insurance contracts,
under applicable provisions of the Code, and that it will make every effort to
maintain such treatment, and that it will notify the Fund, the Adviser and the
Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is
a "modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
1ARTICLE
Potential Conflicts
1.1 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 Designated Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by 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.
1.1 The Company and the Adviser will report any potential or existing conflicts
of which each is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemption Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever Contract owner voting instructions
are disregarded. At least annually, and more frequently if deemed appropriate
by the Board, the Company shall submit to the Adviser, and the Adviser shall at
least annually submit to the Board, such reports, materials and data as the
Board may reasonably request so that the Board may fully carry out the
obligations imposed upon it by the conditions contained in the Shared Funding
Exemption Order; and said reports, materials and data shall be submitted more
<PAGE>
frequently if deemed appropriate by the Board. The responsibility to report
such information and conflicts to the Board will be carried out with a view only
to the interests of the contract owners.
1.2
1.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and any other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (a),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Designated Portfolio and reinvesting such assets in a different
investment medium, which may include another Designated Portfolio of the Fund,
or submitting to a vote of all affected contract owners the question whether
such segregation should be implemented and, as appropriate, segregating the
assets of any appropriate group (i.e. annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and (b),
establishing a new registered management investment company or managed separate
account.
1.4
1.5 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 any Designated Portfolio and terminate this Agreement with respect
to such Account provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. The
Company will bear the cost of any remedial action, including such withdrawal and
termination. No penalty will be imposed by the Fund upon the affected Account
for withdrawing assets from the Fund in the event of a material irreconcilable
conflict. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the effective date of such termination the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of such Designated Portfolio.
1.6
1.7 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the affected Designated Portfolio and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the effective date of such termination the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of such Designated Portfolios.
1.8
<PAGE>
1.9 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict; but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw an Account's investment in any Designated Portfolio and
terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
1.10
1.11 If and to the extent the Shared Funding Exemption Order contains terms and
conditions different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement, then the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with the Shared
Funding Exemption Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5
of the Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in the Shared
Funding Exemption Order or any amendment thereto. 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 Exemption Order) on terms and conditions materially different from those
contained in the Shared Funding Exemption Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5,
3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect only
to the extent that terms and conditions substantially identical to such Sections
are contained in such Rule(s) as so amended or adopted.
<PAGE>
1ARTICLE
Indemnification
1.1 Indemnification by the Company.
1.2
(a) The Company agrees to indemnify and hold harmless the Fund, the Adviser,
the Underwriter and each of their officers, trustees and directors and each
person, if any, who controls the Fund, the Adviser or the Underwriter
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or litigation (including legal and
other expenses), to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the
shares of the Designated Portfolios or the Contracts and;
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement, prospectus, or statement of additional information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of the Fund for use in the Registration Statement, prospectus
or statement of additional information for the Contracts or in the
Contracts or sales literature for the Contracts (for any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or shares of the Designated Portfolios; or
(i) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus, SAI or sales literature of the Fund not supplied by
the Company or persons under its control) or wrongful conduct of the
Company or persons under its authorization or control, with respect to the
sale or distribution of the Contracts or shares of the Designated
Portfolios; or
(i) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, prospectus, SAI or
sales literature of the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
<PAGE>
(i) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good faith or
otherwise, to comply with the qualification requirements specified in
Article VI of this Agreement); or
(v) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in any Registration
Statement, prospectus, statement of additional information or sales
literature for any Unaffiliated Fund, or arise out of or are based upon 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, or otherwise pertain to or arise in connection with the
availability of any Unaffiliated Fund as an underlying funding vehicle in
respect of the Contracts; or
(vi) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company;
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c).
(a) The Company shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of its obligations or duties under
this Agreement.
(b)
(c) The Company shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any liability
that it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision, except
to the extent that the Company has been prejudiced by such failure to give
notice. In case any such action is brought against an Indemnified Party,
the Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action
and to settle the claim at its own expense provided, however, that no such
settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their
conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any
<PAGE>
legal or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs of
investigation.
(d)
(e) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection
with the issuance or sale of the shares of the Designated Portfolios or the
Contracts or the operation of the Fund.
1.1 Indemnification by the Underwriter
1.2
(a) The Underwriter agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Underwriter) or litigation (including legal
and other expenses) to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of
shares of the Designated Portfolios or the Contracts; and
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement, prospectus or SAI of the Fund or sales literature of the Fund
developed by the 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 Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or its sales literature
(or any amendment or supplement thereto) or otherwise for use in connection
with the sale of the Contracts or shares of the Designated Portfolios; or
(i) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not supplied by
the Underwriter or persons under its control) or wrongful conduct of the
Fund or Underwriter or person under their control with respect to the sale
or distribution of the Contracts or shares of the Designated Portfolios; or
(i) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus or sales
literature for the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on behalf of
the Fund; or
<PAGE>
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(i) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
(a) The Underwriter shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to
which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in
the performance or such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company or the Accounts, whichever is applicable.
(b)
(c) The Underwriter shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Underwriter of any such claim shall not relieve the Underwriter from any
liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification
provision, except to the extent that the Underwriter has been prejudiced by
such failure to give notice. In case any such action is brought against
the Indemnified Party, the Underwriter will be entitled to participate, at
its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action and to settle the claim at is own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the Underwriter to
such party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
(d)
(e) The Company agrees promptly to notify the Underwriter of the commencement
of any litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
<PAGE>
1.1 Indemnification By the Fund
(a) The Fund agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund); or litigation (including
legal and other expenses) to which the Indemnified Parties may be required
to pay or may become subject under any statute or regulation, at common law
or otherwise, insofar as such losses, claims, expenses, damages,
liabilities or expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the diversification and qualification requirements specified
in Article VI of this Agreement); or
(i) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
(a) The Fund shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Fund, the Underwriter, the Adviser or the
Accounts, whichever is applicable.
(b)
(c) The Fund shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Fund of any such claim shall not relieve the Fund from any liability that
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision, except to the
extent that the Fund has been prejudiced by such failure to give notice.
In case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action and to settle
the claim at its own expense; provided, however, that no such settlement
shall, without the Indemnified Parties' written consent, include any
factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's
<PAGE>
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d)
(e) The Company, the Adviser and the Underwriter agree to notify the Fund
promptly of the commencement of any litigation or proceeding against it or
any of its respective officers or directors in connection with the
Agreement, the issuance or sale of the Contracts, the operation of any
Account, or the sale or acquisition of shares of the Designated Portfolios.
1ARTICLE
Applicable Law
1.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts.
1.1 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 the statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemption Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
1ARTICLE
Termination
1.1 This Agreement shall continue in full force and effect until the first to
occur of:
1.2
(a) termination by any party, for any reason with respect to any Designated
Portfolio, by one hundred eighty (180) days' advance written notice
delivered to the other parties; or
(a) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter with respect to any Designated Portfolio based upon the
Company's reasonable and good faith determination that shares of such
Designated Portfolio are not reasonably available to meet the requirements
of the Contracts; or
(b)
(c) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter with respect to any Designated Portfolio if the shares of
such Designated Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal securities laws or such law precludes
the use of such shares to fund the Contracts issued or to be issued by the
Company; or
(d)
(e) termination by the Fund, the Adviser or Underwriter in the event that
formal administrative proceedings are instituted against the Company or any
affiliate by the NASD, the SEC, or the Insurance Commissioner or like
official of any state or any other regulatory body
<PAGE>
regarding the Company's duties under this Agreement or related to the sale
of the Contracts, the operation of any Account, or the purchase of the
shares of a Designated Portfolio or the shares of any Unaffiliated Fund,
provided, however, that the Fund, the Adviser or Underwriter determines in
its sole judgement exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Company to perform its obligations under this Agreement; or
(f)
(g) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund, the Adviser or Underwriter by
the NASD, the SEC, or any state securities or insurance department or any
other regulatory body, provided, however, that the Company determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Fund or Underwriter to perform its obligations under this Agreement; or
(h)
(i) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter with respect to any Designated Portfolio in the event that
such Designated Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M or fails to comply with the Section 817(h)
diversification requirements specified in Article VI hereof, or if the
Company reasonably believes that such Designated Portfolio may fail to so
qualify or comply; or
(j)
(k) termination by the Fund, the Adviser or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the qualifications
specified in Article VI hereof; or
(l)
(m) termination by any of the Fund, the Adviser or the Underwriter by written
notice to the Company, if any of the Fund, the Adviser or the Underwriter,
respectively, shall determine, in their sole judgement exercised in good
faith, that the Company has suffered a material adverse change in its
business, operations, financial condition, insurance company rating or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(n)
(o) termination by the Company by written notice to the Fund, the Adviser and
the Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that the Fund, the Adviser or the Underwriter has
suffered a material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the subject
of material adverse publicity and that material adverse change or publicity
will have a material adverse effect on the Fund's or the Underwriter's
ability to perform its obligations under this Agreement; or
(p)
(q) at the option of Company, as one party, or the Fund, the Adviser and the
Underwriter, as one party, upon the other party's material breach of any
provision of this Agreement upon 30 days' notice and opportunity to cure;
or
(r)
(s) termination by any party by advance written notice upon the "assignment" of
the Agreement (as defined under the 1940 Act) unless made with the written
consent of each party to the Agreement; or
<PAGE>
(t)
(u) termination by the Company arising from the substitution of Fund shares
with the shares of another investment company for the Contracts for which
the Fund shares have been selected to serve as the underlying investment
medium, subject to compliance with applicable regulations of the SEC,
Company will give 60 days' written notice to the Fund and the Underwriter
of any proposed action to replace Fund shares.
(v)
1.2 Effect of Termination. Notwithstanding any termination of this Agreement,
the Fund and the Underwriter shall, at the option of the Company, continue to
make available additional shares of a Designated Portfolio pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may in such
event be permitted to reallocate investments in the Designated Portfolios,
redeem investments in the Designated Portfolios and/or invest in the Designated
Portfolios upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement. The parties further agree
that this Section 10.2 shall not apply to any termination under Section 10.1(g)
of this Agreement.
1.3 Notwithstanding any termination of this Agreement, each party's obligation
under Article VIII to indemnify the other parties shall survive.
1ARTICLE
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:
Kemper Variable Series
222 South Riverside Plaza
Chicago, Illinois 60606
Attention: Secretary
If to the Company:
American General Insurance Company
2929 Allen Parkway
Houston, Texas 77019
Attention: General Counsel
<PAGE>
If to the Adviser:
Scudder Kemper Investments, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Attention: Secretary
If to the Underwriter:
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, Illinois 60606
Attention: Secretary
1ARTICLE
Miscellaneous
1.1 The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
1.1 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
1.2
1.3 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
1.4
1.5 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 permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Delaware Insurance Commissioner with any information or
reports in connection with services provided under this Agreement that such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
Delaware variable annuity laws and regulations and any other applicable law or
regulations.
1.6
1.7 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.
1.8
1.9 This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto.
<PAGE>
1.10
1.11 All persons are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which on file with the
Secretary of the Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the Fund with
respect to a Designated Portfolio hereunder are not binding upon any of the
trustees, officers or shareholders of the Fund individually, but are binding
upon only the assets and property of such Designated Portfolio. All parties
dealing with the Fund with respect to a Designated Portfolio shall look solely
to the assets of such Designated Portfolio for the enforcement of any claims
against the Fund hereunder.
1.12
1.13
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and on behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
1.1
1.2
COMPANY: American General Life Insurance Company
By:
Title:
Date:
FUND: Kemper Variable Series
By:
Title:
Date:
ADVISER Scudder Kemper Investments, Inc.
By:
Title:
Date:
UNDERWRITER Kemper Distributors, Inc.
By:
Title:
Date:
<PAGE>
SCHEDULE A
NAME OF SEPARATE ACCOUNT AND DATE
ESTABLISHED BY BOARD OF DIRECTORS
- ---------------------------------
American General Life Insurance Company Separate Account VL-R (Date
Established May 1, 1997)
CONTRACTS UNDER THE AGREEMENT
FUNDED BY SEPARATE ACCOUNT
- --------------------------
The One(R) VUL Solution (sm)
(Policy Form No. 99615)
DESIGNATED PORTFOLIOS
- ---------------------
. Kemper International Portfolio
. Kemper Small Cap Value Portfolio
<PAGE>
SCHEDULE B
EXPENSES
===============================================================================
ITEM FUNCTION RESPONSIBLE
PARTY
===============================================================================
PROSPECTUS
- ------------------------------------------------------------------------------
Update Typesetting Fund
- ------------------------------------------------------------------------------
New Sales: Printing Company
Distribution Company
- ------------------------------------------------------------------------------
Existing Printing Fund
Owners: Distribution Fund
- ------------------------------------------------------------------------------
STATEMENTS OF Same as Prospectus Same
ADDITIONAL INFORMATION
- ------------------------------------------------------------------------------
PROXY MATERIALS OF THE Typesetting Fund
FUND Printing Fund
Distribution Fund
- ------------------------------------------------------------------------------
ANNUAL REPORTS & OTHER
COMMUNICATIONS
WITH SHAREHOLDERS
OF THE FUND
- ------------------------------------------------------------------------------
All Typesetting Fund
- ------------------------------------------------------------------------------
Marketing/1/ Printing Company
Distribution Company
- ------------------------------------------------------------------------------
Existing Owners: Printing Fund
Distribution Fund
- -------------
/1/Solely as it relates to the contracts listed on Schedule A, as it is attached
to the same Agreement as this Schedule B.
<PAGE>
- ------------------------------------------------------------------------------
OPERATIONS All operations and related expenses, including the Fund
OF FUND cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's
prospectus and registration statement, proxy
materials and reports, the preparation of all
statements and notices required by any federal or
state law and all taxes on the issuance of the Fund's
shares, and all costs of management of the business
affairs of the Fund.
===============================================================================
<PAGE>
EXHIBIT (8)(G)
PARTICIPATION AGREEMENT
-----------------------
Among
OPPENHEIMER VARIABLE ACCOUNT FUNDS,
-----------------------------------
OPPENHEIMERFUNDS, INC.
----------------------
and
AMERICAN GENERAL LIFE INSURANCE COMPANY
---------------------------------------
THIS AGREEMENT (the "Agreement"), made and entered into as of the 1st
day of December, 1999 by and among American General Life Insurance Company
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule 1 to this Agreement, as may be amended
from time to time by mutual consent (hereinafter collectively the "Accounts"),
Oppenheimer Variable Account Funds (hereinafter the "Fund") and
OppenheimerFunds, Inc. (hereinafter the "Adviser").
WHEREAS, the Fund is an open-end management investment company and is
available to act as the investment vehicle for separate accounts now in
existence or to be established at any date hereafter for variable life insurance
policies and variable annuity contracts (collectively, the "Variable Insurance
Products") offered by insurance companies (hereinafter "Participating Insurance
Companies");
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio", and each representing the
interests in a particular managed pool of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated July 16, 1986 (File No. 812-6324) granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both
<PAGE>
affiliated and unaffiliated life insurance companies (hereinafter the "Mixed and
Shared Funding Exemptive Order")
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act");
WHEREAS, the Adviser is duly registered as an investment adviser under
the federal Investment Advisers Act of 1940;
WHEREAS, the Company has registered or will register certain variable
annuity and/or life insurance contracts under the 1933 Act (hereinafter
"Contracts") (unless an exemption from registration is available);
WHEREAS, the Accounts are or will be 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 contracts (the Contract(s) and the Account(s) covered by the Agreement
are specified in Schedule 2 attached hereto, as may be modified by mutual
consent from time to time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless an exemption from registration
is available);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios (the
Portfolios covered by this Agreement are specified in Schedule 2 attached hereto
as may be modified by mutual consent from time to time), on behalf of the
Accounts to fund the Contracts named in Schedule 3, as may be amended from time
to time by mutual consent, and the Fund is authorized to sell such shares to
unit investment trusts such as the Accounts at net asset value; and
NOW, THEREFORE, in consideration of their mutual promises, the Fund,
the Adviser and the Company agree as follows:
-2-
<PAGE>
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of the Account, executing such orders on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee in proper form of the order for the shares of the Fund. For
purposes of this Section 1.1, the Company shall be the designee of the Fund for
receipt of such orders from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives written (or
facsimile) notice of such order by 10:00 a.m. New York time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC. "Proper form" means that amounts
to be invested or redeemed are identified on the Company's computer system by
Participant, Contract and Fund in accordance with the Company's standard
procedures for processing transactions. The Company agrees to provide the Fund
and the Adviser with at least ten Business Days' notice of any change in the
Company's standard procedures for processing transactions.
1.2. If the Company requests the purchase of Fund shares, the Company
shall pay for such purchase by wiring federal Funds to the Fund or its
designated account or as otherwise instructed by the Fund's treasurer, on the
day the order is transmitted by the Company. If the Company requests a net
redemption resulting in a payment of redemption proceeds to the Company, the
Fund shall wire the redemption proceeds to the Company on the day the order is
transmitted by the Company, unless doing so would require the Fund to dispose of
portfolio securities or otherwise incur additional costs, but in such event,
proceeds shall be wired to the Company within three business days and the Fund
shall notify the person designated in writing by the Company as the recipient
for such notice of such delay by 3:00 p.m. Eastern time the same Business Day
that the Company transmits the redemption order to the Fund. If the Company's
order requests the application of redemption proceeds from the redemption of
shares of one Portfolio to the purchase of shares of another Portfolio, the Fund
shall so apply such proceeds the same Business Day that the Company transmits
such order to the Fund.
-3-
<PAGE>
1.3. The Fund shall make the Portfolio's net asset value per share
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated but shall use its best efforts to
make such net asset value available by 6:30 p.m. Eastern time. If the Fund
provides the Company with the incorrect share net asset value information
through no fault of the Company, the 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 share net asset value. Any error in the calculation of
net asset value, dividend and capital gain information greater than or equal to
$.01 per share of that Portfolio, shall be reported immediately upon discovery
to The Company. Any error of a lesser amount shall be corrected in net asset
value per share of that Portfolio or the next Business Day after discovery by
the Fund.
1.4. The Fund agrees to redeem for cash, upon 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 in proper form. For
purposes of this Section 1.4, the Company shall be the designee of the Fund for
receipt of requests for redemption and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives written (or facsimile)
notice of such request for redemption by 9:30 a.m. New York time on the next
following Business Day. Payment shall be made within the time period specified
in the Fund's prospectus or statement of additional information, in federal
funds transmitted by wire to the Company's account as designated by the Company
in writing from time to time.
1.5. The Company agrees to purchase and redeem the shares of the
Portfolios named in Schedule 3 in accordance with the provisions of the then
current prospectus and statement of additional information of the Fund. The
Company shall not permit any person other than a Contract owner to give
instructions to the Company which would require the Company to redeem or
exchange shares of the Fund.
-4-
<PAGE>
1.6 Issuance and transfer of Fund Shares will be by book entry only.
Stock certificates will not be issued to the Company. Shares ordered from the
Fund will be recorded in an appropriate title for the Company, on behalf of its
Account.
1.7 The Fund shall furnish same day notice (by wire, telecopier, or
telephone, and if by telephone, followed by confirmation in writing or by
telecopier) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to
receive all such income, dividends and capital gain distributions of the Fund in
the form of additional shares of that the Fund. The Company reserves the right
to revoke this election and to receive all such income, dividends and capital
gain distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
ARTICLE II. Sales Material, Prospectuses and Other Reports
2.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten Business Days
prior to its use. No such material shall be used if the Fund or its designee
reasonably object in writing or by telecopier to such use within ten Business
Days after receipt of such material. "Business Day" shall mean any day in which
the New York Stock Exchange is open for trading and in which the Fund calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
2.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sale literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
2.3. For purposes of this Article II, the phrase "sales literature or
other promotional material" means advertisements (such as material published, or
designed for use in, a newspaper,
-5-
<PAGE>
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboard or electronic media), and sales literature
(such as brochures, circulars, market letters and form letters), distributed or
made generally available to customers or the public.
2.4. The Fund shall provide a copy of its current prospectus within a
reasonable period of its filing date, and provide other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is supplemented or amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document (such printing to be at the Company's expense). The Adviser shall be
permitted to review and approve the typeset form of the Fund's Prospectus prior
to such printing.
2.5. The Fund or the Adviser shall provide the Company with either:
(i) a copy of the Fund's proxy material, reports to shareholders, other
information relating to the Fund necessary to prepare financial reports, and
other communications to shareholders for printing and distribution to Contract
owners at the Company's expense, or (ii) camera ready and/or printed copies, if
appropriate, of such material for distribution to Contract owners at the
Company' expense, within a reasonable period of the filing date for definitive
copies of such material. The Adviser shall be permitted to review and approve
the typeset form of such proxy material and shareholder reports prior to such
printing provided such materials have been provided within a reasonable period.
ARTICLE III. Fees and Expenses
3.1. The Fund and Adviser 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 or Adviser, except as provided herein.
-6-
<PAGE>
3.2. All expenses incident to performance by each party of its
respective duties under this Agreement shall be paid by that party. 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 advisable by
the Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, and the preparation of all statements
and notices required by any federal or state law.
3.3. The Company shall bear the expenses of typesetting, printing and
distributing the Fund's prospectus, proxy materials and reports to owners of
Contracts issued by the Company.
3.4. In the event the Fund adds one or more additional Portfolios and
the parties desire to make such Portfolios available to the respective Contract
owners as an underlying investment medium, a new Schedule 3 or an amendment to
this Agreement shall be executed by the parties authorizing the issuance of
shares of the new Portfolios to the particular Account. The amendment may also
provide for the sharing of expenses for the establishment of new Portfolios
among Participating Insurance Companies desiring to invest in such Portfolios
and the provision of funds as the initial investment in the new Portfolios.
ARTICLE IV. Potential Conflicts
4.1. The Board of Trustees of the Fund (the "Board") will monitor the
Fund for the existence of any material irreconcilable conflict between the
interests of the Contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by variable
annuity contract and variable life insurance contract owners; or (f) a decision
by an insurer to
-7-
<PAGE>
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.
4.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the requested
relief set forth therein. The Company agrees to be bound by the responsibilities
of a participating insurance companies as set forth in the Mixed and Shared
Funding Exemptive Order, including without limitation the requirement that the
Company report any potential or existing conflicts of which it is aware to the
Board. The Company will assist the Board in carrying out its responsibilities
in monitoring such conflicts under the Mixed and Shared Funding Exemptive Order,
by providing the Board in a timely manner with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
Contract owner voting instructions are disregarded and by confirming in writing,
at the Fund's request, that the Company are unaware of any such potential or
existing material irreconcilable conflicts.
4.3. If it is determined by a majority of the Board, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Fund or any Portfolio and reinvesting such assets in a
different investment medium, including (but not limited to) another Portfolio of
the Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making such a change; and
(2) establishing a new registered management investment company or managed
separate account.
-8-
<PAGE>
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the Account's
investment in the Fund and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination must
take place within six (6) months after the Fund gives written notice that this
provision is being implemented, and until the end of the six month period the
Fund shall continue to accept and implement orders by the Company for the
purchase and redemption of shares of the Fund.
4.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the Account's investment in the Fund and terminate this Agreement
within six months after the Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material conflict;
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Fund shall continue to accept and implement
orders by the Company for the purchase and redemption of shares of the Fund,
subject to applicable regulatory limitation.
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 4.3 to establish a new
funding medium for Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the particular Account's investment in the Fund and
terminate this
-9-
<PAGE>
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
ARTICLE V. Applicable Law
5.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
5.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith.
ARTICLE VI. Termination
6.1 This Agreement shall terminate with respect to some or all
Portfolios:
(a) at the option of any party upon three month's advance
written notice to the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Company to the extent that shares of
Portfolios are not reasonably available to meet the requirements of its
Contracts or are not appropriate funding vehicles for the Contracts, as
determined by the Company reasonably and in good faith. Prompt notice of the
election to terminate for such cause and an explanation of such cause shall be
furnished by the Company and termination shall be effective ten days after the
Fund's receipt of said notice unless the Fund makes available a sufficient
number of shares to meet the requirements of the Contracts within said ten-day
period; or
(c) as provided in Article IV.
6.2. It is understood and agreed that the right of any party hereto
to terminate this Agreement pursuant to Section 6.1(a) may be exercised for
cause or for no cause.
-10-
<PAGE>
ARTICLE VII. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify to the
other party.
If to the Fund:
Oppenheimer Variable Account Funds
c/o OppenheimerFunds, Inc.
6803 S. Tucson Way
Englewood, CO 80112
Attn: Brian W. Wixted, Treasurer
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
New York, NY 10048-0203
Attn: Andrew J. Donohue, General Counsel
If to the Company:
American General Life Insurance Company
2929 Allen Parkway
Houston, TX 77019
Attn: General Counsel
ARTICLE VIII. Indemnification
8.1 Indemnification By The Company
8.1(a) The Company agrees to indemnify and hold harmless the Fund and each
director of the Board and officers (collectively, the "Indemnified Parties" for
purposes of this Section 8.1) and any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims,
-11-
<PAGE>
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's share or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the
Contracts or advertisements or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the
Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or advertisements or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied
by the Company, or persons under its control) or wrongful conduct of
the Company or persons under its control, with respect to the sale
or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
advertisements or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
-12-
<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Section 8.1(b) and 8.1(c) hereof.
8.1(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c) The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
-13-
<PAGE>
8.1(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
8.2 Indemnification by the Adviser
8.2(a) The Adviser agrees to indemnify and hold harmless the Company and
the principal underwriter for the Contracts and each of their respective
directors and officers and the principal underwriter for the Contracts and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or advertisements or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Adviser or Fund by or on behalf of
the Company for use in the Registration Statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature for
-14-
<PAGE>
the Contracts not supplied by the Adviser or persons under its
control) or wrongful conduct of the Fund, Adviser or Adviser or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
advertisements or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Section 817(h) of the Internal Revenue Code (the "Code") and
Treasury Regulation 1.817-5 and any amendments or other
modifications to such Section or Regulation, or to qualify as a
regulated investment company under Subchapter M of the Code); or
(v) arise out of or result from any material breach of any
representation or warranty made by the Fund or the Adviser in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Fund or the Adviser; as limited by and in
accordance with the provisions of Section 8.2(b) and 8.2(c) hereof.
8.2(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason or such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
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<PAGE>
8.2(c) The Adviser 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 Adviser in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Adviser of any such claim shall not
relieve the Adviser 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 Adviser also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from the Adviser to such party of the Adviser'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 Adviser will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless the Company and the
principal underwriter for Contracts and each of their respective directors and
officers and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof)
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<PAGE>
or settlements result from the gross negligence, bad faith or willful misconduct
of the Board or any member thereof, are related to the operations of the Fund
and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Section 817(h) of the Code and Treasury Regulation 1.817-5 and
any amendments or other modifications to such Section or Regulation,
or to qualify as a regulated investment company under Subchapter M
of the Code); or
(ii) arise out of or result from any material breach of any
representations or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and 83(c)
hereof.
8.3(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against on Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Adviser or each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund or any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its
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<PAGE>
own expense, in the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d) The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Miscellaneous
9.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as it may come into the public domain.
9.2. 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.
9.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
9.4. 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.
9.5. Each party hereto shall cooperate with, and promptly notify each
other party and all appropriate governmental authorities (including without
limitation the Securities and Exchange
-18-
<PAGE>
Commission, the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.
9.6. 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.
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<PAGE>
9.7. It is understood by the parties that this Agreement is not an
exclusive arrangement in any respect.
9.8. The Company and the Adviser each understand and agree that the
obligations of the Fund under this Agreement are not binding upon any
shareholder of the Fund personally, but bind only the Fund and the Fund's
property; the Company and the Adviser each represent that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder
liability for acts or obligations of the Fund.
9.9. This Agreement shall not be assigned by any party hereto without
the prior written consent of all the parties.
9.10. This Agreement sets forth the entire agreement between the
parties and supercedes all prior communications, agreements and understandings,
oral or written, between the parties regarding the subject matter hereof.
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 as of the date specified below.
AMERICAN GENERAL LIFE
INSURANCE COMPANY
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
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<PAGE>
OPPENHEIMERFUNDS, INC.
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
-21-
<PAGE>
SCHEDULE 1
. American General Life Insurance Company
Separate Account VL-R
. American General Life Insurance Company
Separate Account D
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<PAGE>
SCHEDULE 2
Portfolios of Oppenheimer Variable Account Funds:
Oppenheimer High Income Fund/VA
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<PAGE>
SCHEDULE 3
Legacy Plus Variable Life Insurance Policy
Policy Form No. 98615
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<PAGE>
EXHIBIT (8)(h)
FUND PARTICIPATION AGREEMENT
----------------------------
This Fund Participation Agreement (the "Agreement"), effective as of
February 2, 2000, is made by and among American General Life Insurance Company
("Company"), One Group(R) Investment Trust (the "Trust"), the Trust's investment
advisor, Banc One Investment Advisors Corporation (the "Adviser"), and the
Trust's administrator, One Group Administrative Services, Inc. (the
"Administrator").
WHEREAS, the Trust engages in business as an open-end management
investment company and is available to act as 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");
WHEREAS, insurance companies desiring to utilize the Trust as an
investment vehicle under their Variable Insurance Products are
required to enter into participation agreements with the Trust and the
Administrator (the "Participating Insurance Companies");
WHEREAS, shares of the Trust 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;
WHEREAS, the Trust intends to offer shares of the series set
forth on Schedule B (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 specified on Schedule A (hereinafter referred to individually
as an "Account"; collectively, the "Accounts")
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission, granting 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 (hereinafter the "1940 Act") and Rules 6e-
2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Trust to be sold to and held by Variable
Insurance Product separate accounts of both affiliated and
unaffiliated insurance companies (hereinafter the "Shared Funding
Exemptive Order");
WHEREAS, the Trust is registered as an open-end management
investment company under the 1940 Act and its shares are registered
under the Securities Act of 1933, as amended (hereinafter the "1933
Act");
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;
WHEREAS, the Adviser is the investment adviser of the Portfolios
of the Trust;
WHEREAS, the Company has registered certain Variable Insurance
Products under the 1933 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 Trust is authorized to sell such
shares to each such Account at net asset value.
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<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Trust, the Adviser, and the Administrator agree as
follows:
ARTICLE 1
The Contracts
-------------
1. The Company represents that it has established each of the Accounts
specified on Schedule A as a separate account under Texas law, and has
registered each such Account as a unit investment trust under the 1940 Act
to serve as an investment vehicle for variable annuity contracts and/ or
variable life contracts offered by the Company (the "Contracts"). The
Contracts provide for the allocation of net amounts received by the Company
to separate divisions of the Account for investment in the shares of the
Portfolios. Selection of a particular division is made by the Contract
owner who may change such selection from time to time in accordance with
the terms of the applicable Contract. The Company agrees to make every
reasonable effort to market its Contracts. In marketing its Contracts, the
Company will comply with all applicable state or Federal laws.
ARTICLE 2
Trust Shares
------------
2.1 The Trust agrees to make available for purchase by the Company
shares of the Portfolios and shall execute orders placed for each Account
on a daily basis at the net asset value next computed after receipt by the
Trust or its designee of such order. For purposes of this Section 2.1, the
Company shall be the designee of the Trust for receipt of such orders from
the Account and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust's designated transfer agent receives notice
of such order by 10:00 a.m. Eastern Time on the next following Business Day
("Trade Date plus 1"). Notwithstanding the foregoing, the Company shall use
its best efforts to provide the Trust's designated transfer agent with
notice of such orders by 9:30 a.m. Eastern Time on Trade Date plus 1.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission, as set
forth in the Trust's prospectus and statement of additional information.
Notwithstanding the foregoing, the Board of Trustees of the Trust
(hereinafter the "Board") may refuse to permit the Trust 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.
2.2. The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies for their Variable Insurance Products
and, in the Trust's discretion, to qualified pension and retirement plans.
No shares of any Portfolio will be sold to the general public.
2.3. The Trust agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Trust held by the Company, 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 2.3, 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's designated transfer agent receives notice of such request for
redemption on Trade Date plus 1 in accordance with the timing rules
described in Section 2.1.
2.4. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Trust shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Trust are listed on
Schedule A attached hereto and incorporated herein by reference, as such
Schedule A may be amended from time to time by mutual written agreement of
all of the parties hereto. The Company will give the Trust and the Adviser
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<PAGE>
concurrent written notice of its intention to make available in the future,
as a funding vehicle under the Contracts, any other investment company.
2.5. 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 Trade Date plus 1. 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 by 2:00 p.m.
Eastern Time on Trade Date plus 1. Notwithstanding the foregoing, if the
payment of redemption proceeds on the next Business Day would require the
Portfolio to dispose of Portfolio 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 Trade Date plus 1.
2.6. 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 in an
appropriate title for each Account or the appropriate subaccount of each
Account.
2.7. The Administrator shall use its best efforts to furnish
same day notice by 5:00 p.m. Eastern Time (by wire or telephone, followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Trust'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 Company
reserves the right to revoke this election and to receive all such
dividends and capital gain distributions in cash. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends
and distributions.
2.8. The Administrator shall make the net asset value per
share of each Portfolio available to the Company on a daily basis as soon
as reasonably practical after the net asset value per share is calculated
and shall use its best efforts to make such net asset value per share
available by 6:30 p.m. Eastern Time. In the event that the Administrator
is unable to meet the 6:30 p.m. time stated immediately above, then the
Administrator shall provide the Company with additional time to notify the
Administrator of purchase or redemption orders pursuant to Sections 2.1 and
2.3, respectively, above. Such additional time shall be equal to the
additional time that the Administrator takes to make the net asset values
available to the Company.
2.9. If the Administrator 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 Trust shares
purchased or redeemed to reflect the correct net asset value per share as
subsequently determined by the Administrator. The determination of the
materiality of any net asset value pricing error shall be based on the
Trust's policy for correction of pricing errors (the "Pricing Policy"). The
Company shall correct such error in its records and in the records prepared
by it for Contract owners in accordance with information provided by the
Administrator. 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.
2.10. The Administrator shall provide written confirmation to
the Company of the amount of shares traded and the associated cost per
share (NAV) total trade amount and the outstanding share balances held by
the Account in each Portfolio as of the end of each Business Day. Such
confirmation will be furnished by 1:00 p.m. Eastern time on the next
Business Day.
ARTICLE 3
Prospectuses, Reports to Shareholders and Proxy Statements, Voting
------------------------------------------------------------------
3.1. The Trust shall provide the Company with as many printed
copies of the Trust's current prospectus as the Company may reasonably
request. The Administrator will provide the Company with a copy of the
statement of additional information suitable for duplication. If requested
by the Company, in lieu of
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<PAGE>
providing printed copies, the Trust shall provide camera-ready film or
computer diskettes containing the Trust's prospectus and statement of
additional information in order for the Company once each year (or more
frequently if the prospectus and/or statement of additional information for
the Trust is amended during the year) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one document or
separately. The Company may elect to print the Trust's prospectus and/or
its statement of additional information in combination with other
investment 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 Trust
prospectuses and statements of additional information shall be the expense
of the Company. For prospectuses and statements of additional information
provided by the Company to its existing owners of Contracts in order to
update disclosure 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 Trust.
If the Company chooses to receive camera-ready film or computer diskettes
in lieu of receiving printed copies of the Trust's prospectus and/or
statement of additional information, the Trust shall bear the cost of
typesetting to provide the Trust's prospectus and/or statement of
additional information to the Company in the format in which the Trust 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 Trust 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 Trust's per unit cost of printing the Trust's prospectuses.
The same procedures shall be followed with respect to the Trust's statement
of additional information. The Trust shall not pay any costs of
typesetting, printing and distributing the Trust's prospectus and/or
statement of additional information to prospective Contract owners.
3.2(b). The Trust, at the Company's expense, shall provide the
Company with copies of Annual and Semi-Annual Reports (the "Reports") in
such quantity as the Company shall reasonably require for distributing to
Contract owners. The Trust, at its expense, shall provide the Contract
owners designated by the Company with copies of its proxy statements and
other communications to shareholders (except for prospectuses and
statements of additional information, and which are covered in Section
3.2(a) above, and Reports). The Trust shall not pay any costs of
distributing Reports and other communications to prospective Contract
owners.
3.2(c). The Company agrees to provide the Trust or its designee
with such information as may be reasonably requested by the Trust to assure
that the Trust'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 Trust shall pay no fee or other compensation to the
Company under this Agreement, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Trust may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Trust in
writing.
3.2(e) All expenses, including expenses to be borne by the Trust
pursuant to Section 3.2 hereof, incident to performance by the Trust under
this Agreement shall be paid by the Trust. The Trust 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 Trust, in accordance with applicable state laws prior to their sale.
The Trust shall bear the expenses for the cost of registration and
qualification of the Trust's shares.
3.3. If and to the extent required by law, the Company shall
with respect to proxy material distributed by the Trust to Contract owners
designated by the Company to whom voting privileges are required to be
extended:
(i) solicit voting instructions from Contract owners;
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<PAGE>
(ii) vote the Trust shares in accordance with instructions
received from Contract owners; and
(iii) vote Trust shares for which no instructions have been
received in the same proportion as Trust 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 Trust shares
held in any segregated asset account in its own right, to
the extent permitted by law.
ARTICLE 4
Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to
the Trust, the Adviser or their designee, drafts of the separate accounts
prospectuses and statements of additional information and each piece of
sales literature or other promotional material prepared by the Company or
any person contracting with the Company to prepare such material in which
the Trust, the Adviser or the Administrator is described, at least ten
Business Days prior to its use. No such material shall be used if the
Trust, the Adviser, the Administrator or their designee reasonably objects
to such use within ten Business Days after receipt of such material.
4.2. Neither the Company nor any person contracting with the
Company to prepare sales literature or other promotional material shall
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 Trust prospectus, as such registration statement
or Trust prospectus may be amended or supplemented from time to time, or in
reports to shareholders or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust or its
designee, except with the permission of the Trust or its designee.
4.3. The Adviser 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 Trust in which the Company or its
Accounts, are described 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 Trust, the Administrator, 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 or prospectus
may be amended or supplemented from time to time, or in published reports
or solicitations for voting instruction for each Account which are in the
public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved by
the Company or its designee, except with the permission of the Company.
4.5. The Trust will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Trust or its shares, promptly after the filing of such
document with the Securities and Exchange Commission or other regulatory
authorities.
4.6. The Company will provide to the Trust, upon the Trust's
request, 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 documents with the
Securities and Exchange Commission or other regulatory authorities.
5
<PAGE>
4.7. For purposes of this Article 4, 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 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), and educational or
training materials or other communications distributed or made generally
available to some or all agents or employees.
4.8. The Company and its agents shall make no representations
concerning the Trust except those contained in the then-current prospectus
and Statement of Additional Information of the Trust and in current printed
sales literature of the Trust.
ARTICLE 5
Administrative Services to Contract owners
------------------------------------------
5. Administrative services to Contract owners shall be the
responsibility of the Company and shall not be the responsibility of the
Trust, the Adviser or the Administrator. The Trust and the Administrator
recognize that the Company will be the sole shareholder of Trust shares
issued pursuant to the Contracts.
ARTICLE 6
Representations and Warranties
------------------------------
6.1. The Trust represents that it believes, in good faith, that each
Portfolio is currently qualified as a regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986,as amended (the "Code")
and that it will make every effort to maintain such qualification of the
Trust and that it will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that it might not so qualify in the future.
6.2. The Company represents that it believes, in good faith, that
the Contracts will at all times be treated as annuity contracts under
applicable provisions of the Code, and that it will make every effort to
maintain such treatment and that it will notify the Trust 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.
6.3. The Trust represents that it believes, in good faith, that the
Funds will at all times comply 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, and that it will make every effort to maintain
the Trust's' compliance with such diversification requirements, and that it
will notify the Company immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that a Fund might not so
qualify in the future.
6.4 . The Company represents and warrants that the interests of the
Contracts are or will be registered unless exempt and that it will maintain
such registration under the 1933 Act and the regulations thereunder to the
extent required by the 1933 Act and that the Contracts will be issued and
sold in compliance 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 Texas
Insurance Code and the regulations thereunder and has registered or, prior
to any issuance or sale of the Contracts, 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, unless exempt therefrom, 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.
6.5. The Company represents that it believes, in good faith, that
the Variable Account is a "segregated asset account" and that interests
in the Variable Account are offered exclusively through the purchase of
a "variable contract," within the meaning of such terms under Section
1.817-5(f) (2) of the
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regulations under the Code, and that it will make every effort to continue
to meet such definitional requirements, and that it will notify the Trust
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.
6.6. The Trust represents and warrants that it is and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount no 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. Such bond shall
include coverage for larceny and embezzlement and shall be issued by a
relevant bonding company. The Trust will notify the Company immediately
upon having a reasonable basis for believing that a Portfolio no longer has
the coverage required by this Section 6.6.
6.7. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with
the money or securities of the Trust are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Trust, in an amount not less than five million dollars
($5,000,000). Such bond shall include coverage for larceny and
embezzlement and shall be 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 Trust immediately upon having a reasonable basis for believing
that the Company no longer has the coverage required by this Section 6.7.
6.8. The Trust represents that to the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act,
the Trust undertakes to have a majority of the disinterested members of the
Board, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
6.9. The Adviser and the Administrator each represents and warrants
that it complies with all applicable federal and state laws and regulations
and that it will perform its obligations for the Trust and the Company in
compliance with the laws and regulations of its state of domicile and any
applicable state and federal laws and regulations.
ARTICLE 7
Statements and Reports
----------------------
7.1. The Administrator or its designee shall provide the Company
within five (5) business days after the end of each month a monthly
statement of account confirming all transactions made during that month in
the Account.
7.2. The Trust and Administrator agree to provide the Company no
later than March 1 of each year with the investment advisory and other
expenses of the Trust incurred during the Trust's most recently completed
fiscal year, to permit the Company to fulfill its prospectus disclosure
obligations under the SEC's variable annuity fee table requirements.
ARTICLE 8
Potential Conflicts
-------------------
8.1. The Board 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. 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
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promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
8.2. The Company will report in writing any potential or existing
material irreconcilable conflict of which it is aware to the Administrator.
Upon receipt of such report, the Administrator shall report the potential
or existing material irreconcilable conflict to the Board. The
Administrator shall also report to the Board on a quarterly basis whether
the Company has reported any potential or existing material irreconcilable
conflicts during the previous calendar quarter. The Company will assist the
Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but
is not limited to, an obligation by the Company to inform the Board
whenever Contract owner voting instructions are disregarded.
8.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at
their expense and to the extent reasonably practicable (as determined by a
majority of the disinterested trustees), take whatever steps are necessary
to remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to)
another Portfolio of the Trust, or submitting the question 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 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.
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 the Trust 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.
8.5. For purposes of Sections 8.3 through 8.4 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 Trust be required to establish a new
funding medium for the Contracts. The Company shall not be required by
Section 8.3 through 8.4 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.
8.6. 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 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.
8.7. Each of the Company and the Adviser shall at least annually
submit to the Board 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 in the Shared Funding
Exemptive Order, and said
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reports, materials and data shall be submitted more frequently if deemed
appropriate by the Board. Without limiting the generality of the foregoing
or the Company's obligations under Section 8.2, the Company shall provide
to the Administrator a written report to the Board no later than January
15th of each year indicating whether any material irreconcilable conflicts
have arisen during the prior fiscal year of the Trust. 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 Securities and Exchange
Commission upon request.
ARTICLE 9
Indemnification
---------------
9.1. Indemnification By The Company
------------------------------
9.1 (a). The Company agrees to indemnify and hold harmless the
Trust, the Administrator, the Adviser, and each member of their respective
Boards and officers and each person, if any, who controls the Trust within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 9.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus for the
Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of
the Trust for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or
Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or
sales literature of the Trust not supplied by the Company,
or persons under its control and other than statements or
representations authorized by the Trust) or unlawful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of or as a result 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 and in
conformity with information furnished to the Trust by or
on behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Company; as
limited by and in accordance with the provisions of
Section 9.1(b) and 9.1(c) hereof.
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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 as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
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), 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 as 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 shall 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 Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust shares or the Contracts or the operation
of the Trust.
9.2. Indemnification by Administrator
--------------------------------
9.2(a). The Administrator agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 9.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Administrator) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
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 Trust or the
Administrator by or on behalf of the Company, the Adviser,
Counsel for the Trust , the independent public accountant to the
Trust, or any person or entity that is not acting as agent for or
controlled by the Administrator for use in the registration
statement or prospectus for the Trust or in sales literature (or
any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement
or omission was made in reliance upon information furnished to
the Company by or on behalf of the Administrator; or
(iii) arise as a result of any failure by the Administrator to provide
the services and furnish the materials under the terms of this
Agreement; or
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(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Administrator in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Administrator; as limited by and
in accordance with the provisions of Section 9.2(b) and 9.2(c)
hereof.
9.2(b). The Administrator shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
9.2(c). The Administrator 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 Administrator in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Administrator
of any such claim shall not relieve the Administrator 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 Administrator will be
entitled to participate, at its own expense, in the defense thereof. The
Administrator also shall be entitled to assume the defense thereof, with counsel
satisfactory to the Indemnified Party named in the action. After notice from
the Administrator to such Indemnified Party of the Administrator'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 Administrator 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 agrees promptly to notify the Administrator 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 in which the Portfolios are made available.
9.3. Indemnification by the Adviser
------------------------------
9.3(a). The Adviser agrees to indemnify and hold harmless the
Company and its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
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 Adviser) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
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 Adviser or
the Trust by or on behalf of the Company, the Administrator,
Counsel for the Trust, the independent public accountant to the
Trust, or any person or entity that is not acting as agent for or
controlled by the Adviser for use in the registration statement
or prospectus for the Trust or in sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or
the omission or alleged
11
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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 Adviser; or
(iii) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this
Agreement; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser; as limited by and in
accordance with the provisions of Section 9.3(b) and 9.3(c)
hereof.
9.3(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
9.3(c). The Adviser 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 Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser 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 Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Adviser to such Indemnified Party of
the Adviser'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 Adviser 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 then reasonable costs
of investigation.
9.3(d). The Company agrees to promptly notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
9.4. Indemnification by the Trust
----------------------------
9.4(a). The Trust agrees to indemnify and hold harmless the Company
and its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (hereinafter collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 9.4) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Trust) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
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 the Trust by or on
behalf of the Adviser, the Company, or the Administrator for use
in the registration statement or prospectus for the Trust or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Portfolio
shares; or
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(ii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Trust; or
(iii) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this
Agreement; or
(iv) 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; as limited by and in
accordance with the provisions of Section 9.4(b) and 9.4(c)
hereof.
9.4(b). The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
9.4(c). The Trust 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 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), 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 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 then reasonable costs
of investigation.
9.4(d). The Company agrees to promptly notify the Trust of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Contracts, with respect to the operation of each Account, or the
sale or acquisition of shares of the Trust.
ARTICLE 10
Applicable Law
--------------
10.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State 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
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE 11
Termination
-----------
11.1. This Agreement shall continue in full force and effect until
the first to occur of:
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(a) termination by any party for any reason upon ninety days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Trust, the
Adviser, and the Administrator 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 Trust 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 upon written notice to the Trust, the
Adviser, and the Administrator 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 upon written notice to the Trust, the
Adviser and the Administrator 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
(e) termination by the Company upon written notice to the Trust, the
Adviser, and the Administrator with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Section 6.3 hereof; or
(f) termination by either the Trust, the Adviser, or the
Administrator by written notice to the Company, if either one or more
of the Trust, the Adviser, or the Administrator, shall determine, in
its or their sole judgment exercised in good faith, that the Company
and/or their affiliated companies has suffered a material adverse
change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity, provided that the Trust, the Adviser, or the Administrator
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 and any other changes in circumstances since the giving of
such notice, the determination of the Trust, the Adviser, or the
Administrator 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 by written notice to the Trust, the
Adviser, and the Administrator, if the Company shall determine, in
its sole judgment exercised in good faith, that either the Trust, the
Adviser, or the Administrator 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 Trust, the Adviser,
and the Administrator 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 Trust,
the Adviser, or the Administrator and any other changes in
circumstances since the giving of such notice, the determination of
the Company 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 Trust, the Adviser, or the Administrator by
written notice to the Company, if the Company gives the Trust, the
Adviser, and the Administrator 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
11.1(h) shall be effective sixty (60) days after the notice specified
in Section 2.4 was given; or
14
<PAGE>
(i) termination by any party upon the other party's breach of any
representation in Article 6 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 Trust or the Company, as the case may be;
or
(j) termination by the Trust, the Adviser, or Administrator by written
notice to the Company in the event an Account or Contract is not
registered (unless exempt from registration) 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 3.3.
11.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Trust 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") unless such
further sale of Trust shares is proscribed by law, regulation or applicable
regulatory body, or unless the Trust determines that liquidation of the Trust
following termination of this Agreement is in the best interests of the Trust
and its shareholders. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to direct reallocation of investments in
the Trust, redemption of investments in the Trust and/or investment in the Trust
upon the making of additional purchase payments under the Existing Contracts.
The parties agree that this Section 11.2 shall not apply to any terminations
under Article 8 and the effect of such Article 8 terminations shall be governed
by Article 8 of this Agreement.
11.3. The Company shall not redeem Trust shares attributable to the
Contracts (as distinct from Trust 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 Trust, the Adviser and
the Administrator the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust 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 Trust or the Adviser 30 days notice of its intention to do so.
ARTICLE 12
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:
One Group Investment Trust
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attn: Fund President
If to the Administrator:
One Group Administrative Services, Inc.
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43240
Attention: President
15
<PAGE>
If to the Adviser:
Banc One Investment Advisors Corporation
1111 Polaris Parkway, Suite B2
Columbus, Ohio 43271-0211
Attn: Peter Atwater
If to the Company:
American General Life Insurance Company
2929 Allen Parkway, A40-04
Houston, Texas 77019
Attn: General Counsel
ARTICLE 13
Miscellaneous
-------------
13.1. All persons dealing with the Trust must look solely to the
property of the Trust for the enforcement of any claims against the Trust as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Trust. Each of the
Company, the Adviser, and the Administrator acknowledges and agrees that, as
provided by the Trust's Amended and Restated Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Trust and
the Portfolios shall not personally be bound by or liable for matters set forth
hereunder, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder. The Trust's Amended and
Restated Declaration of Trust is on file with the Secretary of State of
Massachusetts.
13.2. 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.
13.3. 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.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. 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.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities (and
other parties hereto) reasonable access to its books and records in connection
with any investigation or inquiry 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. 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, with advance written
notice to the other parties hereto, 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.
16
<PAGE>
13.9. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee upon request, 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), as
soon as practical and in any event within 45 days following such period;
(c) any financial statement, proxy statement, stockholders
and/or policyholders, as soon as notice or report of the Company sent to
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports the Company filed with the Securities and Exchange Commission or
any state insurance regulator, as soon as practical after the filing
thereof; and
(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.
13.10. The names "One Group(R) Investment Trust" and `Trustees of One
Group(R) Investment Trust" refer respectively to the Trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under a Declaration of Trust dated June 7, 1993 to which reference is
hereby made and a copy of which is on file at the office of the Secretary of the
Commonwealth of Massachusetts and elsewhere as required by law, and to any and
all amendments thereto so filed or hereafter filed. The obligations of `One
Group Investment Trust' entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, Shareholders or
representatives of the Trust personally, but bind only the assets of the Trust,
and all persons dealing with any series of Shares of the Trust must look solely
to the assets of the Trust belonging to such series for the enforcement of any
claims against the Trust.
13.11. The Trust and the Administrator agree to consult with the Company
concerning whether any Portfolio of the Trust qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
[SIGNATURE PAGES FOLLOW]
17
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
By:_________________________________________
Title: _______________________________________
ONE GROUP INVESTMENT TRUST
By:_________________________________________
Title: _______________________________________
BANC ONE INVESTMENT ADVISORS CORPORATION
By:_________________________________________
Title: _______________________________________
ONE GROUP ADMINISTRATIVE SERVICES, INC.
By:_________________________________________
Title: _______________________________________
18
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
-------------------------------
<TABLE>
<CAPTION>
Name of Separate Account and Date Established by Form Numbers
Board of Directors Funded by Separate Account
- ------------------------------------------------------------------------------------------
<S> <C>
Contract Form Nos:
-------------------------------------
American General Life Insurance Company Separate 99615
Account VL-R, May 6, 1997 -------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
SCHEDULE B
----------
PORTFOLIOS OF THE TRUST
- -----------------------
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Large Cap Growth Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Diversified Equity Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
20
<PAGE>
EXHIBIT (8)(i)(ii)
AMENDMENT TO FUND PARTICIPATION AGREEMENT
American General Life Insurance Company, Templeton Variable Products Series
Fund, and Franklin Templeton Distributors, Inc. hereby amend their Fund
Participation Agreement dated as of April 1, 1999, ("Agreement"), by:
1. Adding Franklin Templeton Variable Insurance Products Trust ("VIP"),
an open-end management investment company organized as a business
trust under Massachusetts law, as a party to the Agreement between
and among Templeton Variable Products Series Fund ("TVP"), an open-
end management investment company organized as a business trust under
Massachusetts law (both Templeton Variable Products Series Fund and
Franklin Templeton Variable Insurance Products Trust shall
hereinafter be referred to as the "Trust"), Franklin Templeton
Distributors, Inc., a California corporation, the Trust's principal
underwriter (the "Underwriter") and American General Life Insurance
Company, a life insurance company organized as a corporation under
Texas law (the "Company").
2. Adding Article IX, "Agreement"
AGREEMENT
9.1 Form of Agreement. This Agreement shall create a separate
agreement for each Trust and the Underwriter as though each
Trust and the Underwriter had separately executed an identical
Fund Participation Agreement with the Company. No rights,
responsibilities or liabilities arising under the Agreement as
it pertains to one Trust shall be enforceable by or against any
party to the Agreement as it pertains to another Trust.
3. Adding Franklin Templeton Variable Insurance Products Trust to
Article VII, "Notices"
If to the Trust:
Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Assistant Vice
President & Assistant Secretary
4. Replacing Schedules A, B, and C with amended Schedule A-C, attached;
5. Replacing Schedule D with amended Schedule D, attached;
6. Replacing Schedule E with amended Schedule E, attached.
1
<PAGE>
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to Fund Participation Agreement, to be effective as of
[ ], 1999.
<TABLE>
<CAPTION>
<S> <C>
American General Life Insurance Company Templeton Variable Products Series Fund
- --------------------------------------- ---------------------------------------
By its authorized officer By its authorized officer
By:____________________________________ By:______________________________
Name: Name: Karen L. Skidmore
Title: Title: Assistant Vice President and Assistant Secretary
Franklin Templeton Variable Insurance Products Trust
-------------------------------------------------------
By its authorized officer
By:_______________________________
Name: Karen L. Skidmore
Title: Assistant Vice President and Assistant Secretary
Franklin Templeton Distributors, Inc.
-------------------------------------
By its authorized officer
By:__________________________________
Name: Deborah Gatzek
Title: Senior Vice President
</TABLE>
2
<PAGE>
SCHEDULE A-C
Contracts Issued by American General Life Insurance Company
-----------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME Platinum Investor Legacy Plus VUL Key Legacy Plus VUL
AND TYPE Variable Annuity
- -----------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes Yes
- -----------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-70667 333-53909 333-89897
NUMBER -1933 ACT
- -----------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM 98020 98615 99616
NUMBERS
- -----------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT American General Life American General Life American General Life
NAME/DATE ESTABLISHED Insurance Company Insurance Company Insurance Company
Separate Account D Separate Account VL-R - Separate Account VL-R -
May 6, 1997 May 6, 1997
- -----------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-02441 811-08561 811-08561
NUMBER - 1940 ACT
- -----------------------------------------------------------------------------------------------------------
TEMPLETON VARIABLE TVP - Templeton Asset TVP - Templeton TVP - Templeton
PRODUCTS SERIES FUND Allocation Fund - Developing Markets Fund - International Fund -
("TVP"), FRANKLIN Class 2 (Templeton Class 2 (Templeton Asset Class 2 (Templeton
TEMPLETON VARIABLE Investment Counsel, Management Ltd.) Investment Counsel, Inc.)
INSURANCE PRODUCTS Inc.)
TRUST ("VIP") TVP - Templeton VIP - Franklin Small Cap
-PORTFOLIOS, CLASSES TVP - Templeton International Fund - Fund - Class 2 (Franklin
AND ADVISER International Fund - Class 2 (Templeton Advisers, Inc.)
Class 2 (Templeton Investment Counsel, Inc.)
Investment Counsel,
Inc.) TVP - Franklin Small Cap
Investments Fund - Class
2 (Franklin Advisers,
Inc.)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
SCHEDULE A-C
Contracts Issued by American General Life Insurance Company
-----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME The One Solution VUL
AND TYPE
- -----------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes
- -----------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-87307
NUMBER -1933 ACT
- -----------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM 99615
NUMBERS
- -----------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT American General Life
NAME/DATE ESTABLISHED Insurance Company
Separate Account VL-R
- May 6, 1997
- -----------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-08561
NUMBER - 1940 ACT
- -----------------------------------------------------------------------------------------------------------
TEMPLETON VARIABLE TVP - Templeton
PRODUCTS SERIES FUND Developing Markets
("TVP"), FRANKLIN Fund - Class 2
TEMPLETON VARIABLE (Templeton Asset
INSURANCE PRODUCTS Management Ltd.)
TRUST ("VIP")
-PORTFOLIOS, CLASSES VIP - Franklin Small
AND ADVISER Cap Fund - Class 2
(Franklin Advisers,
Inc.)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
<TABLE>
<CAPTION>
Platinum Investor Variable Annuity: Legacy Plus VUL:
- ----------------------------------- ----------------
<S> <C>
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
AIM V.I. International Equity Fund V.I. International Equity Fund
AIM V.I. Value Fund V.I. Value Fund
American General Series Portfolio Company American General Series Portfolio Company
International Equities Fund Money Market Fund
MidCap Index Fund
Money Market Fund
Stock Index Fund
Dreyfus Variable Investment Fund BT Insurance Funds Trust
Quality Bond Portfolio Equity 500 Index
Small Cap Portfolio EAFE Equity Index
Dreyfus Socially Responsible Growth Fund, Inc.
MFS Variable Insurance Trust Morgan Stanley Universal Funds, Inc.
MFS Emerging Growth Series Equity Growth
Morgan Stanley Universal Funds, Inc. MFS Variable Insurance Trust
Equity Growth Portfolio MFS Emerging Growth Series
High Yield Portfolio
SAFECO Resource Series Trust Putnam Variable Trust
Equity Portfolio Putnam VT Diversified Income Fund
Growth Portfolio Putnam VT Growth & Income Fund
Van Kampen American Capital Life Investment Trust
Strategic Stock Portfolio
Oppenheimer Variable Account Funds
Oppenheimer High Income
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
(CONTINUED)
<S> <C>
Key Legacy Plus The One VUL Solution
- --------------- --------------------
AIM Variable Insurance Funds, Inc. AIM Variable Insurance Funds, Inc.
- ---------------------------------- -----------------------------------
AIM V.I. International Equity Fund AIM V.I. Capital Appreciation Fund
--------------------------------------------
AIM V.I. Government Securities Fund
---------------------------------------------
AIM V.I. High Yield Fund
----------------------------------
AIM V.I. International Equity Fund
--------------------------------------------
American Century Variable Portfolios, Inc. American General Series Portfolio Company
- ------------------------------------------ -----------------------------------------
VP Value Fund Money Market Fund
American General Series Portfolio Company Kemper Variable Series
- ----------------------------------------- ----------------------
Money Market Fund Kemper International Portfolio
Kemper Small Cap Value Portfolio
MFS Variable Insurance Trust MFS Variable Insurance Trust
- ---------------------------- ----------------------------
MFS Total Return Series MFS Growth With Income Series
Neuberger Berman Advisers Management Trust Oppenheimer Variable Account Funds
- ------------------------------------------ ----------------------------------
Partners Portfolio Oppenheimer High Income Fund/VA
Oppenheimer Variable Account Funds One Group Investment Trust
- ---------------------------------- --------------------------
Oppenheimer High Income Fund/VA One Group Investment Trust Diversified Equity
Portfolio
One Group Investment Trust Equity Index Portfolio
One Group Investment Trust Government Bond Portfolio
One Group Investment Trust Large Cap Growth
Portfolio
One Group Investment Trust Mid Cap Growth Portfolio
Putnam Variable Trust Putnam Variable Trust
- --------------------- --------------------------------------------------------------
Putnam VT Diversified Income Fund Putnam VT Vista Fund
Van Kampen Life Investment Trust Van Kampen Life Investment Trust
- -------------------------------- --------------------------------------------------------------
Emerging Growth Portfolio Emerging Growth Portfolio
Victory Variable Insurance Funds
- --------------------------------
Diversified Stock Fund
Investment Quality Bond Fund
Small Cap Opportunity Fund
</TABLE>
6
<PAGE>
SCHEDULE E
RULE 12B-1 PLANS
Compensation Schedule
---------------------
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
Trust and Portfolio Maximum Annual Payment Rate
- ---------------------------------------------------------------------------
TVP - FRANKLIN SMALL CAP INVESTMENTS FUND 0.25%
TVP - TEMPLETON ASSET ALLOCATION FUND 0.25%
TVP - TEMPLETON DEVELOPING MARKETS FUND 0.25%
TVP - TEMPLETON INTERNATIONAL FUND 0.25%
VIP - FRANKLIN SMALL CAP FUND 0.25%
Agreement Provisions
--------------------
If the Company, on behalf of any Account, purchases Trust Portfolio shares
("Eligible Shares") which are subject to a Rule 12b-1 Plan adopted under the
1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees (collectively
"you") you provide administrative and other services which assist in the
promotion and distribution of Eligible Shares or Variable Contracts offering
Eligible Shares, the Underwriter, the Trust or their affiliates (collectively,
"we") may pay you a Rule 12b-1 fee. "Administrative and other services" may
include, but are not limited to, furnishing personal services to owners of
Contracts which may invest in Eligible Shares ("Contract Owners"), answering
routine inquiries regarding a Portfolio, coordinating responses to Contract
Owner inquiries regarding the Portfolios, maintaining such accounts or providing
such other enhanced services as a Trust Portfolio or Contract may require,
maintaining customer accounts and records, or providing other services eligible
for service fees as defined under NASD rules. Your acceptance of such
compensation is your acknowledgment that eligible services have been rendered.
All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the
Company on behalf of its Accounts, and shall be calculated on the basis and at
the rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an increase is
approved by shareholders as provided in the Plan. These maximums shall be a
specified percent of the value of a Portfolio's net assets attributable to
Eligible Shares owned by the Company on behalf of its Accounts (determined in
the same manner as the Portfolio uses to compute its net assets as set forth in
its effective Prospectus).
You shall furnish us with such information as shall reasonably be requested by
the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees
paid to you pursuant to the Plans. We shall furnish to the Trustees, for their
review on a quarterly basis, a written report of the amounts expended under the
Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Trust and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the Disinterested Trustees, or by a
vote of a majority of the outstanding shares
7
<PAGE>
as provided in the Plan, on sixty (60) days' written notice, without payment of
any penalty. The Plans may also be terminated by any act that terminates the
Underwriting Agreement between the Underwriter and the Trust, and/or the
management or administration agreement between Franklin Advisers, Inc. or
Templeton Investment Counsel, Inc. or their affiliates and the Trust.
Continuation of the Plans is also conditioned on Disinterested Trustees being
ultimately responsible for selecting and nominating any new Disinterested
Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate,
and persons who are party to any agreement related to a Plan have a duty to
furnish, such information as may reasonably be necessary to an informed
determination of whether the Plan or any agreement should be implemented or
continued. Under Rule 12b-1, the Trust is permitted to implement or continue
Plans or the provisions of any agreement relating to such Plans from year-to-
year only if, based on certain legal considerations, the Trustees are able to
conclude that the Plans will benefit each affected Trust Portfolio and class.
Absent such yearly determination, the Plans must be terminated as set forth
above. In the event of the termination of the Plans for any reason, the
provisions of this Schedule E relating to the Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Fund.
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule E, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the contracts.
8
<PAGE>
EXHIBIT (8)(k)
AGREEMENT
THIS AGREEMENT ("Agreement") made as of January 1, 2000, is by and between VAN
KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and AMERICAN
GENERAL LIFE INSURANCE COMPANY, a Texas corporation ("AGL").
W I T N E S S E T H:
WHEREAS, each of the investment companies listed 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") (such investment companies are hereinafter
collectively called the "Funds," or each a "Fund"); and
WHEREAS, each of the Funds is available as an investment vehicle for AGL for
certain of its separate accounts to fund variable life insurance policies and/or
variable annuity contracts identified on Schedule Two hereto ("Schedule Two," as
the same may be amended from time to time) (the "Contracts"); and
WHEREAS, AGL has entered into a participation agreement dated January 24, 1997,
among AGL, American General Securities Incorporated, Adviser, Van Kampen Funds
Inc. ("Underwriter"), and the Funds (the "Participation Agreement," as the same
may be amended from time to time); and
WHEREAS, Adviser provides, among other things, investment advisory and/or
administrative services to the Funds; and
WHEREAS, Adviser desires AGL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
Contracts for the benefit of persons who maintain their ownership interests in
the separate account, whose interests are included in the master account
("Master Account") referred to in paragraph 1 of Exhibit A ("Shareholders"), and
AGL 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. AGL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of the Shareholders.
2. AGL 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.
1
<PAGE>
3. AGL agrees to provide copies of all the historical records relating to
transactions between the Funds and Shareholders, and all written
communications and other related materials regarding the Fund(s) to or from
such Shareholders, as reasonably requested by Adviser or its representatives
(which representatives, include, without limitation, its auditors, legal
counsel or the Underwriter, as the case may be), to enable Adviser or its
representatives to monitor and review the Administrative Services performed
by AGL, or comply with any request of the board of directors, or trustees or
general partners (collectively, the "Directors") of any Fund, or of a
governmental body, self-regulatory organization or Shareholder.
In addition, AGL agrees that it will permit Adviser, the Funds or their
representatives, to have reasonable access to its personnel and records in
order to facilitate the monitoring of the quality of the Administrative
Services.
4. AGL may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of AGL required by this Agreement, or the
Participation Agreement, provided that AGL shall be fully responsible for the
acts and omissions of such other parties.
5. AGL hereby agrees to notify Adviser promptly if for any reason it is unable
to perform fully and promptly any of its obligations under this Agreement.
6. AGL 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 AGL or the name of its nominee and which are
maintained in AGL variable annuity or variable life insurance accounts. AGL
represents further that it is not registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the"1934 Act"), and it is not
required to be so registered, including as a result of entering into this
Agreement and performing the Administrative Services, and other obligations
of AGL set forth in this Agreement.
7. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Underwriter 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 such Funds and/or sale of its shares.
8. In consideration of the performance of the Administrative Services by AGL
with respect to the Contracts, beginning on the date hereof and during the
term of the Participation Agreement, Adviser agrees to pay AGL an annual fee
which shall equal .25% of the value of each Fund's assets in the Contracts
maintained in the Master Account for the Shareholders (excluding all assets
invested during the guarantee periods available under the Contracts). The
determination of applicable assets shall be made by averaging assets in
applicable Funds as of the last Valuation Date (as defined in the prospectus
relating to the Contracts) of each month falling within the applicable
calendar year. The foregoing fee will be paid by Adviser to AGL on a calendar
year basis, and in this regard, payment
2
<PAGE>
of such fee will be made by Adviser to AGL within thirty (30) days
following the end of each calendar year.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to AGL relate solely to
the performance by AGL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by AGL to
AGL policy or contract owners, or to any separate account organized by AGL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
9. AGL shall indemnify and hold harmless each of the Funds, Adviser and
Underwriter 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 AGL of the Administrative
Services under this Agreement.
10. This Agreement may be terminated without penalty at any time by AGL or by
Adviser as to one or more of the Funds collectively, upon one hundred and
eighty days (180) written notice to the other party. Notwithstanding the
foregoing, the provisions of paragraphs 2, 3, 9 and 11 of this Agreement,
shall continue in full force and effect after termination of this Agreement.
This Agreement shall not require AGL to preserve any records (in any medium
or format) relating to this Agreement beyond the time periods otherwise
required by the laws to which AGL or the Funds are subject provided that
such records shall be offered to the Funds in the event AGL decides to no
longer preserve such records following such time periods.
11. After the date of any termination of this Agreement in accordance with
paragraph 10 of this Agreement, no fee will be due with respect to any
amounts in the Contracts first placed in the Master Account for the benefit
of Shareholders after the date of such termination. However,
notwithstanding any such termination, Adviser will remain obligated to pay
AGL the fee specified in paragraph 8 of this Agreement, with respect to the
value of each Fund's average daily net assets maintained in the Master
Account with respect to the Contracts as of the date of such termination,
for so long as such amounts are held in the Master Account and AGL 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.
12. AGL understands and agrees that the obligations of Adviser under this
Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
13. It is understood and agreed that in performing the services under this
Agreement AGL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser, Underwriter or any of the Funds. AGL
agrees, and agrees to cause its agents, not to make
3
<PAGE>
any representations concerning a Fund except those contained in the Fund's
then-current prospectus; in current sales literature furnished by the Fund,
Adviser or Underwriter to AGL; in the then current prospectus for a variable
annuity contract or variable life insurance policy issued by AGL or then
current sales literature with respect to such variable annuity contract or
variable life insurance policy, approved by Adviser.
14. This Agreement, including the provisions set forth herein in paragraph 8,
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.
15. This Agreement shall be governed by the laws of the State of Illinois,
without giving effect to the principles of conflicts of law of such
jurisdiction.
16. 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 Schedules One and Two may
be replaced from time to time with new Schedule One and Two, as appropriate
to accurately reflect any changes in the Funds available as investment
vehicles under the Participation Agreement.
4
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _____________________________
Authorized Signatory
-----------------------------
Print or Type Name
VAN KAMPEN ASSET MANAGEMENT INC.
By: _____________________________
Authorized Signatory
-----------------------------
Print or Type Name
5
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S):
- ----------------------- ------------
Van Kampen Life Investment Trust Strategic Stock Portfolio
Emerging Growth Portfolio
6
<PAGE>
SCHEDULE TWO
LIST OF CONTRACTS
1. Platinum Investor I and II, Form Nos. 97600 and 97610
2. Platinum Investor Variable Annuity, Form No. 98020
3. Corporate America Variable Life Insurance Form No. 93301
4. Platinum Investor Survivor VUL; Form No. 99206
5. The ONE VUL Solution; Form No. 99615
6. Key Legacy Plus VUL; Form No. 99616
7
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, AGL shall perform the
following Administrative Services:
1. Maintain separate records for each Shareholder, which records shall reflect
shares purchased and redeemed for the benefit of the Shareholder and share
balances held for the benefit of the Shareholder. AGL shall maintain the
Master Account with the transfer agent of the Fund on behalf of Shareholders
and such Master Account shall be in the name of AGL or its nominee as the
record owner of the shares held for such Shareholders.
2. For each Fund, disburse or credit to Shareholders all proceeds of redemptions
of shares of the Fund and all dividends and other distributions not
reinvested in shares of the Fund or paid to the Separate Account holding the
Shareholders' interests.
3. Prepare and transmit to Shareholders periodic account statements showing the
total number of shares held for the benefit of the Shareholder as of the
statement closing date (converted to interests in the Separate Account),
purchases and redemptions of Fund shares for the benefit of the Shareholder
during the period covered by the statement, and the dividends and other
distributions paid for the benefit of the Shareholder during the statement
period (whether paid in cash or reinvested in Fund shares).
4. Transmit to Shareholders proxy materials and reports and other information
received by AGL from any of the Funds and required to be sent to Shareholders
under the federal securities laws and, upon request of the Fund's transfer
agent, transmit to Shareholders material Fund communications deemed by the
Fund, through its Board of Directors or other similar governing body, to be
necessary and proper for receipt by all Fund beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Shareholders.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or any
of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
Underwriter to comply with any applicable State Blue Sky requirements.
<PAGE>
EXHIBIT (8)(N)
December 1, 1999
Mr. Don Ward
Senior Vice President
American General Life Insurance Company
2727 Allen Parkway
Houston, TX 77019
Dear Don:
The following constitutes a letter of understanding (the "Agreement")
whereby OppenheimerFunds, Inc. ("OFI") intends to compensate American General
Life Insurance Company ("American General") for providing the administrative
support services described in Schedule A hereto, which is made a part hereof, to
contract owners of any American General variable annuity and/or variable life
insurance product described in Schedule C hereto, which is made a part hereof
("American General Products") that are indirect shareholders of Oppenheimer
Variable Account Funds ("OVAF"), a series investment company dedicated to
insurance company separate accounts for which OFI acts as investment manager.
This Agreement will be effective as of December 1, 1999. All other terms
and conditions of this Agreement are described in Schedule C hereto, which is
made a part hereof.
We look forward to a long and prosperous relationship. If this Agreement
meets with your approval, please have the enclosed duplicate copy of this letter
signed on behalf of American General, and return it to my attention.
Sincerely,
Michael F.X. Keogh
Title: Vice President,
OppenheimerFunds, Inc.
Agreed to and accepted on behalf of
American General Life Insurance Company
By:
------------------------------
Title:
---------------------------
<PAGE>
SCHEDULE A TO
DECEMBER 1, 1999 LETTER AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL LIFE INSURANCE COMPANY
AND
OPPENHEIMERFUNDS, INC. (THE "AGREEMENT")
Maintenance of Books and Records
Assist as necessary to maintain book entry records on behalf of the Funds
regarding issuance to, transfer within (via net purchase orders) and
redemption by the Accounts of Fund shares.
Maintain general ledgers regarding the Accounts' holdings of Fund shares,
coordinate and reconcile information, and coordinate maintenance of ledgers
by financial institutions and other contract owner service providers.
Communication with the Funds
Serve as the designee of the Funds for receipt of purchase and redemption
orders from the Account and to transmit such orders, and payment therefor,
to the Funds. Coordinate with the Funds' agents respecting daily valuation
of the Funds' shares and the Accounts' units.
Purchase Orders
-- Determine net amount available for investment in the Funds.
-- Deposit receipts at the Funds or the Funds' custodian (generally by
wire transfer).
-- Notify the Funds of the estimated amount required to pay dividend or
distribution.
Redemption Orders
-- Determine net amount required for redemption by the Funds.
Notify the custodian and Funds of cash required to meet payments.
Purchase and redeem shares of the Funds on behalf of the Accounts at the
then current price in accordance with the terms of each Fund's then current
prospectus.
Assistance in enforcing procedures adopted on behalf of the Trust to
reduce, discourage, or eliminate market timing transactions in a
Fund's shares in order to reduce or eliminate adverse effects on the
Fund or its shareholders.
Processing Distributions from the Funds
Process ordinary dividends and capital gains.
Reinvest the Funds' distributions.
Reports
Periodic information reporting to the Funds, including, but not limited to,
furnishing registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, and any other
SEC filings with respect to the Accounts invested in the Funds, as not
otherwise provided for.
Periodic information reporting about the Funds, including any necessary
delivery of the Funds' prospectus and annual and semi-annual reports to
contract owners, as not otherwise provided for.
Fund-related Contract Owner Services
<PAGE>
Maintain adequate fidelity bond or similar coverage for all Company
officers, employees, investment advisors and other individuals or entities
controlled by the Company who deal with the money and/or securities of the
Funds.
Provide general information with respect to Fund inquiries (not including
information about performance or related to sales).
Provide information regarding performance of the Funds and the subaccounts
of the Accounts to existing contract owners.
Oversee and assist the solicitation, counting and voting or contract owner
voting interests in the Funds pursuant to Fund proxy statements.
Other Administrative Support
Provide other administrative and legal compliance support for the Funds as
mutually agreed upon by the Company and the Funds or the Fund
Administrator.
Relieve the Funds of other usual or incidental administrative services
provided to individual contract owners.
<PAGE>
SCHEDULE B TO
DECEMBER 1, 1999 LETTER AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL LIFE INSURANCE COMPANY
AND
OPPENHEIMERFUNDS, INC. (THE "AGREEMENT")
Separate Accounts Products
- ----------------- --------
American General Life Insurance Company Legacy Plus Variable Life
Insurance Policy Form No. 98615
Separate Account VL-R
American General Life Insurance Company
Separate Account D
<PAGE>
SCHEDULE C TO
DECEMBER 1, 1999 LETTER AGREEMENT
BY AND BETWEEN
AMERICAN GENERAL LIFE INSURANCE COMPANY
AND
OPPENHEIMERFUNDS, INC. (THE "AGREEMENT")
1. The Agreement may be cancelled by any party upon ten days of written
notice: (1) if the participation agreement for American General Products between
OFI, American General and OVAF is terminated; (2) if neither American General
nor any underwriter under its control actively promotes American General
Products with OVAF as underlying options to new investors; (3) if either party
is subject to a change of control; or (4) if it is not permissible to continue
this Agreement under laws, rules or regulations applicable to OVAF, OFI or
American General. Either party may also cancel this Agreement upon six months
written notice.
2. Payment will be made to American General quarterly during the term
this Agreement is in effect, no later than thirty days after the end of the
quarter starting with the quarter ending December 31, 1999. Payments shall be
separately computed on the average net assets of OVAF held by American General
Products variable account during the prior quarter, subject to a limit of one-
third of the average management fee paid by that OVAF series to OFI during the
prior quarter, subject to a limit of one-third of the average management fee
paid by that series to OFI during the prior quarter, at the annual rate of:
0.20% of the first $100 million of average net assets, plus 0.25% of average net
assets held by American General Products variable account(s) in excess of $100
million during that prior quarter. For purposes of determining whether the
breakpoint described in the preceding sentence has been achieved, the net asset
value of OVAF shares held by separate accounts of American General Life
Insurance Company will be aggregated with shares held by American General.
3. Except to the extent that American General's, OFI's or OVAF's counsel
may deem it necessary or advisable to disclose in their respective prospectuses
or elsewhere, the terms of this Agreement will be held confidential by each
party. The party making such disclosure shall provide advance written
notification, including particulars, to the other party that it is making such
disclosure.
4. No other fees or expenses will be required of OFI or OVAF for the
sponsorship within American General product line, except as mutually agreed to
by the parties.
5. On advance written notice, OFI or a subsidiary may pay all or a
portion of the fees provided for in this Agreement under any service fee or Rule
12b-1 plan hereafter adopted by OVAF, which shall satisfy that portion of OFI's
payment obligation hereunder.
6. OFI will be responsible for calculating the fees payable hereunder.
7. Each party shall provide each other party or its designated agent
reasonable access
<PAGE>
to its records to permit it to audit or review the accuracy of the charges
submitted for payment under this Agreement.
8. This Agreement does not modify or replace the November 23, 1998
Agreement by and between American General Annuity Insurance Company and OFI (the
"1998 Agreement"), or any other agreement with American General Life Insurance
Company pertaining to any Oppenheimer fund other than OVAF. The parties hereto
agree that OVAF assets that qualify for payment under the 1998 Agreement shall
not qualify for payment under this Agreement.
<PAGE>
EXHIBIT (8)(o)
January, 2000
Dear Sir or Madam:
This letter sets forth the agreement between Scudder Kemper Investments,
Inc. ("Scudder Kemper") and American General Life Insurance Company (the
"Company") concerning certain administrative services to be provided by you on a
sub-administration basis, with respect to Portfolios (as defined below) of the
Kemper Variable Series (the "Fund").
1. Administrative Services and Expenses. Administrative services for the
Accounts (as defined below) which invest in Portfolios of the Fund
pursuant to the Participation Agreement among the Company, the Fund,
Kemper Distributors, Inc., ("KDI"), and Scudder Kemper (the
"Participation Agreement") and for purchasers of Variable Insurance
Products (as defined below) are the responsibility of the Company.
Administrative services for the Portfolios, in which the Accounts
invest, and for purchasers of shares of the Portfolios, are the
responsibility of the Fund, KDI or Scudder Kemper. Capitalized terms
not defined herein shall have the meanings ascribed to them in the
Participation Agreement.
The Company has agreed to assist Scudder Kemper, as Scudder Kemper may
request from time to time, with the provision of administrative
services ("Administrative Services") to the Portfolios, on a sub-
administration basis, as they may relate to the investment in the
Portfolios by the Accounts. It is anticipated that Administrative
Services may include (but shall not be limited to) the mailing of Fund
reports, notices, proxies and proxy statements and other informational
materials to holders of the Variable Insurance Products supported by
the Accounts with allocations to the Portfolios; 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 Portfolios; such 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, Scudder Kemper agrees to pay the Company on a
quarterly basis an amount set forth in Schedule B attached hereto and
made a part hereof.
<PAGE>
January, 2000
Page 2
The expense payment contemplated by this Paragraph 2 shall be
calculated by Scudder Kemper at the end of each calendar quarter.
Payment will be accompanied by a statement showing the calculation of
the quarterly amount payable by Scudder Kemper and such other
supporting data as may be reasonably requested by American General.
Scudder Kemper shall make the quarterly expense payment to the Company
within 20 days after the end of each calendar quarter.
3. Nature of Payments. The parties to this letter agreement recognize
and agree that Scudder Kemper's payments to the Company relate to
Administrative Services only. The amount of administrative expense
payments made by Scudder Kemper to the Company pursuant to Paragraph 2
of this letter agreement shall not be deemed to be conclusive with
respect to actual administrative expenses or savings of Scudder
Kemper.
4. Term. This letter agreement shall remain in full force and effect for
so long as the assets of the Portfolios are attributable to amounts
invested by the 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. In the event of a termination of this
letter agreement, the administrative expense payments made by Scudder
Kemper to the Company pursuant to Paragraph 2 of this letter agreement
shall continue with respect to assets of the Portfolios attributable
to Accounts of the Company (not including investments made after the
date of termination) for a period of one year from the date of
termination of this letter agreement; provided however, that Scudder
Kemper shall not be required to make such payments for any time period
where Scudder Kemper has ceased to serve as investment manager for the
Fund.
6. Representation. The Company 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.
<PAGE>
January, 2000
Page 3
7. Subcontractors. The Company may, with the consent of Scudder Kemper,
contract with or establish relationships with other parties for the
provision of the Administrative Services or other activities of the
Company required by this letter agreement, provided that the Company
shall be fully responsible for the acts and omissions of such other
parties.
8. Authority. This letter agreement shall in no way limit the authority
of the Fund, KDI or Scudder Kemper to take such action as any of such
parties may deem appropriate or advisable in connection with all
matters relating to the operations of the Fund and/or sale of its
shares. The Company understands and agrees that the obligations of
Scudder Kemper under this letter agreement are not binding upon the
Fund.
9. Indemnification. This letter agreement will be subject to the
indemnification provisions in Article VIII 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,
except that either party may assign this agreement to an affiliate.
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. The Company agrees to notify Scudder Kemper promptly if
for any reason it is unable to perform fully and promptly any of its
obligations under this letter agreement.
11. Notice. Any notice required to be sent hereunder shall be sent in
accordance with the Participation Agreement.
<PAGE>
January, 2000
Page 4
If this letter is consistent with the Company's understanding of the
matters discussed herein concerning administrative expense payments, kindly sign
below and return a signed copy to Scudder Kemper.
Very truly yours,
Scudder Kemper Investments, Inc.
By:_____________________________________
Name:___________________________________
Title:__________________________________
American General Life Insurance Company
Acknowledged and Agreed
this _____th day of January, 2000
By:_____________________________________
Name:___________________________________
Title:__________________________________
Attachment: Schedule A
Schedule B
<PAGE>
SCHEDULE A
I. Fund related contractowner services
. Certain costs associated with dissemination of Fund prospectus to existing
contractowners, as provided in the Participation Agreement.
. Fund proxies (including facilitating distribution of proxy material to
contractowners, tabulation and reporting).
. Telephonic support for contractowners with respect to inquiries about the
Fund (not including information related to sales).
. Communications to contractowners regarding performance of the account and
the Designated Portfolios.
II. Sub-Accounting Services
. Aggregating purchase and redemption orders of the Account for sales of the
Portfolios.
. Processing and reinvesting dividends and distributions of the Portfolios
held by the Account.
III. Other administrative Support
. Providing other administrative support to the Fund as mutually agreed
between the Company and the Fund, Scudder Kemper or KDI.
<PAGE>
SCHEDULE B
Scudder Kemper agrees to pay the Company a quarterly amount based on the
following: 4.25 basis points (.0425%) [i.e., 0.17% on an annual basis] of
the average daily net asset balance of Fund shares held in the Accounts.
For the month and year in which this letter agreement becomes effective or
the expense payment terminates, there shall be an appropriate proration on
the basis of the number of days that the expense payment is in effect
during the quarter.
<PAGE>
Exhibit 10(d)
American
|General
|Financial Group
Part A Single Insured
Life Insurance Application
[_] American General Life Insurance Company, Houston, TX
[_] The Old Line Life Insurance Company of America, Milwaukee, WI
[_] All American Life Insurance Company, Springfield, IL
[_] The Franklin Life Insurance Company, Springfield, IL
[_] The American Franklin Life Insurance Company, Springfield, IL
Members of American General Financial Group. American General
Financial Group is a marketing name for American General
Corporation and its subsidiaries.
In this application, the "Company" refers to the insurance company
whose name is checked above.
The insurance company checked above is solely responsible for the
obligation and payment of benefits under any policy that it may
issue. No other company shown is responsible for such obligations
or payments.
- ------------------------------------------------------------------------------
Personal Information
Proposed Name Social Security #
insured ----------------------------- -----------------------------------
Address Zip
---------------------------------------- ------------------------
Home phone # Work phone #
------------------------------ ----------------------------------
E-mail address
-----------------------------------------------------------------
Sex: [_] male [_] female
Birthplace (city, state, country)
-----------------------------------------------------------------
Date of birth Drivers license # State
--------------------- ----------------------------- ------------
U.S. citizen: [_] yes [_] no
If no, date of entry Type of visa
----------------------------------- -----------------------------
Employer
-----------------------------------------------------------------
Occupation and duties Income:
------------------------------------- ---------------------------
Tobacco use
Have you ever used any form of tobacco or
nicotine products? [_] yes [_] no
Date of last use
-----------------------------------------------------------------
Type of tobacco or nicotine products
-----------------------------------------------------------------
- ------------------------------------------------------------------------------
Product Information
Product name
-----------------------------------------------------------------
(If a variable product, complete appropriate supplement.)
Amount applied for $
-----------------------------------------------------------------
Reason for insurance (If more space is needed, use "Remarks"
section.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
- ------------------------------------------------------------------------------
Business Does the proposed insured have an ownership interest
coverage in the business? [_] yes [_] no
If yes, what is proposed insured's percentage
(Complete only of ownership? %
if applying -----------------------
for business If buy-sell, stock redemption, or key person insurance,
coverage) will all partners or key people be covered? [_] yes [_] no
Describe any special circumstances.
------------------------------------------------------------
------------------------------------------------------------
- ------------------------------------------------------------------------------
Riders [_] Waiver of premium
[_] Waiver of monthly deduction
[_] Waiver of monthly guarantee premium
[_] Accidental death benefit $
------------------------------------------------------------
[_] Other rider(s)
------------------------------------------------------------
------------------------------------------------------------
- ------------------------------------------------------------------------------
Dividend options For participating policy only
[_] Cash [_] Premium reduction [_] Paid-up additions
[_] Deposit earning interest [_] Other (explain)
- ------------------------------------------------------------------------------
Death benefit For universal life only
options [_] Level [_] Increasing
------------------------------ --------------------------
AGLC 0033-99
Page 1
<PAGE>
Beneficiary Primary
Name Relationship % share
------------------------ -------------------- -------------
Name Relationship % share
------------------------ -------------------- -------------
Contingent
Name Relationship % share
------------------------ -------------------- -------------
Name Relationship % share
------------------------ -------------------- -------------
Complete if beneficiary is a trust.
Exact name of trust
-----------------------------------------------------------
Trust ID # Date of trust
--------------------------- -------------------------------
Current trustee(s)
-----------------------------------------------------------
- -------------------------------------------------------------------------------
Other life Indicate life insurance policies or annuities in force or
insurance or pending for the proposed insured.
annuities Type: i = individual, b = business, g = group,
p = pending life insurance or annuity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Policy Insurance Type Year of Amount Replacement*
number company issue
[_] Check if none ------------- -------------- ----------- ------------ $__________ [_] yes [_] no
------------- -------------- ----------- ------------ $__________ [_] yes [_] no
------------- -------------- ----------- ------------ $__________ [_] yes [_] no
------------- -------------- ----------- ------------ $__________ [_] yes [_] no
</TABLE>
* Replacement means that the insurance being applied for
may replace, change, or use any monetary value of any
existing or pending life insurance policy or annuity. If
replacement may be involved, complete and submit
replacement-related forms.
- ------------------------------------------------------------------------------
Owner [_] Primary proposed insured [_] Someone other than
[_] Trust a proposed insured or
trust
Complete if owner is a trust.
Exact name of trust
-----------------------------------------------------------
Trust ID # Date of trust
------------------------------ ----------------------------
Current trustee(s)
-----------------------------------------------------------
Complete if someone other than a proposed insured or
trust is the owner.
Name Home phone #
----------------------------- -----------------------------
Address City, State Zip
-------------------------- ------------------ -------------
Social Security or Tax ID # Date of birth
----------------------------------------- -----------------
Relationship to proposed insured
-----------------------------------------------------------
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Premium payment [_] Single premium: $ [_] Modal premium: $ [_] Additional initial premium: $
------------------------------- ----------------------------- -------------------------------------------
Frequency of modal premium
[_] Annual [_] Semi-annual [_] Quarterly [_] Monthly Amount submitted with application $
-----------
Method
[_] Direct billing [_] Automatic bank draft
[_] List bill: number
[_] Other
---------------------------------------------------------------------------------------------------------
Premium payor
Complete if other than owner.
Name Social Security #
-------------------------------------------------------------------- -------------------------------------
Address
----------------------------------------------------------------------------------------------------------
Zip Home phone #
------------------------------------ ---------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Remarks -----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
AGLC 0033-99 Page 2
<PAGE>
Your Signature
- -------------------------------------------------------------------------------
Authorization to obtain and disclose information and declaration
I hereby give my consent to any of the entities listed below to give to the
Company or its legal representative, all information they have pertaining to:
my medical consultations, treatments, or surgeries; hospital confinements,
which concern my physical and mental condition; my use of drugs or alcohol; or
any other non-medical information. Non-medical information could include items
such as: personal finances; habits; hazardous avocations; motor vehicle or court
records; or foreign travel, etc. The list of entities for which I give my
consent to provide the information above is as follows: any physical or medical
practitioner; any hospital, clinic or other health care facility; any insurance
or reinsurance company; any consumer reporting agency or insurance support
organization; my employer; or the Medical Information Bureau (MIB).
I understand the information obtained will be used by the Company to
determine eligibility for insurance and eligibility for benefits under an
existing policy. The Company may disclose such information and any
information developed during its evaluation of my application to: its
reinsurers; MIB; other insurance companies; other persons or organizations
performing business or legal services in connection with my application or
claim; me; any physician designated by me; or any person or entity required
to receive such information by law or as I may further consent.
I, as well as any person authorized to act on my behalf, may upon written
request, obtain a copy of this consent from the Company.
This consent will be valid for 30 months from the date of this application. I
agree that a photocopy of this consent will be as valid as the original. I
authorize the Company to obtain an investigative consumer report on me. I
understand that I may: request to be interviewed in connection with the
preparation of the report; and receive, upon written request, a copy of such
report.
[_] Check if you wish to be interviewed.
I have read the above statements or they have been read to me. The above
statements are true and complete to the best of my knowledge and belief. I
understand that this application: (1) will consist of Part A, Part B, and, if
applicable, Part C and related forms; and (2) shall be the basis for any
policy issued on this application. I understand that any misrepresentation
contained in this application and relied on by the Company may be used to:
reduce or deny a claim or void the policy, if it is within its contestable
period and if such misrepresentation materially affects the acceptance of the
risk. Except as may be provided in a Limited Temporary Life Insurance
Agreement (LTLIA) for which all eligibility requirements are met, I
understand and agree that no insurance will be in effect pursuant to this
application, or under any policy issued by the Company, unless or until: the
policy has been delivered and accepted; the full first modal premium for the
issued policy has been paid; and there has been no change in the health of
any proposed insured that would change the answers to any questions in the
application.
I understand and agree that no agent is authorized to: accept risks or pass
upon insurability; make or modify contracts; or waive any of the Company's
rights or requirements.
I have received a copy of the Notice to Proposed Insured regarding Fair
Credit Reporting Act; the MIB; Insurance information practices; and telephone
interview information.
Limited Temporary Life Insurance - If eligible, I have received and accepted
the LTLIA. Temporary insurance is available only if: the full first modal
premium is submitted with this application and only "no" answers have been
given by proposed insured to the "Health and Age" questions in the LTLIA.
Under penalties of perjury, I certify: that the number shown on this
application is my correct Social Security or Tax ID number; and that I am
not subject to backup withholding under Section 3406(a)(1)(C) of the
Internal Revenue Code. The Internal Revenue Service does not require my
consent to any provision of this document other than the certifications
required to avoid backup withholding.
- ------------------------------------------------------------------------------
Signatures X Owner Date
--------------------------------------- -------------------
Signed at (city, state)
-----------------------------------------------------------
X Witness Date
---------------------------------------- ------------------
X Proposed insured Date
---------------------------------------- ------------------
(If under age 15, signature of parent or guardian)
If the Company needs to contact the proposed insured,
when would be the best time to call?
Time Day of the week
---------------------------------------- ------------------
Date Phone number
---------------------------------------- ------------------
I certify that I have truthfully and accurately recorded on
the Part A application the information supplied by the
proposed insured.
Agent name (please print)
-----------------------------------------------------------
Agent # State license #
--------------------------------- -------------------------
X Agent Date
----------------------------------------- -----------------
AGLC 0033-99 Page 3
<PAGE>
Agent's Report
Number of years you have known proposed insured
----------------------------------------------------------------
Have you scheduled a medical exam, inspection report,
blood profile, urinalysis, or APS? [_] yes [_] no
If yes, please provide name of examiner, clinic, date, and
the type of report ordered.
----------------------------------------------------------------
----------------------------------------------------------------
- ------------------------------------------------------------------------------
Statements
Did you personally see the proposed insured on the date of
this application, ask each question, and accurately record
the answers yourself? [_] yes [_] no
If no, please provide details in the "Remarks" section below.
Do you have any information that indicates that the proposed
insured may replace, change, or use any monetary value of any
existing or pending life insurance policy or annuity with any
company in connection with the purchase of insurance?
[_] yes [_] no If yes, please provide details in the
"Remarks" section below and attach all replacement-related forms.
Are you aware of any information that would adversely affect any
proposed insured's eligibility, acceptability, or insurability?
[_] yes [_] no If yes, please provide details in the
"Remarks" section below, and do not provide limited temporary
life insurance.
Did you provide client with LTLIA? [_] yes [_] no
Has the proposed insured or the owner submitted an application
for coverage with any of the American General life insurance
companies within the last 30 days? [_] yes [_] no
If proposed insured is a child, what amount of insurance
is in force on the father $___________ and/or mother $________?
Are you related by blood or marriage to the proposed insured?
[_] yes [_] no (If yes, relationship)________________________
Remarks (Please include information on any split dollar,
collateral assignment, etc.)
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Commission Please list servicing agent first.
Agent(s) to receive commission Agency number Agent number Percent of commission
--------------------------------------- ------------------- ------------------ ------------------------
--------------------------------------- ------------------- ------------------ ------------------------
--------------------------------------- ------------------- ------------------ ------------------------
--------------------------------------- ------------------- ------------------ ------------------------
X Writing agent Date
------------------------------------------------------------ --------------------------------------------
Social Security or Tax ID # Phone #
------------------------------------------------------------ --------------------------------------------
Primary appointing company
----------------------------------------------------------------------------------------------------------
Client #
----------------------------------------------------------------------------------------------------------
If applicable:
Broker-Dealer(s)
----------------------------------------------------------------------------------------------------------
Contact person Processing center
------------------------------------------------------------ --------------------------------------------
Phone # Fax #
------------------------------------------------------------ --------------------------------------------
If other than writing agent, send policy/delivery requirements to:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
</TABLE>
AGLC 0033-99 AR
<PAGE>
Limited Temporary Life Insurance Agreement
[_] American General Life Insurance Company, Houston, TX
[_] The Old Line Life Insurance Company of America, Milwaukee, WI
[_] All American Life Insurance Company, Springfield, IL
[_] The Franklin Life Insurance Company, Springfield, IL
[_] The American Franklin Life Insurance Company, Springfield, IL
In this application, the "Company" refers to the insurance
company whose name is checked above.
The insurance company checked above is solely responsible for the
obligation and payment of benefits under any policy that it may
issue. No other company shown is responsible for such obligations
or payments.
- ------------------------------------------------------------------------------
Health and If the proposed insured answers "yes" to either Proposed
Age questions question, temporary insurance is not available, insured
this agreement will be void, and any payment
submitted will be refunded.
During the last two years, have you had a heart
attack, stroke, cancer, diabetes, or disorder of
the immune system; or have you been confined in
a hospital or other health care facility or been
advised to have any diagnostic test or surgery
not yet performed? [_] yes [_] no
Are you age 71 or above? [_] yes [_] no
- ------------------------------------------------------------------------------
Premium payment
Received $ Date
---------------------------------------- -----------------------
All premium checks must be made payable to the Company.
Do not make check payable to the agent or leave payee blank.
Note: Agent does not have the authority to accept a premium
(including automatic bank draft check, salary savings,
or government allotment) with this application if the conditions
in "Authorization to obtain and disclose information and
declaration" cannot be met or if any part of the
"Health and Age questions" have been answered "yes" by the
proposed insured, answered falsely, or left blank.
- ------------------------------------------------------------------------------
Conditions 1. The first modal premium must be paid with Part A of the
of temporary application.
life
insurance 2. The answer to both of the above "Health and Age questions" must
be "no".
3. Upon receiving proof of the death of the proposed insured
during the period covered by this agreement, the total
amount that will be paid by the Company pursuant to this and
any other limited temporary life insurance agreements covering
the proposed insured will be the lesser of:
. the plan amount the proposed insured applied for;
or
. $500,000 plus the amount of any premium paid for
coverage in excess of $500,000.
The Company will pay this sum to the beneficiary named in the
application. If death is due to suicide, payment will be
limited to the amount of premium paid.
4. Coverage under this agreement will begin on the date
the later of the following events have been completed:
. this Limited Temporary Life Insurance Agreement
(LTLIA) has been signed by the proposed insured; or
. all required medical examinations have been taken.
5. Coverage under this agreement will end on the earliest of the
following dates:
. the date the policy as applied for is delivered
and accepted;
. the date the Company declines the application;
. the date the Company states the application will not be
considered on a prepaid basis;
. 60 days from the date coverage begins under this agreement;
or
. the date the Company issues a policy other than as applied
for.
6. The prepayment for this temporary insurance will be:
. applied to the first premium due if the policy is issued as
applied for; or
. refunded if the Company declines the application or if the
owner does not accept the policy; or
. applied to the first premium if a policy is issued other than
as applied for and is accepted.
7. Any misrepresentation contained in this agreement and relied on
by the Company may be used to deny a claim on or void this
agreement.
No changes may be made in the terms and conditions of this
agreement. No statement that tries to make such a change will
bind the Company.
X Owner Date
-------------------------------------- -------------------------
Signed at (city, state)
----------------------------------------------------------------
X Witness Date
--------------------------------------- ------------------------
X Proposed insured Date
--------------------------------------- ------------------------
(If under age 15, signature of parent or guardian)
I certify that I have truthfully and accurately recorded
on the LTLIA the information supplied by the proposed insured.
Agent name (please print)
----------------------------------------------------------------
Agent # State license #
----------------------------------------------------------------
X Agent Date
----------------------------------------- ----------------------
AGLC 0033-99 TIA
<PAGE>
Bank Draft Information
[_] American General Life Insurance Company, Houston, TX
[_] The Old Line Life Insurance Company of America, Milwaukee, WI
[_] All American Life Insurance Company, Springfield, IL
[_] The Franklin Life Insurance Company, Springfield, IL
[_] The American Franklin Life Insurance Company, Springfield, IL
The company checked above will withdraw the premiums from
the specified account. This company will be referred to hereafter
as the "Company." "You," "your," "I," and "me" refer to the
accountholder whose name appears below.
- ------------------------------------------------------------------------------
How automatic bank draft works
Automatic bank draft is a debit service that offers a convenient way to pay
life insurance premiums. The Company will collect the life insurance premiums
from your bank account electronically - you do not need to write checks or mail
in any payments. Premium withdrawals will appear on your bank statement,
and your statements will be your receipt for payment of your premium.
- ------------------------------------------------------------------------------
Automatic bank draft agreement
I authorize the Company to electronically withdraw money from my account at
(name of bank) ___________________________________________________________
(bank address)____________________________________________________________
(Type of account [_] Checking [_] Savings)
for the payment of premiums and other charges on the insurance policy. I
authorize the Company to continue to make these withdrawals if there is a
conversion, renewal, or other change in the policy. I will compensate the
Company for any loss, claim, or liability caused by these withdrawals and
will not hold the Company responsible for any such loss, claim, or liability.
This authorization will not affect the terms of the policy. If the premiums
are not paid within the grace period allowed, the policy may lapse, and it
will be subject to any applicable nonforfeiture provision. Authorizing this
automatic payment plan does not put the insurance policy into effect.
This authorization may be retracted by me or the Company at any time for any
reason by giving written notice. The Company may retract the authorization
immediately, without giving me written notice, if any debt is not paid by the
bank stated above for any reason.
Name of proposed insured
- ------------------------------------------------------------------------------
Premium amount $
- ------------------------------------------------------------------------------
Frequency: [_] annual [_] semi-annual [_] quarterly [_] monthly
Preferred withdrawal date
- ------------------------------------------------------------------------------
[_] Please debit my account for all outstanding premiums due.
X Signature of accountholder
- ------------------------------------------------------------------------------
Print name
- ------------------------------------------------------------------------------
Please attach voided check.
AGLC 0033-99 BDI
<PAGE>
Detach this page and leave it with the proposed insured.
Notice To The Proposed Insured
You have applied for life insurance with one of the following companies:
American General Life Insurance Company, The Old Line Life Insurance Company
of America, All American Life Insurance Company, The Franklin Life
Insurance Company, or The American Franklin Life Insurance Company. "Company"
refers to the company with which you have applied for insurance. This
notice is provided on behalf of that company.
- ------------------------------------------------------------------------------
Fair Credit Reporting Act
Pursuant to the Federal Fair Credit Reporting Act, as amended (15 U.S.C.
1681d), notice is hereby given that, as a component of our underwriting
process relating to your application for life insurance, the Company may
request an investigative consumer report that may include information about
your character, general reputation, personal characteristics, and mode of
living.
This information may be obtained through personal interviews with your
neighbors, friends, associates, and others with whom you are acquainted or who
may have knowledge concerning any such items of information. You have a right to
request in writing, within a reasonable period of time after receiving this
notice, a complete and accurate disclosure of the nature and scope of the
investigation the Company requests. You should direct this written request to
the Company at:
P. O. Box 1931
Houston, TX 77251-1931
Upon receipt of such a request, the Company will respond by mail within five
business days.
To make it easier to use its products and services, the Company may share
information about you with its affiliates beyond the 30 month period
described in "Authorization to Obtain and Disclose Information and
Declaration." You should notify the Company in writing at the address above
if you do not want the Company to share this information with its affiliates.
- ------------------------------------------------------------------------------
Medical Information Bureau
The designated insurer or its reinsurers may make a brief report regarding
your insurability to the Medical Information Bureau (MIB), a non-profit
membership organization of life insurance companies, that operates an
information exchange on behalf of its members. If you apply to another
MIB-member company for life or health insurance or a claim for benefits is
submitted to such a company, the MIB will supply such company with the
information they have about you.
At your request, the MIB will disclose any information it has in your file.
If you question the accuracy of information in the MIB's file, you may seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address and phone number of the MIB's information
office are:
P. O. Box 105
Essex Station
Boston, Massachusetts 01112
(617) 426-3660
The designated insurer, or its reinsurer, may also release information in its
file to other life insurance companies to whom you may apply for life or
health insurance, or to whom a claim for benefits may be submitted.
- ------------------------------------------------------------------------------
Insurance information practices
To issue an insurance policy, we need to obtain information
about you. Some of that information will come from you, and some will come
from other sources. This information may in certain circumstances be
disclosed to third parties without your specific authorization as permitted
by law.
You have the right to access and correct this information, except information
that relates to a claim or a civil or criminal proceeding.
Upon your written request, the Company will provide you with a more detailed
written notice explaining the types of information that may be collected, the
types of sources and investigative techniques that may be used, the types of
disclosures that may be made and the circumstances under which they may be
made without your authorization, a description of your rights to access and
correct information, and the role of insurance support organizations with
regard to your information.
If you desire additional information on Insurance Information Practices you
should direct your requests to the Company at:
P. O. Box 1931
Houston, TX 77251-1931
- ------------------------------------------------------------------------------
Telephone interview information
To help process your application as soon as possible, the Company may have
one of its representatives call you by telephone, at your convenience,
and obtain additional underwriting information.
AGLC 0033-99 NPI
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 10(e)
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
Home Office: Houston, Texas
VARIABLE UNIVERSAL LIFE INSURANCE SUPPLEMENTAL APPLICATION
(This supplement must accompany the appropriate application for life insurance.)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 1. APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Supplement to the application on the life of John Doe dated 10/1/99
________________________________________________ _____________________________.
- ------------------------------------------------------------------------------------------------------------------------------------
PART 2. INITIAL ALLOCATION PERCENTAGES
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPTIONS: In the "Premium Allocation" column, indicate how each premium received is to be allocated. In the "Deduction
Allocation" column, indicate which investment options are to be used for the deduction of monthly account charges. Total allocations
in each column must equal 100%. Use whole percentages only.
PREMIUM DEDUCTION PREMIUM DEDUCTION
DIVISIONS ALLOCATION ALLOCATION DIVISIONS ALLOCATION ALLOCATION
- ---------------------------------------------------------------- ------------------------------------------------------------------
[AIM Variable Insurance Funds, Inc. One Group(R) Investment Trust
AIM V.I. Capital Appreciation (59) 100% 100% One Group Investment Trust Diversified Equity (68) ___% ___%
AIM V.I. Government Securities (60) ___% ___% One Group Investment Trust Equity Index (69) ___% ___%
AIM V.I. High Yield (61) ___% ___% One Group Investment Trust Government Bond (70) ___% ___%
AIM V.I. International Equity (62) ___% ___% One Group Investment Trust Large Cap Growth (71) ___%
American General Series Portfolio Company One Group Investment Trust Mid Cap Growth (72) ___% ___%
Money Market (63) ___% ___% Putnam Variable Trust
Kemper Variable Series Putnam VT Vista (73) ___% ___%
Kemper International (64) ___% ___% Franklin Templeton Variable Insurance Products Trust
Kemper Small Cap Value (65) ___% ___% Franklin Small Cap (74) ___% ___%
MFS(R) Variable Insurance Trust Templeton Variable Products Series Fund
MFS Growth With Income (66) ___% ___% Templeton Developing Markets (75) ___% ___%
Oppenheimer Variable Account Funds Van Kampen Life Investment Trust
Oppenheimer High Income (67) ___% ___% Emerging Growth (76) ___% ___%
OTHER: ________________________________ ___% ___%]
- ------------------------------------------------------------------------------------------------------------------------------------
PART 3. DOLLAR COST AVERAGING
- ------------------------------------------------------------------------------------------------------------------------------------
Dollar Cost Averaging: ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) An amount can be systematically transferred from the [Money
Market Division (63)] and transferred to one or more of the investment options below. Please refer to the prospectus for more
information on the Dollar Cost Averaging option.
Day of the month for transfers: __________________________ (Choose a day of the month between 1-28.)
Frequency of transfers: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
Transfer $__________________ ($100 MINIMUM, WHOLE DOLLARS ONLY) from the [Money Market (63)] to the following division(s):
[AIM V.I. Capital Appreciation (59) $______ One Group Investment Trust Equity Index (69) $______
AIM V.I. Government Securities (60) $______ One Group Investment Trust Government Bond (70) $______
AIM V.I. High Yield (61) $______ One Group Investment Trust Large Cap Growth (71) $______
AIM V.I. International Equity (62) $______ One Group Investment Trust Mid Cap Growth (72) $______
Kemper International (64) $______ Putnam VT Vista (73) $______
Kemper Small Cap Value (65) $______ Franklin Small Cap (74) $______
MFS Growth With Income (66) $______ Templeton Developing Markets (75) $______
Oppenheimer High Income (67) $______ Emerging Growth (76) $______
One Group Investment Trust Diversified Equity (68) $______ Other: ________________________________ $______ ]
- ------------------------------------------------------------------------------------------------------------------------------------
PART 4. AUTOMATIC REBALANCING
- ------------------------------------------------------------------------------------------------------------------------------------
Automatic Rebalancing: ($5,000 MINIMUM BEGINNING ACCUMULATION VALUE) Variable division assets will be automatically rebalanced based
on the premium percentages designated in Part 2. Please refer to the prospectus for more information on the Automatic Rebalancing
option.
[_] CHECK HERE FOR AUTOMATIC REBALANCING.
Frequency: [_] Quarterly [_] Semiannually [_] Annually
NOTE: Automatic Rebalancing is not available if the Dollar Cost Averaging option has been chosen.
- ------------------------------------------------------------------------------------------------------------------------------------
AGLC 0087 PAGE 1 of 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY
Home Office: Houston, Texas
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
PART 5. TELEPHONE AUTHORIZATION
- ------------------------------------------------------------------------------------------------------------------------------------
I (or we, if Joint Owners), hereby authorize American General Life Insurance Company ("AGL") to act on telephone instructions to
transfer values among the variable divisions and to change allocations for future purchase payments and monthly deductions given by:
(Initial appropriate box below.)
[ ] Policy Owner(s) only -- if Joint Owners, either of us acting independently.
[ ] Policy Owner(s) or the Agent/Registered Representative who is appointed to represent AGL and the firm authorized to service
my policy.
AGL and any person designated by this authorization will not be responsible for any claim, loss or expense based upon telephone
instructions received and acted on in good faith, including losses due to telephone instruction communication errors. AGL's
liability for erroneous transfers and allocations, unless clearly contrary to instructions received, will be limited to correction
of the allocations on a current basis. If an error, objection or other claim arises due to a telephone transaction, I will notify
AGL in writing within five working days from receipt of confirmation of the transaction from AGL. I understand that this
authorization is subject to the terms and provisions of my variable universal life insurance policy and its related prospectus. This
authorization will remain in effect until my written notice of its revocation is received by AGL and its home office.
[ ] INITIAL HERE TO DECLINE THE ABOVE TELEPHONE AUTHORIZATION.
- ------------------------------------------------------------------------------------------------------------------------------------
PART 6. MODIFIED ENDOWMENT CONTRACT
- ------------------------------------------------------------------------------------------------------------------------------------
If any premium payment causes the policy to be classified as a modified endowment contract under Section 7702A of the United States
Internal Revenue Code, there may be potentially adverse U.S. tax consequences. Such consequences include: (1) withdrawals or loans
being taxed to the extent of gain; and (2) a 10% penalty tax on the taxable amount. In order to avoid modified endowment status, I
request any excess premium that could cause such status to be refunded. [_] YES [_] NO
- ------------------------------------------------------------------------------------------------------------------------------------
PART 7. SUITABILITY (All questions must be answered.)
- ------------------------------------------------------------------------------------------------------------------------------------
YES NO
--- --
1. Have you, the Proposed Insured or Owner (if different), received the variable universal life insurance
policy prospectus and the prospectuses describing the investment options? [ ] [_]
(If "yes," please furnish the Prospectus dates.)
Variable Universal Life Insurance Policy Prospectus: _______________
Supplements (if any): _______________
2. Do you understand that under the Policy applied for:
a. THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT? [_] [_]
b. THE POLICY VALUES MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE SEPARATE
ACCOUNT AND CERTAIN EXPENSE DEDUCTIONS? [_] [_]
c. The Policy is designed to provide life insurance coverage and to allow for the accumulation of
values in the Separate Account? [_] [_]
3. Do you believe the Policy you selected meets your insurance and investment objectives and your anticipated
financial needs? [_] [_]
Signed at: Any Town USA Date: 10/1/99
______________________________________________________________________ _______________________________
CITY STATE
X John Doe X
__________________________________________________________ ____________________________________________________________
SIGNATURE OF PRIMARY PROPOSED INSURED SIGNATURE OF REGISTERED REPRESENTATIVE
X__________________________________________________________ X____________________________________________________________
SIGNATURE OF OWNER (if different from Proposed Insured) PRINT NAME OF BROKER/DEALER
X__________________________________________________________
SIGNATURE OF JOINT OWNER (if applicable)
- ------------------------------------------------------------------------------------------------------------------------------------
AGLC 0087 PAGE 2 of 2
</TABLE>
<PAGE>
EXHIBIT 10(f)
SERVICE REQUEST
THE ONE(R) VUL Solution(SM)
- ----------------------------
AMERICAN GENERAL LIFE
- --------------------------------------------------------------------------------
The One VUL Solution--Variable Divisions
AIM Variable Insurance Funds, Inc.
- ----------------------------------------
. Division 59 - AIM V.I. Capital Appreciation Fund
. Division 60 - AIM V.I. Government Securities Fund
. Division 61 - AIM V.I. High Yield Fund
. Division 62 - AIM V.I. International Equity Fund
American General Series Portfolio Company
- -----------------------------------------
. Division 63 - Money Market Fund
Kemper Variable Series
- ----------------------
. Division 64 - Kemper International Portfolio
. Division 65 - Kemper Small Cap Value Portfolio
MFS(R) Variable Insurance Trust
- -------------------------------
. Division 66 - MFS Growth With Income Series
Oppenheimer Variable Account Funds
- ----------------------------------
. Division 67 - Oppenheimer High Income Fund/VA
One Group(TM) Investment Trust
- ------------------------------
. Division 68 - One Group Investment Trust Diversified Equity Portfolio
. Division 69 - One Group Investment Trust Equity Index Portfolio
. Division 70 - One Group Investment Trust Government Bond Portfolio
. Division 71 - One Group Investment Trust Large Cap Growth Portfolio
. Division 72 - One Group Investment Trust Mid Cap Growth Portfolio
Putnam Variable Trust
- ---------------------
. Division 73 - Putnam VT Visa Fund
Franklin Templeton Variable Insurance Products Trust
- ----------------------------------------------------
. Division 74 - Franklin Small Cap Fund
Templeton Variable Products Series Fund
- ---------------------------------------
. Division 75 - Templeton Developing Markets Fund
Van Kampen Life Investment Trust
- --------------------------------
. Division 76 - Emerging Growth Portfolio
<PAGE>
<TABLE>
<CAPTION>
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
Complete and return this request to: -----------------------------------------------
Variable Universal Life Operations A Subsidiary of American General Corporation AMERICAN
PO Box 4880 Houston, TX 77210-4880 ----------------------------------------------- |GENERAL
(888) 436-5255 or Houston, Texas |Financial Group
Hearing Impaired (TDD) (888) 436-5258
Toll Free Fax: (887) 445-3098 VARIABLE UNIVERSAL LIFE INSURANCE SERVICE REQUEST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] POLICY 1.| POLICY #:___________________________________________________ INSURED:_________________________________
IDENTIFICATION |
| ADDRESS:________________________________________________________________________ New Address (yes)(no)
COMPLETE THIS SECTION |
FOR ALL REQUESTS. | Primary Owner (If other than insured):__________________________________________
|
| Address:________________________________________________________________________ New Address (yes)(no)
|
| Primary Owner's S.S. No. or Tax I.D. No._____________________________ Phone Number: ( )____ - ______
|
| Joint Owner (If applicable):____________________________________________________
|
| Address:________________________________________________________________________ New Address (yes)(no)
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] NAME 2.|
CHANGE | Change Name Of: (Circle One) Insured Owner Payor Beneficiary
|
Complete this section if | Change Name From: (First, Middle, Last) Change Name To: (First, Middle, Last)
the name of the Insured, |
Owner, Payor or Beneficiary| _________________________________________ _________________________________________________
has changed. (Please note,|
this does not change the |
Insured, Owner, Payor or | Reason for Change: (Circle One) Marriage Divorce Correction Other (Attach copy of legal proof)
Beneficiary designation) |
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] MODE OF PREMIUM 3.|
PAYMENT/BILLING | Indicate frequency and premium amount desired: $______ Annual $______ Semi-Annual $_______ Quarterly
METHOD CHANGE |
| $______ Monthly (Bank Draft Only)
Use this section to change |
the billing frequency and/ | Indicate billing method desired:_____ Direct Bill ______ Pre-Authorized Bank Draft (attach a Bank Draft
or method of premium pay- | Authorization Form and "Void" Check)
ment. Note, however, that |
AGL will not bill you on a | Start Date: ______/______/_____
direct monthly basis. Refer|
to your policy and its |
related prospectus for |
further information |
concerning minimum premiums|
and billing options. |
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] DOLLAR COST 4.| Designate the day of the month for transfers:_________(choose a day from 1-28)
AVERAGING |
($5,000 minimum initial | Frequency of transfers (check one): _______Monthly _______Quarterly ______Semi-Annually _____Annually
accumulation value) An |
amount may be deducted | I want: $___________($100 minimum) taken from the Money Market Division (63) and transferred to the
periodically from the | following Divisions:
Money Market Division and |
placed in one or more of | AIM Variable Insurance Funds, Inc. One Group Investment Trust
the Divisions listed. This | $_________(59) AIM V.I. Capital Appreciation $________(68) One Group Investment Trust Diversified
option is not available | $_________(60) AIM V.I. Government Securities Equity
while the Automatic Re- | $_________(61) AIM V.I. High Yield $________(69) One Group Investment Trust Equity
balancing option is in use.| $_________(62) AIM V.I. International Equity Index
Please refer to the pros- | Kemper Variable Series $________(70) One Group Investment Trust Government
pectus for more infor- | $_________(64) Kemper International Bond
mation on the Dollar Cost | $_________(65) Kemper Small Cap Value $________(71) One Group Investment Trust Large
Averaging Option. | MFS(R) Variable Insurance Trust Cap Growth
| $_________(66) MFS Growth With Income $________(72) One Group Investment Trust Mid Cap
| Oppenheimer Variable Account Funds Growth
| $_________(67) Oppenheimer High Income Putnam Variable Trust
| $________(73) Putnam VT Vista
| Franklin Templeton Variable Insurance Products
| Trust
| $________(74) Franklin Small Cap Investments
| Templeton Variable Products Series Fund
| $________(75) Templeton Developing Markets
| Van Kampen Life Investment Trust
| $________(76) Emerging Growth
|
| ________INITIAL HERE TO REVOKE DOLLAR COST AVERAGING ELECTION.
- -----------------------------------------------------------------------------------------------------------------------------------
VUL 0008 PAGE 2 OF 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] TELEPHONE 5.| I(/we if Joint Owners) hereby authorize AGL to act on telephone instructions to transfer values among
PRIVILEGE | Divisions and to change allocations for future purchase payments and monthly deductions.
AUTHORIZATION |
|
Complete this section if | Initial the designation you prefer:
you are applying for or |
revoking current telephone| __________Policy Owner(s) only--If Joint Owners, either one acting independently.
privileges. | __________Policy Owner(s) or Agent/Registered Representative who is appointed to represent AGL and the
| firm authorized to service my policy.
|
| AGL and any person designated by this authorization will not be responsible for any claim, loss or
| expense based upon telephone transfer or allocation instructions received and acted upon in good faith,
| including losses due to telephone instruction communication errors. AGL's liability for erroneous
| transfers or allocations, unless clearly contrary to instructions received, will be limited to
| correction of the allocations on a current basis. If an error, objection or other claim arises due to a
| telephone transaction, I will notify AGL in writing within five working days from the receipt of the
| confirmation of the transaction from AGL. I understand that this authorization is subject to the terms
| and provisions of my policy and its related prospectus. This authorization will remain in effect until
| my written notice of its revocation is received by AGL at the address printed on the top of this
| service request form.
|
|___________INITIAL HERE TO REVOKE TELEPHONE PRIVILEGE AUTHORIZATION.
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] CORRECT AGE 6.|
| Name of Insured for whom this correction is submitted:___________________________________
|
Use this section to correct| Correct DOB: ________/________/________
the age of any person |
covered under this policy. |
Proof of the correct date |
of birth must accompany |
this request. |
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] TRANSFER OF 7.| (Division Name or Number) (Division Name or Number)
ACCUMULATED VALUES |
|
|
Use this section if you |
want to move money between | Transfer $________ or _______% from_______________________________to__________________________________
divisions. If a transfer |
causes the balance in any | Transfer $________ or _______% from_______________________________to__________________________________
division to drop below |
$500, AGL reserves | Transfer $________ or _______% from_______________________________to__________________________________
the right to transfer |
the remaining balance. | Transfer $________ or _______% from_______________________________to__________________________________
Amounts to be transferred |
should be indicated in | Transfer $________ or _______% from_______________________________to__________________________________
dollar or percentage |
amounts, maintaining | Transfer $________ or _______% from_______________________________to__________________________________
consistency throughout. |
There is a $500 minimum | Transfer $________ or _______% from_______________________________to__________________________________
amount for division |
transfers. |
-----------------------------------------------------------------------------------------------------------------------------------
[ ] CHANGE IN 8.| INVESTMENT DIVISION PREM % DED % INVESTMENT DIVISION PREM % DED %
ALLOCATION | AIM Variable Insurance Funds, Inc. One Group Investment Trust
PERCENTAGES | (59) AIM V.I. Capital Appreciation ______ ______ (68) One Group Investment Trust Diversified
| (60) AIM V.I. Government Securities ______ ______ Equity ______ ______
Use this section to | (61) AIM V.I. High Yield ______ ______ (69) One Group Investment Trust Equity
indicate how premiums or | (62) AIM V.I. International Equity ______ ______ Index ______ ______
monthly deductions are to | American General Series Portfolio Company (70) One Group Investment Trust Government
be allocated. Total | (63) Money Market ______ ______ Bond ______ ______
allocation in each | Kemper Variable Series (71) One Group Investment Trust Large Cap
column must equal 100%; | (64) Kemper International ______ ______ Growth ______ ______
whole numbers only | (65) Kemper Small Cap Value ______ ______ (72) One Group Investment Trust Mid Cap
| MFS Variable Insurance Trust Growth ______ ______
| (66) MSF Growth With Income ______ ______ Putnam Variable Trust
| Oppenheimer Variable Account Funds (73) Putnam VT Vista ______ ______
| (67) Oppenheimer High Income ______ ______ Franklin Templeton Variable Insurance
| Products Trust
| (74) Franklin Small Cap ______ ______
| Templeton Variable Products Series Fund
| (75) Templeton Developing Markets
| ______ ______
| Van Kampen Life Investment Trust
| (76) Emerging Growth ______ ______
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 9.| Indicate frequency: _______ Quarterly ______ Semi-Annually ______ Annually
REBALANCING |
| (Division Name or Number) (Division Name or Number)
|
($5,000 minimum | _________% _______________________________________: _________% __________________________________:
accumulation value) Use |
this section to apply for | _________% _______________________________________: _________% __________________________________:
or make changes to |
Automatic Rebalancing of | _________% _______________________________________: _________% __________________________________:
the divisions. |
Please refer to the | _________% _______________________________________: _________% __________________________________:
prospectus for more |
information on the | _________% _______________________________________: _________% __________________________________:
Automatic Rebalancing |
Option. This option is not | _________% _______________________________________: _________% __________________________________:
available while the Dollar |
Cost Averaging Option is |
in use. | _________INITIAL HERE TO REVOKE AUTOMATIC REBALANCING ELECTION.
- -----------------------------------------------------------------------------------------------------------------------------------
VUL 0008 PAGE 3 OF 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> |<C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 10.| _________I request a partial surrender of $_________ or %_________ of the net cash surrender value.
PARTIAL |
SURRENDER/ | _________I request a loan in the amount of $________.
POLICY LOAN |
| _________I request the maximum loan amount available from my policy.
Use this section to apply |
for a partial surrender | Unless you direct otherwise below, proceeds are allocated according to the deduction allocation
or policy loan. | percentages in effect, if available; otherwise they are taken pro-rata from the Divisions in use.
If applying for a partial |
surrender, be sure to |
complete the Notice of | ______________________________________________________________________________________________________
Withholding section of this|
Service Request in addition| ______________________________________________________________________________________________________
to this section. |
There will be a charge not | ______________________________________________________________________________________________________
to exceed 2% of the amount |
withdrawn or $25. The min- | ______________________________________________________________________________________________________
imum surrender amount is |
$500. Refer to your policy | ______________________________________________________________________________________________________
and its related prospectus |
for further information. |
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] NOTICE OF 11.| The taxable portion of the distribution you receive from your variable universal life insurance policy
WITHHOLDING | is subject to federal income tax withholding unless you elect not to have withholding apply.
| Withholding of state income tax may also be required by your state of residence. You may elect not to
Complete this section if | have withholding apply by checking the appropriate box below. If you elect not to have withholding
you have applied for a | apply to your distribution or if you do not have enough income tax withheld, you may be responsible for
partial surrender in | payment of estimated tax. You may incur penalties under the estimated tax rules, if your withholding
Section 10. | and estimated tax are not sufficient.
|
| Check one: _______ I DO want income tax withheld from this distribution.
|
| _______ I DO NOT want income tax withheld from this distribution.
|
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] LOST POLICY 12.|
WITHHOLDING | I/we hereby certify that the policy of insurance for the listed policy has been _________LOST
| __________DESTROYED ________OTHER.
Complete this section if |
applying for a Certificate | Unless I/we have directed cancellation of the policy, I/we request that a:
of Insurance or duplicate |
policy to replace a lost | _______ Certificate of Insurance at no charge
or misplaced policy. If a |
full duplicate policy is | _______ Full Duplicate policy at a charge of $25
being requested, a check |
or money order for $25 | be issued to me/us. If the original policy is located, I/we will return the Certificate or
payable to AGL must be | duplicate policy to AGL for cancellation.
submitted with this |
request. |
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] AFFIRMATION/ 13.| CERTIFICATION: Under penalties of perjury, I certify: (1) that the number shown on this form is my
SIGNATURE | correct taxpayer identification number and; (2) that I am not subject to backup withholding under
| Section 3406(a)(1)(C) of the Internal Revenue Code. The Internal Revenue Service does not require your
Complete this section for | consent to any provision of this document other than the certification required to avoid backup
ALL requests. | withholding.
|
| Dated at __________________________________ this _________ day of ________________________, ________.
| (MONTH) (YEAR)
|
| X_________________________________________________ X_____________________________________________
| SIGNATURE OF OWNER SIGNATURE OF WITNESS
|
| X_________________________________________________ X_____________________________________________
| SIGNATURE OF JOINT OWNER SIGNATURE OF WITNESS
|
| X_________________________________________________ X_____________________________________________
| SIGNATURE OF ASSIGNEE SIGNATURE OF WITNESS
- -----------------------------------------------------------------------------------------------------------------------------------
PAGE 4 OF 4
</TABLE>
<PAGE>
AMERICAN
GENERAL EXHIBIT (2)(a)
LIFE COMPANIES
2929 ALLEN PARKWAY (A40-04), HOUSTON, TEXAS 77019
PAULETTA P. COHN
DEPUTY GENERAL COUNSEL
Direct Line (713) 831-1230
FAX (713) 620-3878
E-mail: [email protected]
January 20, 2000
American General Life Insurance Company
2727-A Allen Parkway
Houston, TX 77019
Dear Ladies and Gentlemen:
As Deputy General Counsel of American General Life Companies, I have acted as
counsel to American General Life Insurance Company (the "Company") in
connection with the filing of Pre-effective Amendment No. 1 to the Registration
Statement on Form S-6, File Nos. 333-87307 and 811-08561 ("Registration
Statement") for Separate Account VL-R ("Separate Account VL-R") of the Company
with the Securities and Exchange Commission. The Registration Statement relates
to the proposed issuance of The One VUL Solution - Variable (policy form No.
99615) flexible premium variable life insurance policies by the Company
("Policies"). Net premiums received under the Policies are allocated by the
Company to Separate Account VL-R to the extent directed by owners of the
Policies. Net premiums under other policies that may be issued by the Company
may also be allocated to Separate Account 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 authorizing 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>
American General Life Insurance Company
January 20, 2000
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:
l. The Company is a corporation duly organized and validly existing under the
laws of the State of Texas.
2. Separate Account VL-R was duly established and is maintained by the Company
pursuant to the laws of the State of Texas, under which income, gains and
losses, whether or not realized, from assets allocated to Separate Account
VL-R, are, in accordance with the Policies, credited to or charged against
Separate Account VL-R without regard to other income, gains or losses of
the Company.
3. Assets allocated to Separate Account 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 VL-R equal to the
reserves and other Policy liabilities with respect to Separate Account
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 VL-R in excess of such reserves and
other Policy liabilities to the general account of the Company.
4. When issued and sold as described above, the Policies (including any units
of Separate Account VL-R 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 Securities Act of 1933 and I hereby consent to
the use of this opinion as an exhibit to the Registration Statement.
Sincerely,
/s/ PAULETTA P. COHN
-------------------------
PPC:mlc
<PAGE>
EXHIBIT 2(b)
Writer's Direct Number
(713) 831-2738
January 19, 2000
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Dear Ladies and Gentlemen:
This opinion is furnished in connection with the Registration Statement on Form
S-6, File No. 333-87307 ("Registration Statement") of Separate Account VL-R
("Separate Account VL-R") of American General Life Insurance Company ("AGL")
covering an indefinite number of units of interest in Separate Account VL-R
under The One VUL Solution (policy form No. 99615) 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 18 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 AGL) 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 "Accounting and
Actuarial Experts" 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 report dated February 16, 1999, as to American
General Life Insurance Company, in Pre-Effective Amendment No. 1 to the
Registration Statement (Form S-6, Nos. 333-87307 and 811-08561) of American
General Life Insurance Company.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Houston, Texas
January 19, 2000
