<PAGE>
Registration Nos. 333-63673
811-09007
As filed with the Commission on May 26, 1999
______________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_]
Pre-Effective Amendment No. 1 [X]
------
Post-Effective Amendment No. ______ [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [_]
Amendment No. 2 [X]
-----
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Exact Name of Registrant)
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(Name of Depositor)
125 Maiden Lane
New York, NY 10038
(Address of Depositor's Principal Executive Offices) (Zip Code)
(713) 831-8471
(Depositor's Telephone Number, including Area Code)
Pauletta P. Cohn, Esq.
Associate General Counsel and Secretary
American General Life Companies
2727 Allen Parkway
Houston, TX 77019
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Title of Securities Being Registered:
Units of interest in The United States Life Insurance Company in the City of
New York Separate Account USL VA-R under variable annuity certificates.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file another
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
GENERATIONS(TM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP
DEFERRED ANNUITY CERTIFICATES
OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ADMINISTRATIVE CENTER
ADDRESS FOR SERVICES: ADDRESS FOR PAYMENTS:
P.O. BOX 1401 ________________
HOUSTON, TX 77251-1401 1-800-346-4944; 1-713-831-3505 HOUSTON, TX
The United States Life Insurance Company in the City of New York ("USL") is
offering, under a group annuity master contract, the flexible payment variable
and fixed group deferred annuity certificates (the "Certificates") described in
this Prospectus.
You may use USL's Separate Account USL VA-R ("Separate Account") for a variable
investment return under the Certificates based on one or more of the following
mutual fund series of the Van Kampen Life Investment Trust ("Trust") and the
Morgan Stanley Dean Witter Universal Funds, Inc. ("Fund"):
<TABLE>
<CAPTION>
<S> <C>
. Van Kampen Life Investment Trust . Morgan Stanley Dean Witter Universal Funds Inc.
. Domestic Income Portfolio . Asian Equity Portfolio
. Emerging Growth Portfolio . Emerging Markets Equity Portfolio
. Enterprise Portfolio . Equity Growth Portfolio
. Government Portfolio . Global Equity Portfolio
. Growth and Income Portfolio . International Magnum Portfolio
. Money Market Portfolio . Fixed Income Portfolio
. Morgan Stanley Real Estate Securities Portfolio . High Yield Portfolio
. Strategic Stock Portfolio . Mid Cap Value Portfolio
. Value Portfolio
</TABLE>
You may also use USL's guaranteed interest option. This option currently has
one Guarantee Period, with a guaranteed interest rate.
We have designed this Prospectus to provide you with information that you should
have before investing in the Certificates. Please read the Prospectus carefully
and keep it for future reference.
For additional information about the Certificates, you may request a copy of the
Statement of Additional Information (the "Statement"), dated [
], 1999. We have filed the Statement with the Securities and Exchange
Commission ("SEC") and have incorporated it by reference into this Prospectus.
The "Contents" of the Statement appears at page 52 of this Prospectus. You may
obtain a free copy of the Statement if you write or call our Administrative
Center, which is located at 2727-A Allen Parkway, Houston, Texas 77019-2191.
The telephone number is 1-800-346-4944. You may also obtain the Statement
through the SEC's Web site at http://www.sec.gov.
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the Prospectus. Any representation to the contrary is a
criminal offense. The Certificates are not available in all states.
This Prospectus is valid only if you also receive current prospectuses of the
Van Kampen Life Investment Trust and the Morgan Stanley Dean Witter Universal
Funds, Inc.
This Prospectus is dated [ ], 1999
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Definitions................................................................................ 4
Fee Table.................................................................................. 7
Synopsis of Certificate Provisions......................................................... 10
Minimum Investment Requirements...................................................... 10
Purchase Payment Accumulation........................................................ 10
Fixed and Variable Annuity Payments.................................................. 11
Changes in Allocations Among Divisions and Guarantee Periods......................... 11
Surrenders and Withdrawals........................................................... 12
Cancellation Rights.................................................................. 12
Death Proceeds....................................................................... 12
Limitations Imposed by Retirement Plans and Employers................................ 12
Communications to Us................................................................. 12
Financial and Performance Information................................................ 13
Other Information.................................................................... 14
Financial Information...................................................................... 15
USL........................................................................................ 15
Separate Account USL VA-R.................................................................. 15
The Series................................................................................. 15
Voting Privileges.................................................................... 18
The Fixed Account.......................................................................... 18
Guarantee Periods.................................................................... 19
Crediting Interest................................................................... 19
New Guarantee Periods................................................................ 20
Certificate Issuance and Purchase Payments................................................. 20
Minimum Requirements................................................................. 21
Payments............................................................................. 22
Owner Account Value........................................................................ 22
Variable Account Value............................................................... 22
Fixed Account Value.................................................................. 23
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value... 23
Transfers............................................................................ 23
Automatic Rebalancing................................................................ 25
Surrenders........................................................................... 25
Partial Withdrawals.................................................................. 26
Annuity Period and Annuity Payment Options................................................. 27
Annuity Commencement Date............................................................ 27
Application of Owner Account Value................................................... 27
Fixed and Variable Annuity Payments.................................................. 27
Annuity Payment Option............................................................... 28
Election of Annuity Payment Option................................................... 28
Available Annuity Payment Options.................................................... 29
Transfers............................................................................ 31
Death Proceeds............................................................................. 31
Death Proceeds Before the Annuity Commencement Date.................................. 31
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Death Proceeds After the Annuity Commencement Date................................... 33
Proof of Death....................................................................... 33
Charges Under the Certificates............................................................. 34
Premium Taxes........................................................................ 34
Surrender Charge..................................................................... 34
Transfer Charges..................................................................... 36
Annual Certificate Fee............................................................... 37
Charge to the Separate Account ...................................................... 37
Miscellaneous........................................................................ 37
Systematic Withdrawal Plan........................................................... 38
One-Time Reinvestment Privilege...................................................... 38
Reduction in Surrender Charges or Administrative Charges............................. 38
Other Aspects of the Certificates.......................................................... 38
Owners, Annuitants and Beneficiaries; Assignments.................................... 38
Reports.............................................................................. 39
Rights Reserved by Us................................................................ 39
Payment and Deferment................................................................ 40
Federal Income Tax Matters................................................................. 41
General.............................................................................. 41
Non-Qualified Certificates........................................................... 41
Individual Retirement Annuities ("IRAs")............................................. 43
Roth IRAs............................................................................ 45
Simplified Employee Pension Plans.................................................... 46
Simple Retirement Accounts........................................................... 46
Other Qualified Plans................................................................ 46
Private Employer Unfunded Deferred Compensation Plans................................ 48
Federal Income Tax Withholding and Reporting......................................... 48
Taxes Payable by USL and the Separate Account........................................ 48
Distribution Arrangements.................................................................. 49
Services Agreements........................................................................ 49
Legal Matters.............................................................................. 50
Year 2000 Considerations................................................................... 50
Other Information on File.................................................................. 51
Contents of Statement of Additional Information............................................ 52
Request for Statement of Additional Information............................................ 53
</TABLE>
3
<PAGE>
DEFINITIONS
WE, OUR AND US - The United States Life Insurance Company in the City of New
York ("USL").
YOU AND YOUR - a reader of this Prospectus who is contemplating making purchase
payments or taking any other action in connection with a Certificate. This is
generally the Owner of a Certificate.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees. We may subtract certain other charges from your
Account Value in the case of transfers or distributions of your Account Value.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account USL VA-R before the Annuity Commencement Date.
ADMINISTRATIVE CENTER - our annuity service center to which you should direct
all requests, instructions and other communications. Our Administrative Center
is located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The mailing
address for services is P.O. Box 1401, Houston, Texas 77251-1401. The mailing
address for purchase payments is ___________.
ANNUITANT - the person named as Annuitant in the application for a Certificate
and on whose life annuity payments may be based.
ANNUITY COMMENCEMENT DATE - the date on which we begin making payments under an
Annuity Payment Option, unless you elect a single sum payment instead.
ANNUITY PAYMENT OPTION - one of the ways in which you can request us to make
annuity payments to you. An Annuity Payment Option will control the amount of
each payment, how often we make payments, and for how long we make payments.
ANNUITY PERIOD - the period of time during which we make annuity payments under
an Annuity Payment Option.
ANNUITY UNIT - a measuring unit used to calculate the amount of Variable Annuity
Payments.
BENEFICIARY - the person who will receive any proceeds due under a Certificate
following the death of an Owner or an Annuitant.
CERTIFICATE - an individual annuity Certificate offered by this Prospectus.
CERTIFICATE ANNIVERSARY - each anniversary of the date of issue of the
Certificate.
CERTIFICATE YEAR - each year beginning with the date of issue of the
Certificate.
CODE - the Internal Revenue Code of 1986, as amended.
4
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CONTINGENT ANNUITANT - a person whom you designate under a Non-Qualified
Certificate to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant is alive when the Annuitant dies.
CONTINGENT BENEFICIARY - a person whom you designate to receive any proceeds due
under a Certificate following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary is alive when the proceeds
become payable.
DIVISION - one of the several different investment options into which Separate
Account USL VA-R is divided. Each Division invests in shares of a Series.
FIXED ACCOUNT - the name of the investment option that allows you to allocate
purchase payments to USL's General Account.
FIXED ACCOUNT VALUE - the sum of your net purchase payments and transfers in the
Fixed Account, plus accumulated interest, less any partial withdrawals and
transfers you make out of the Fixed Account.
FIXED ANNUITY PAYMENTS - annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account USL VA-
R.
GENERAL ACCOUNT - all assets of USL other than those in Separate Account USL
VA-R or any other legally segregated separate account established by USL.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which we credit a Guaranteed Interest Rate.
HOME OFFICE - our office at the following address and phone number: The United
States Life Insurance Company in the City of New York, 125 Maiden Lane, New
York, NY 10038; 1-212-709-6000. (You should, however, contact your sales
representative or our Administrative Center for all services. Purchase payments
should be mailed to the address for payments shown on the first page of this
Prospectus.)
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series and the Separate Account.
NON-QUALIFIED - not eligible for the kind of federal income tax treatment that
occurs with retirement plans allowed by Sections 401, 403, 408 or 408A of the
Code.
OWNER - the holder of record of a Certificate, except that the employer or
trustee may be the Owner of the Certificate in connection with a retirement
plan.
PARTICIPANT - the Owner of a Certificate.
QUALIFIED - eligible for the kind of federal income tax treatment that occurs
with retirement plans allowed by sections 401, 403, 408 or 408A of the Code.
5
<PAGE>
SEPARATE ACCOUNT - the segregated asset account of USL named Separate Account
USL VA-R which receives and invests purchase payments under the Certificates.
SERIES - an individual portfolio of a mutual fund that you may choose for
investment under the Certificates. Currently, the Series are part of either the
Van Kampen Life Investment Trust or the Morgan Stanley Dean Witter Universal
Funds, Inc.
SURRENDER CHARGE - a charge for sales expenses that we may assess when you
surrender a Certificate or receive payment of certain other amounts from a
Certificate.
VALUATION DATE - a day when we are open for business. However, a day is not a
Valuation Date, if the Series in which a Division invests does not calculate the
value of its shares on that day.
VALUATION PERIOD - the period that starts at the close of regular trading on the
New York Stock Exchange on a Valuation Date and ends at the close of regular
trading on the Exchange on the next Valuation Date.
VARIABLE ACCOUNT VALUE - the sum of your account values in the Separate Account
Divisions. Your account value in a Separate Account Division is the value of a
Division's Accumulation Unit multiplied by the number of Accumulation Units you
have in that Division.
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment earnings and losses of one or more of the Divisions.
WRITTEN - signed, dated, and in a form satisfactory to us and received at our
Administrative Center. (See "Synopsis of Certificate Provisions -
Communications to Us.") You must use special forms your sales representative or
we provide to elect an Annuity Option or exercise your one-time reinvestment
privilege.
6
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly under a
Certificate. The table reflects expenses of the Separate Account and the
Series. We may also deduct amounts for state premium taxes or similar
assessments, where applicable.
TRANSACTION CHARGES
Front-End Sales Charge Imposed on Purchases........................ 0%
Maximum Surrender Charge/1/........................................ 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee.......................................................$ 0/2/
ANNUAL CERTIFICATE FEE/3/...............................................$ 30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily Variable
Account Value)
Mortality and Expense Risk Charge.................................. 1.25%
Administrative Expense Charge...................................... 0.15%
-----
Total Separate Account Annual Expenses............................... 1.40%
=====
- - -------------------
/1/ This charge does not apply or is reduced under certain circumstances. See
"Surrender Charge."
/2/ This charge is $25 after the 12th transfer during each Certificate Year
before the Annuity Commencement Date.
/3/ This charge does not apply during the Annuity Period.
7
<PAGE>
THE SERIES' ANNUAL EXPENSES/1,2/ (as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Other Annual
Fees After Expenses Expenses
Expense After Expense After Expense
Series Reimbursement Reimbursement Reimbursement
- - ---------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Domestic Income 0.01% 0.59% 0.60%
Emerging Growth 0.32% 0.53% 0.85%
Enterprise 0.46% 0.14% 0.60%
Government 0.37% 0.23% 0.60%
Growth and Income 0.26% 0.49% 0.75%
Money Market 0.11% 0.49% 0.60%
Morgan Stanley Real Estate Securities 1.00% 0.08% 1.08%
Strategic Stock 0.00% 0.65% 0.65%
Asian Equity 0.00% 1.21% 1.21%
Emerging Markets Equity 0.00% 1.95% 1.95%
Equity Growth 0.09% 0.76% 0.85%
Global Equity 0.32% 0.83% 1.15%
International Magnum 0.15% 1.00% 1.15%
Fixed Income 0.06% 0.64% 0.70%
High Yield 0.15% 0.65% 0.80%
Mid Cap Value 0.23% 0.82% 1.05%
Value 0.08% 0.77% 0.85%
</TABLE>
- - ----------------
/1/ The Series' advisers have entered into administrative services agreements
with USL. The advisers pay fees to USL for these services. The fees do not
have a direct relationship to the Series' Annual Expenses. (See "Services
Agreements.")
/2/ Management fees and other expenses would have been the percentages shown in
the following table without certain voluntary expense reimbursements from
the investment adviser.
<TABLE>
<CAPTION>
Management Other Total Annual
Fees Expenses Expenses
----------- --------- -------------
<S> <C> <C> <C>
Domestic Income 0.50% 0.59% 1.09%
Emerging Growth 0.70% 0.53% 1.23%
Enterprise 0.50% 0.14% 0.64%
Government 0.50% 0.23% 0.73%
Growth and Income 0.60% 0.49% 1.09%
Money Market 0.50% 0.49% 0.99%
Morgan Stanley Real Estate Securities 1.00% 0.08% 1.08%
Strategic Stock 0.50% 0.75% 1.25%
Asian Equity 0.80% 2.00% 2.80%
Emerging Markets Equity 1.25% 2.20% 3.45%
Equity Growth 0.55% 0.76% 1.31%
Global Equity 0.80% 0.83% 1.63%
International Magnum 0.80% 1.00% 1.80%
Fixed Income 0.40% 0.64% 1.04%
High Yield 0.50% 0.65% 1.15%
Mid Cap Value 0.75% 0.82% 1.57%
Value 0.55% 0.77% 1.32%
</TABLE>
8
<PAGE>
Example The following expenses would apply to a $1,000 investment at the end of
the applicable time period, if you surrender your Certificate (or if you
annuitize under circumstances where you owe a surrender charge)/3/ , and if you
assume a 5% annual return on assets:
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- - ------------------------------ ------ ------- ------- --------
Domestic Income $75 $110 $147 $239
Emerging Growth $78 $118 $160 $265
Enterprise $75 $110 $147 $239
Government $75 $110 $147 $239
Growth and Income $77 $114 $155 $255
Money Market $75 $110 $147 $239
Morgan Stanley Real Estate Securities $80 $124 $172 $288
Strategic Stock $76 $111 $150 $245
Asian Equity $81 $128 $178 $301
Emerging Markets Equity $89 $150 $214 $370
Equity Growth $78 $118 $160 $265
Global Equity $81 $127 $175 $295
International Magnum $81 $127 $175 $295
Fixed Income $76 $113 $152 $250
High Yield $77 $116 $158 $260
Mid Cap Value $80 $124 $170 $285
Value $78 $118 $160 $265
Example The following expenses would apply to a $1,000 investment at the end of
the applicable time period, if you do not surrender your Certificate (or if you
annuitize under circumstances where a surrender charge is not payable)/3/, and
if you assume a 5% annual return on assets:
If all amounts are invested
in one of the following Series 1 year 3 years 5 years 10 years
- - ------------------------------ ------ ------- ------- --------
Domestic Income $21 $ 65 $111 $239
Emerging Growth $24 $ 73 $124 $265
Enterprise $21 $ 65 $111 $239
Government $21 $ 65 $111 $239
Growth and Income $23 $ 69 $119 $255
Money Market $21 $ 65 $111 $239
Morgan Stanley Real Estate Securities $26 $ 79 $136 $288
Strategic Stock $22 $ 66 $114 $245
Asian Equity $27 $ 83 $142 $301
Emerging Markets Equity $35 $105 $178 $370
Equity Growth $24 $ 73 $124 $265
Global Equity $27 $ 82 $139 $295
International Magnum $27 $ 82 $139 $295
Fixed Income $22 $ 68 $116 $250
High Yield $23 $ 71 $122 $260
Mid Cap Value $26 $ 79 $134 $285
Value $24 $ 73 $124 $265
- - ----------------------
/3/ See "Surrender Charge" for a description of the circumstances when you may
be required to pay the Surrender Charge under annuitization.
9
<PAGE>
THE EXAMPLES ARE NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The assumed 5% annual rate of
return is not an estimate or a guarantee of future investment performance. The
examples assume an estimated average Account Value of $40,000 for each of the
Divisions.
SYNOPSIS OF CERTIFICATE PROVISIONS
You should read this synopsis together with the other information in this
Prospectus.
The purpose of the Certificates is to provide retirement benefits through
. the accumulation of purchase payments on a fixed or variable basis; and
. the application of such accumulations to provide Fixed or Variable
Annuity Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $2,000 if you are buying a
Qualified Certificate, and $5,000 if you are buying a Non-Qualified Certificate.
(See "Federal Income Tax Matters" for a discussion of the various tax aspects
involved in purchasing Qualified and Non-Qualified Certificates.) The amount of
any subsequent purchase payment that you make must be at least $100. If your
Account Value falls below $500, we may cancel your Certificate and treat it as a
full surrender. We also may transfer funds, without charge, from a Division
(other than the Money Market Division) or Guarantee Period under your
Certificate to the Money Market Division, if the Account Value of that Division
or Guarantee Period falls below $500. (See "Certificate Issuance and Purchase
Payments.")
PURCHASE PAYMENT ACCUMULATION
We accumulate purchase payments on a variable or fixed basis until the Annuity
Commencement Date.
For variable accumulation, you may allocate part or all of your Account Value to
one or more of the 17 available Divisions of the Separate Account. Each
Division invests solely in shares of one of 17 corresponding Series. (See "The
Series.") The value of accumulated purchase payments allocated to a Division
increases or decreases, as the value of the investments in a Series' shares
increases or decreases, subject to reduction by charges and deductions. (See
"Variable Account Value.")
For fixed accumulation, you may allocate part or all of your Account Value to
one or more of the Guarantee Periods available in our Fixed Account at the time
you make your allocation. Each Guarantee Period is for a different period of
time and has a different Guaranteed Interest Rate. The value of accumulated
purchase payments increases at the Guaranteed Interest Rate applicable to that
Guarantee Period. (See "The Fixed Account.")
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<PAGE>
Over the lifetime of your Certificate, you may allocate part or all of your
Account Value to no more than 18 Divisions and Guarantee Periods. This limit
includes those Divisions and Guarantee Periods from which you have either
transferred or withdrawn all of your Account Value previously allocated to such
Divisions or Guarantee Periods. For example, if you allocate 100% of your
initial purchase payment to the Money Market Division, you have selected the
Money Market Division as one of the 18 Divisions and Guarantee Periods available
to you. When you transfer all of your Account Value from the Money Market
Division, it remains as one of the 18 Divisions and Guarantee Periods available
to you, even if you never again allocate any of your Account Value of a new
purchase payment to the Money Market Division.
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments or a combination of
Payments beginning on the Annuity Commencement Date. Fixed Annuity Payments are
periodic payments from USL in a fixed amount guaranteed by USL. The amount of
the Payments will depend on the Annuity Payment Option chosen, the age and, in
some cases, the gender of the Annuitant, and the total amount of Account Value
applied to the fixed Annuity Payment Option.
Variable Annuity Payments are similar to Fixed Annuity Payments, except that the
amount of each periodic payment from USL will vary reflecting the net investment
return of the Division or Divisions you selected under your variable Annuity
Payment Option. The payment for a given month will exceed the previous month's
payment, if the net investment return for a given month exceeds the assumed
interest rate used in the Certificate's annuity tables. The monthly payment
will be less than the previous payment if the net investment return for a month
is less than the assumed interest rate. The assumed interest rate used in the
Certificate's annuity tables is 3.5%. USL may offer other forms of the
Certificate with a lower assumed interest rate and reserves the right to
discontinue the offering of the higher interest rate form of Certificate. (See
"Annuity Period and Annuity Payment Options.")
CHANGES IN ALLOCATIONS AMONG DIVISIONS AND GUARANTEE PERIODS
Before the Annuity Commencement Date, you may change your allocation of future
purchase payments to the various Divisions and Guarantee Periods, without
charge.
In addition, you may reallocate your Account Value among the Divisions and
Guarantee Periods before the Annuity Commencement Date. However, you are
limited in the amount that you may transfer out of a Guarantee Period. See
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers," for these and other conditions of transfer.
After the Annuity Commencement Date, you may make transfers from a Division to
another Division or to a fixed Annuity Payment Option. However, you may not
make transfers from a fixed Annuity Payment Option. (See "Annuity Period and
Annuity Payment Options - Transfers.")
11
<PAGE>
SURRENDERS AND WITHDRAWALS
You may make a total surrender of or partial withdrawal from your Certificate at
any time prior to the Annuity Commencement Date by Written request to us. A
surrender or partial withdrawal may require you to pay a Surrender Charge, and
some surrenders and partial withdrawals may require you to pay tax penalties.
(See "Surrenders and Partial Withdrawals.")
CANCELLATION RIGHTS
You may cancel your Certificate by delivering it or mailing it with a Written
cancellation request to our Administrative Center or to your sales
representative, before the close of business on the 10th day after you receive
the Certificate. If you send the items by mail, properly addressed and postage
prepaid, we will consider them received at our Administrative Center on the date
we actually receive them.
We will refund to you the sum of:
. any purchase payments allocated to a Guarantee Period of the Fixed
Account,
. your Account Value allocated to the Divisions of the Separate Account,
and
. any premium taxes and Annual Certificate Fee that have been deducted.
DEATH PROCEEDS
If the Annuitant or Owner dies before the Annuity Commencement Date, we will pay
a benefit to the Beneficiary. (See "Death Proceeds Before the Annuity
Commencement Date.")
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
An employer or trustee who is the Owner under a retirement plan may limit
certain rights you would otherwise have under a Certificate. These limitations
may restrict total and partial withdrawals, the amount or timing of purchase
payments, the start of annuity payments, and the type of annuity options that
you may select. You should familiarize yourself with the provisions of any
retirement plan in which a Certificate is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
You should include, in communications to us, your Certificate number, your name,
and, if different, the Annuitant's name. You may direct communications to the
addresses and phone numbers on the first page of this Prospectus.
Unless the Prospectus states differently, we will consider purchase payments or
other communications to be received on the date we actually receive them, if
they are in proper form. However, we will
12
<PAGE>
consider purchase payments to be received on the next Valuation Date if we
receive them (1) after the close of regular trading on The New York Stock
Exchange or (2) on a date that is not a Valuation Date.
FINANCIAL AND PERFORMANCE INFORMATION
From time to time, the Separate Account may include in advertisements and other
sales materials several types of performance information for the Divisions.
This information may include "average annual total return," "total return," and
"cumulative total return." The Domestic Income Division, the Government
Division, and the Growth and Income Division may also advertise "yield." The
Money Market Division may advertise "yield" and "effective yield."
The performance information that we may present is not an estimate or guarantee
of future investment performance and does not represent the actual investment
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
Total Return and Yield Quotations. Average annual total return, total return,
and cumulative total return figures measure the net income of a Division and any
realized or unrealized gains or losses of the underlying investments in the
Division, over the period stated. Average annual total return figures are
annualized and represent the average annual percentage change in the value of an
investment in a Division over the period stated. Total return figures are also
annualized, but do not, as described below, reflect deduction of any applicable
Surrender Charge or Annual Certificate Fee. Cumulative total return figures
represent the cumulative change in the value of an investment in a Division for
various periods stated.
Yield is a measure of the net dividend and interest income earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Division), expressed as a percentage of the value of the Division's Accumulation
Units. Yield is an annualized figure, which means that we assume that the
Division generates the same level of net income over a one-year period and
compound that income on a semi-annual basis. We calculate the effective yield
for the Money Market Division similarly, but include the increase due to assumed
compounding. The Money Market Division's effective yield will be slightly
higher than its yield due to this compounding effect.
Average annual total return figures reflect deduction of all recurring charges
and fees applicable under the Certificate to all Owner accounts, including the
following:
. the Mortality and Expense Risk Charge,
. the Administrative Expense Charge,
. the applicable Surrender Charge that may be charged at the end of the
period in question; and
. a pro-rated portion of the Annual Certificate Fee.
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Yield, effective yield, total return, and cumulative total return figures do not
reflect deduction of any Surrender Charge that we may impose upon partial
withdrawal, and thus may be higher than if such charge were deducted. Total
return and cumulative total return figures also do not reflect deduction of the
Annual Certificate Fee.
Division Performance. The investment performance for each Division that invests
in a corresponding Series will reflect the investment performance of that Series
for the periods stated. This information appears in the Statement. For periods
before the date the Certificates became available, we calculate the performance
information for a Division on a hypothetical basis. In so doing, we reflect
deductions of current Separate Account fees and charges under the Certificate
from the historical performance of the corresponding Series. We may waive or
reimburse certain fees or charges applicable to the Certificate. Such waivers
or reimbursements will affect each Division's performance results.
Information about the investment experience of the Series of the Fund and the
Trust appears in the prospectuses of the Fund and the Trust.
USL may also advertise or report to Owners its ratings as an insurance company
by the A. M. Best Company. Each year, A. M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect A.M. Best's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health industry. Best's Ratings range from A++ to F.
USL may also advertise or report to Owners its ratings as to claims-paying
ability by the Standard & Poor's Corporation. A Standard & Poor's insurance
claims-paying ability rating is an assessment of an operating insurance
company's financial capacity to meet the obligations of its insurance policies
in accordance with their terms. Standard & Poor's ratings range from AAA to D.
USL may additionally advertise its ratings as to claims-paying ability by the
Duff & Phelps Credit Rating Co. A Duff & Phelps' claims-paying ability rating
is an assessment of a company's insurance claims-paying ability. Duff & Phelps'
ratings range from AAA to CCC.
Current ratings from A.M. Best, Standard & Poor's, and Duff & Phelps Credit
Rating Co. may be used from time to time in any advertising about the
Certificates, as well as in any reports that publish the ratings.
The ratings reflect the claims-paying ability and financial strength of USL.
They are not a rating of investment performance that purchasers of insurance
products funded through separate accounts, such as the Separate Account, have
experienced or are likely to experience in the future.
OTHER INFORMATION
USL may also advertise endorsements from organizations, individuals or other
parties that recommend USL or the Certificates. USL may occasionally include in
advertisements (1) comparisons of currently
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taxable and tax-deferred investment programs, based on selected tax brackets, or
(2) discussions of alternative investment vehicles and general economic
conditions.
FINANCIAL INFORMATION
The financial statements of USL appear in the Statement. Please see the first
page of this Prospectus for information on how to obtain a copy of the
Statement. You should consider the financial statements of USL only as bearing
on the ability of USL to meet its contractual obligations under the
Certificates. The financial statements do not bear on the investment
performance of the Separate Account. (See "Contents of Statement of Additional
Information.")
USL
USL is a stock life insurance company, which was organized under the laws of the
State of New York in 1850. USL is an indirect, wholly-owned subsidiary of
American General Corporation, a diversified financial services holding company
engaged primarily in the insurance business. USL is principally involved in
writing life insurance policies and annuity contracts in the State of New York.
The commitments under the Certificates are USL's, and American General
Corporation has no legal obligation to back those commitments.
USL is a member of the Insurance Marketplace Standards Association ("IMSA").
IMSA is a voluntary membership organization created by the life insurance
industry to promote ethical market conduct for individual life insurance and
annuity products. USL's membership in IMSA applies only to USL and not its
products.
SEPARATE ACCOUNT USL VA-R
USL established the Separate Account on August 8, 1997. The Separate Account is
registered with the Securities and Exchange Commission as a unit investment
trust under the 1940 Act.
Each Division of the Separate Account is part of USL's general business, and the
assets of the Separate Account belong to USL. Under New York law and the terms
of the Certificates, the assets of the Separate Account will not be chargeable
with liabilities arising out of any other business that USL may conduct. These
assets will be held exclusively to meet USL's obligations under variable annuity
Certificates. Furthermore, USL credits or charges the Separate Account with the
income, gains, and losses from the Separate Account's assets, whether or not
realized, without regard to other income, gains, or losses of USL.
THE SERIES
The Separate Account has 17 Divisions funding the variable benefits under the
Certificates. These Divisions invest in shares of eight separate investment
Series of the Trust and nine separate Series of the Fund.
The Trust and the Fund offer shares of these Series, without sales charges,
exclusively to insurance company variable annuity and variable life insurance
separate accounts and not directly to the public. The Trust and the Fund also
offer shares to variable annuity and variable life insurance separate accounts
of insurers that are not affiliated with USL.
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We do not foresee any disadvantage to you arising out of these arrangements.
Nevertheless, 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 Trust or the Fund could cause the contracts or certificates funded
through another separate account to lose their tax deferred status. Such a
result might require us to take remedial action. A separate account may have to
withdraw its participation in the Trust or the Fund, if a material
irreconcilable conflict arises among separate accounts. In such event, the
Trust or the Fund may have to liquidate portfolio securities at a loss to pay
for a separate account's redemption of Trust or Fund shares. At the same time,
the Trust's Board of Trustees, the Fund's Board of Directors and we will monitor
events for any material irreconcilable conflicts that may possibly arise and
determine what action, if any, to take to remedy or eliminate the conflict.
We automatically reinvest any dividends or capital gain distributions that we
receive on shares of the Series held under Certificates. We reinvest at the
Series' net asset value on the date payable. Dividends and distributions will
reduce the net asset value of each share of the corresponding Series and
increase the number of shares outstanding of the Series by an equivalent value.
However, these dividends and distributions do not change your Account Value.
The names of the Series of the Trust in which the available Divisions invest are
as follows:
Van Kampen Life Investment Trust
Domestic Income Portfolio
Emerging Growth Portfolio
Enterprise Portfolio
Government Portfolio
Growth and Income Portfolio
Money Market Portfolio
Morgan Stanley Real Estate Securities Portfolio
Strategic Stock Portfolio
Van Kampen Asset Management Inc. is the investment adviser of each Series of the
Trust. Van Kampen Funds Inc. is the distributor of shares of each Series of the
Trust.
The names of the Series of the Fund in which the available Divisions invest are
as follows:
Morgan Stanley Dean Witter Universal Funds, Inc.
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
Global Equity Portfolio
International Magnum Portfolio
Fixed Income Portfolio
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High Yield Portfolio
Mid Cap Value Portfolio
Value Portfolio
Morgan Stanley Dean Witter Investment Management Inc. is the investment adviser
of the Asian Equity, Emerging Markets Equity, Equity Growth, Global Equity, and
International Magnum Portfolios. (On December 1, 1998, Morgan Stanley Asset
Management Inc. changed its name to Morgan Stanley Dean Witter Investment
Management Inc. The investment adviser continues to use the name Morgan Stanley
Asset Management, in some instances.) Miller Anderson & Sherrerd, LLP is the
investment adviser of the Fixed Income, High Yield, Mid Cap Value and Value
Portfolios. Morgan Stanley & Co. Incorporated is the distributor of shares of
each Series of the Fund.
The investment advisers and the distributors are all wholly-owned subsidiaries
of Morgan Stanley Dean Witter & Co. Morgan Stanley Dean Witter & Co. is a
preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses -- securities, asset
management and credit services.
Before selecting any Division, you should carefully read the prospectus. The
prospectus provides more complete information about the Series in which that
Division invests, including investment objectives and policies, charges and
expenses.
You can find information about the investment performance of the Series of the
Trust in the Statement. You can find information about the experience of the
investment advisers to the Series of the Fund in the prospectus for the Fund.
You may obtain additional copies of a prospectus by contacting USL's
Administrative Center at the addresses and phone numbers on the first page of
this Prospectus. When making your request, please indicate the names of the
Series in which you are interested.
High yielding fixed-income securities, such as those in which the Domestic
Income Portfolio and the High Yield Portfolio invest, are subject to greater
market fluctuations and risk of loss of income and principal than investments in
lower yielding fixed-income securities. You should carefully read about these
Series in the Trust and Fund prospectuses and related statements of additional
information and consider your ability to assume the risks of making an
investment in the Divisions that invest in them.
The name of each Series of the Trust and the Fund describes its type (e.g.,
money market fund, growth and income fund, fixed income fund, etc.), except for
the Enterprise Portfolio, the Strategic Stock Portfolio, and the International
Magnum Portfolio. The Enterprise Portfolio invests primarily in growth common
stocks that are believed to have above average potential for capital
appreciation. The Strategic Stock Portfolio invests primarily in dividend
paying equity securities with the potential for above average total return
through a combination of potential capital appreciation and dividend income,
consistent with the preservation of invested capital. The International Magnum
Portfolio invests primarily in equity securities of issuers domiciled in
Australia, Japan, New Zealand, Western Europe, and certain developed countries
in Asia, with the objective of long-term capital appreciation.
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VOTING PRIVILEGES
The following people may give us voting instructions for Series' shares held in
the Separate Account Divisions attributable to their Certificate:
. You, as the Owner, before the Annuity Commencement Date, and
. The Annuitant or other payee, during the Annuity Period.
We will vote according to such instructions at meetings of shareholders of the
Series.
We will determine who is entitled to give voting instructions and the number of
votes for which they may give directions as of the record date for a meeting.
We will calculate the number of votes in fractions. We will calculate the
number of votes for any Series as follows:
. For each Owner before the Annuity Commencement Date, we will divide (1)
the Owner's Variable Account Value invested in the corresponding Division
by (2) the net asset value of one share of that Series.
. For each Annuitant or payee during the Annuity Period, we will divide (1)
our liability for future Variable Annuity Payments to the Annuitant or
payee by (2) the value of an Annuity Unit. We will calculate our
liability for future Variable Annuity Payments based on the mortality
assumptions and the assumed interest rate that we use in determining the
number of Annuity Units under a Certificate and the value of an Annuity
Unit.
We will vote all shares of each Series owned by the Separate Account as follows:
. Shares for which we receive instructions, in accordance with those
instructions; and
. Shares for which we receive no instructions, in the same proportion as
the shares for which we receive instructions.
Shares of each Series may be owned by separate accounts of insurance companies
other than us. We understand that each Series will see that all insurance
companies vote shares uniformly.
We believe that our voting instruction procedures comply with current federal
securities law requirements. However, we reserve the right to modify these
procedures to conform with legal requirements and interpretations that are put
in effect or modified from time to time.
THE FIXED ACCOUNT
Amounts in the Fixed Account or supporting Fixed Annuity Payments become part of
our General Account. We have not registered interests in the General Account
under the Securities Act of 1933, and we have not registered the General Account
as an investment company under the 1940 Act, based on federal law exclusion and
exemption. The staff of the Securities and Exchange Commission has advised us
that it has not reviewed the disclosures in this Prospectus that relate to the
Fixed Account or
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Fixed Annuity Payments. At the same time, we have legal responsibility for the
accuracy and completeness of this Prospectus.
Our obligations for the Fixed Account are legal obligations of USL. Our General
Account assets support these obligations. These General Account assets also
support our obligations under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of USL. Owners have no legal rights in such investments.
GUARANTEE PERIODS
Account Value that the Owner allocates to the Fixed Account earns a Guaranteed
Interest Rate beginning with the date of the allocation. This Guaranteed
Interest Rate continues for the number of months or years that the Owner selects
from among the Guarantee Periods that we offer at the time.
At the end of a Guarantee Period, we will allocate your Account Value in that
Guarantee Period, including interest you have earned, to a new Guarantee Period
of the same length. In the alternative, the Owner may submit a Written request
to us to allocate this amount to a different Guarantee Period or Periods or to
one or more of the Divisions of the Separate Account. We must receive this
Written request at least three business days before the end of the Guarantee
Period.
We will contact the Owner regarding the scheduled Annuity Commencement Date, if
the Owner has not provided the necessary Written request and the renewed
Guarantee Period extends beyond the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this case, we will, under certain circumstances,
waive the Surrender Charge. (See "Annuity Payment Options" and "Surrender
Charge.")
The first day of the new Guarantee Period (or other reallocation) will be the
day after the end of the prior Guarantee Period. We will notify the Owner in
writing at least 15 days and not more than 45 days before the end of any
Guarantee Period.
If the Owner's Account Value in a Guarantee Period is less than $500, we reserve
the right to transfer, without charge, the balance to the Money Market Division
at the end of that Guarantee Period. However, we will transfer such balance to
another Division selected by the Owner, if we have received Written instructions
to transfer such balance to that Division.
CREDITING INTEREST
We declare the Guaranteed Interest Rates from time to time as market conditions
dictate. We tell an Owner the Guaranteed Interest Rate for a chosen Guarantee
Period at the time we receive a purchase payment, make a transfer, or renew a
Guarantee Period. We may credit a different interest rate to one Guarantee
Period than to another Guarantee Period that is the same length but that began
on a different date. The minimum Guaranteed Interest Rate is an effective
annual rate of 3%.
Proceeds from an exchange, rollover or transfer will accrue interest in the
following manner, if you allocate them to the Fixed Account within 60 days
following the date of application for a Certificate:
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. We credit interest to such proceeds during the Guarantee Period chosen.
. We will calculate interest at a rate that is the higher of:
(a) the current interest rate we use on the date of the application for
the Guarantee Period selected; or
(b) the current interest rate we use on the date we receive the proceeds.
Proceeds that we receive more than 60 days after the date the application is
signed will receive interest at the rate in effect on the date we receive the
proceeds. The interest rate we use remains in effect for the duration of the
applicable Guarantee Period.
USL's management makes the final determination of the Guaranteed Interest Rates
to be declared. USL cannot predict or assure the level of any future Guaranteed
Interest Rates in excess of the minimum Guaranteed Interest Rate stated in your
Certificate.
You may obtain information concerning the Guaranteed Interest Rates applicable
to the various Guarantee Periods at any time from your sales representative or
from the addresses or telephone numbers on the first page of this Prospectus.
NEW GUARANTEE PERIODS
Each allocation or transfer of an amount to a Guarantee Period starts the
running of a new Guarantee Period for that amount. That new Guarantee Period
will earn a Guaranteed Interest Rate that will continue unchanged until the end
of that Period. The Guaranteed Interest Rate will never be less than the
minimum Guaranteed Interest Rate stated in your Certificate.
Each Guarantee Period has its own Guaranteed Interest Rate. Guarantee Periods
can have different Guaranteed Interest Rates. We have the right to change the
Guaranteed Interest Rate for future Guarantee Periods of various lengths. These
changes will not affect the Guaranteed Interest Rates being paid on Guarantee
Periods that have already started. Each allocation or transfer of an amount to
a Guarantee Period starts the running of a new Guarantee Period for the amount
allocated or transferred. That amount earns a Guaranteed Interest Rate that
will continue unchanged until the end of that Period. The Guaranteed Interest
Rate will never be less than the minimum Guaranteed Interest Rate stated in your
Certificate. We may offer one or more Guarantee Periods with a required dollar
cost averaging feature. (See "Transfers.") Currently, we make available a one-
year Guarantee Period and no others. However, we reserve the right to change
the Guarantee Periods that we make available at any time, except that we will
always make available a one-year Guarantee Period.
CERTIFICATE ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $2,000 for a Qualified Certificate and
$5,000 for a Non-Qualified Certificate. The minimum subsequent purchase payment
is $100. We reserve the right to modify these minimums at our discretion.
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Your application to purchase a Certificate must be on a Written application that
we provide and that you sign. USL and Van Kampen Funds, Inc., as distributor of
the Certificates, may agree on a different medium or format for the application.
When a purchase payment accompanies an application to purchase a Certificate and
you have properly completed the application, we will either:
. process the application, credit the purchase payment, and issue the
Certificate, or
. reject the application and return the purchase payment within two
Valuation Dates after receipt of the application.
If you have not completed the application or have not completed it correctly, we
will request additional documents or information within five Valuation Dates
after receipt of the application.
If we have not received a correctly completed application within five Valuation
Dates after receipt of the purchase payment, we will return the purchase payment
immediately. However, you may specifically consent to our retaining the purchase
payment until you complete the application. In that case, we will credit the
initial purchase payment as of the end of the Valuation Period in which we
receive the last information required to process the application.
We will credit subsequent purchase payments as of the end of the Valuation
Period in which we receive them along with any required Written information.
We reserve the right to reject any application or purchase payment for any
reason.
MINIMUM REQUIREMENTS
If your Account Value in any Division falls below $500 because of a partial
withdrawal from the Certificate, we reserve the right to transfer, without
charge, the remaining balance to the Money Market Division.
If your Account Value in any Division falls below $500 because of a transfer to
another Division or to the Fixed Account, we reserve the right to transfer the
remaining balance in that Division, without charge and pro rata, to the
investment option or options.
We will waive these minimum requirements for transfers under the automatic
rebalancing program. (See "Automatic Rebalancing.")
If your total Account Value falls below $500, we may cancel the Certificate. We
consider such a cancellation a full surrender of the Certificate. We will
provide you with 60 days advance notice of any such cancellation.
So long as the Account Value does not fall below $500, you do not have to make
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time before the Annuity Commencement Date, if the Owner and
Annuitant are still living.
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PAYMENTS
You should make checks for subsequent purchase payments payable to The United
States Life Insurance Company in the City of New York and forward them directly
to the address for payments shown on the first page of this Prospectus, unless
we ask you to use another address. We also accept purchase payments by wire or
by exchange from another insurance company. You may obtain further information
about how to make purchase payments by either of these methods from your sales
representative or from us at the addresses and telephone numbers on the first
page of this Prospectus.
You may make purchase payments pursuant to employer-sponsored plans only with
our agreement.
Your purchase payments are allocated to the Divisions of the Separate Account or
the Guarantee Periods of the Fixed Account as of the date we credit the purchase
payments to your Certificate. In your application form, you select (in whole
percentages) the amount of each purchase payment that you are allocating to each
Division and Guarantee Period. You can change these allocation percentages at
any time by Written notice to us.
We issue the Certificates under a group annuity master contract that we have
issued to the trustee of a group trust. We established the group trust under
Delaware law. The master contract provides for rights under the Certificates
and further provides that nothing in the master contract will invalidate or
impair any right granted to an Owner. The master contract does not provide any
material ownership rights to the master contract owner and, in particular, does
not authorize the master contract owner to surrender the master contract.
OWNER ACCOUNT VALUE
Before the Annuity Commencement Date, your Account Value under a Certificate is
the sum of your Variable Account Value and Fixed Account Value, as discussed
below.
VARIABLE ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Variable Account Value is the sum of your Variable Account Values in
each Division of the Separate Account.
. Your Variable Account Value in a Division is the product of the number of
your Accumulation Units in that Division multiplied by the value of one
such Accumulation Unit as of that Valuation Date.
There is no guaranteed minimum Variable Account Value. To the extent that your
Account Value is allocated to the Separate Account, you bear the entire
investment risk.
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We credit Accumulation Units in a Division to you when you allocate purchase
payments or transfer amounts to that Division. Similarly, we redeem
Accumulation Units when you transfer or withdraw amounts from a Division or when
we pay certain charges under the Certificate. We determine the value of these
Accumulation Units at the end of the Valuation Date on which we make the credit
or charge.
The value of an Accumulation Unit for a Division on any Valuation Date is equal
to the previous value of that Division's Accumulation Unit multiplied by that
Division's net investment factor for the Valuation Period ending on that
Valuation Date.
The net investment factor for a Division is determined by dividing (1) the net
asset value per share of the Series' shares held by the Division, determined at
the end of the current Valuation Period, plus the per share amount of any
dividend or capital gains distribution made for the Series shares held by the
Division during the current Valuation Period, by (2) the net asset value per
share of the Series shares held in the Division determined at the end of the
previous Valuation Period. We then subtract from that result a factor
representing the mortality risk, expense risk and administrative expense charge.
FIXED ACCOUNT VALUE
As of any Valuation Date before the Annuity Commencement Date:
. Your Fixed Account Value is the sum of your Fixed Account Value in each
Guarantee Period.
. Your Fixed Account Value in any Guarantee Period is equal to the
following amounts, in each case increased by accrued interest at the
applicable Guaranteed Interest Rate: (1) the amount of net purchase
payments, renewals and transferred amounts allocated to the Guarantee
Period, less (2) the amount of any transfers or withdrawals out of the
Guarantee Period, including withdrawals to pay applicable charges.
USL guarantees the Fixed Account Value. Therefore, USL bears the investment
risk for amounts allocated to the Fixed Account, except to the extent that USL
may vary the Guaranteed Interest Rate for future Guarantee Periods (subject to
the minimum Guaranteed Interest Rate stated in your Certificate).
TRANSFER, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
You can transfer your Account Value beginning 30 days after we issue your
Certificate and before the Annuity Commencement Date. The following rules
apply:
. You may transfer your Account Value at any time among the available
Divisions of the Separate Account and Guarantee Periods. Transfers will
be effective at the end of the Valuation Period in which we receive your
Written transfer request.
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. If a transfer causes your Account Value in any Division or Guarantee
Period to fall below $500, we reserve the right to transfer the remaining
balance in that Division or Guarantee Period in the same proportions as
the transfer request.
. You may make up to 12 transfers each Certificate Year without charge. We
will charge you $25 for each additional transfer.
. You may transfer no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception during any Certificate Year. This 25%
limitation does not apply to transfers (1) within 15 days before or after
the end of the Guarantee Period in which you held the transferred
amounts, or (2) a renewal at the end of the Guarantee Period to the same
Guarantee Period.
You may establish an automatic transfer plan. (We also refer to this plan as a
dollar cost averaging plan.) Under this plan, we will automatically transfer
amounts from the Money Market Division or the one-year Guarantee Period (or any
other Guarantee Period that is available at that time) to one or more other
Divisions. By transferring a set amount on a regular schedule instead of
transferring the total amount at one particular time, you may reduce the risk of
investing in the corresponding Division only when the price is high. An
automatic transfer plan does not guarantee a profit and it does not protect
against a loss of market price decline. You will select:
. the amount we are to transfer under the plan,
. the frequency of the transfers - either monthly, quarterly, semi-
annually, or annually, and
. the duration of the plan.
We may also offer certain "special automatic transfer plans" to Owners who:
. make the new purchase payments, and
. do not own another annuity contract or certificate which USL, or any USL
affiliate, issued.
Under such plans, we will make equal monthly transfers over a period of time
that we will determine. We may offer a higher Guaranteed Interest Rate under
such a special automatic transfer plan than we would offer for another Guarantee
Period of the same duration that is not offered under such a plan. Any such
higher interest rate will reflect differences in costs or services and will not
be unfairly discriminatory as to any person. Differences in costs or services
will result from such factors as reduced sales expenses or administrative
efficiencies related to transferring amounts to other Divisions on an automatic,
rather than a discretionary, basis.
Transfers under any automatic transfer plan will:
. not count towards the 12 free transfers each Certificate Year,
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. not incur a $25 charge,
. not be subject to the 25% limitation on transfers from a Guarantee
Period, and
. not be subject to the minimum Account Value requirement described above.
You may obtain additional information about how to establish an automatic
transfer plan from your sales representative or from us at the telephone numbers
and addresses on the first page of this Prospectus. You cannot have an
automatic transfer plan in effect at the same time you have Automatic
Rebalancing, described below, in effect.
We have not designed the Certificates for professional market timing
organizations or other entities using programmed and frequent transfers. We may
not unilaterally terminate or discontinue transfer privileges. However, we
reserve the right to suspend such privileges for a reasonable period.
AUTOMATIC REBALANCING
You may arrange for Automatic Rebalancing among the Separate Account Divisions
if your Certificate has an Account Value of $25,000 or more at the time we
receive the application for Automatic Rebalancing. You may apply for Automatic
Rebalancing either at issue or after issue, and you may subsequently discontinue
it.
Under Automatic Rebalancing, we transfer funds among the Separate Account
Divisions to maintain the percentage allocation you have selected for each
Division. At your election, we will make these transfers on a quarterly, semi-
annual or annual basis, measured from the Certificate Anniversary date. A
Certificate Anniversary date that falls on the 29th, 30th, or 31st of the month
will result in Automatic Rebalancing starting with the 1st of the next month.
Automatic Rebalancing does not permit transfers to or from any Guarantee Period.
Transfers under Automatic Rebalancing will not count towards the 12 free
transfers each Certificate Year and will not incur a $25 charge. You cannot
have Automatic Rebalancing in effect at the same time you have an automatic
transfer plan, described above, in effect.
SURRENDERS
At any time before the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender of a Certificate.
We will pay you the following upon full surrender:
. your Account Value at the end of the Valuation Period in which we receive
a Written surrender request,
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. minus any applicable Surrender Charge,
. minus any uncollected Certificate Fee (see "Annual Certificate Fee"), and
. minus any applicable premium tax.
Our current practice is to require that you return the Certificate to our
Administrative Center with any request for a full surrender.
After a full surrender, or if the Owner's Account Value falls to zero, all
rights of the Owner, Annuitant or any other person under the Certificate will
terminate. The Owner will, however, have a right to reinvest the proceeds of
the Certificate. (See "One-Time Reinvestment Privilege.")
All collateral assignees of record must consent to any full surrender.
PARTIAL WITHDRAWALS
Your Written request for a partial withdrawal should specify the Divisions of
the Separate Account, or the Guarantee Periods of the Fixed Account, from which
you wish to make the partial withdrawal. We will take the withdrawal pro rata
from the Divisions and Guarantee Periods, if (1) you do not tell us how to make
the withdrawal, or (2) we cannot make the withdrawal as you requested.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer the remaining balance
to the Money Market Division. We will do this without charge.
We will always pay you the amount of your partial withdrawal request, unless it
exceeds the value of your Certificate. In that case, we pay the surrender value
of your Certificate. The value of your Accumulation Units and Fixed Account
interests that we redeem will equal the amount of the withdrawal request, plus
any applicable Surrender Charge and premium tax. You can also tell us to take
Surrender Charges and income tax from the amount you want withdrawn.
We also make available a systematic withdrawal plan. Under this plan, you may
make automatic partial withdrawals in amounts and at periodic intervals that you
specify. The terms and conditions that apply to other partial withdrawals will
also apply to this plan. You may obtain additional information about how to
establish a systematic withdrawal plan from your sales representative or from us
at the addresses and telephone numbers on the first page of this Prospectus. We
reserve the right to modify or terminate the systematic withdrawal plan at any
time.
The Code imposes a penalty tax on certain premature surrenders or withdrawals.
See the "Federal Income Tax Matters" section for a discussion of this and other
tax implications of total surrenders and systematic and other partial
withdrawals. The Section also discusses tax withholding requirements.
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All collateral assignees of record must consent to any partial withdrawal.
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date may be any day of any month between the
Annuitant's 50th and 90th birthday. You may select the Annuity Commencement Date
on the Certificate application. You may also change a previously selected date
any time before that date by submitting a Written request, subject to our
approval.
See "Federal Income Tax Matters" for a discussion of the penalties that may
result from distributions before the Annuitant's reaching age 59 1/2 under any
Certificate or after April 1 of the year following the calendar year in which
the Annuitant reaches age 70 1/2 under certain Qualified Certificates.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division to
provide Variable Annuity Payments based on that Division and your Fixed Account
Value to provide Fixed Annuity Payments. However, we will apply your Account
Value in different proportions, if you give us Written instructions at least 30
days before the Annuity Commencement Date.
We deduct any applicable state and local premium taxes from the amount of
Account Value that we apply to an Annuity Payment Option. In some cases, we may
deduct a Surrender Charge from the amount we apply. (See "Surrender Charge.")
Subject to any such adjustments, we apply your Variable and Fixed Account Values
to an Annuity Payment Option, as discussed below, as of the end of the Valuation
Period that contains the 10th day before the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
We will determine your first monthly Fixed or Variable Annuity Payment using the
annuity tables in the Certificate and the amount of your Account Value that is
applied to provide the Fixed or Variable Annuity Payments.
We determine the amount of each monthly Fixed Annuity Payment thereafter based
on the terms of the Annuity Payment Option selected.
We determine the amount of each monthly Variable Annuity Payment thereafter as
follows:
. We convert the Account Value that we apply to provide Variable Annuity
Payments to a number of Annuity Units. We do this by dividing the amount
of the first Variable Annuity Payment by the value of an Annuity Unit of
a Division as of the end of the Valuation Period that includes the 10th
day before the Annuity Commencement Date. This number of Annuity Units
remains constant for any Annuitant.
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. We determine the amount of each subsequent Variable Annuity Payment by
multiplying the number of Annuity Units by the value of an Annuity Unit
as of the end of the Valuation Period that contains the 10th day before
the date of each payment.
. If we base the Variable Annuity Payments on more than one Division, we
perform these calculations separately for each Division.
. The value of an Annuity Unit at the end of a Valuation Period is the
value of the Annuity Unit at the end of the previous Valuation Period,
multiplied by the net investment factor (see "Variable Account Value")
for the Valuation Period, with an offset for the 3.5% assumed interest
rate used in the Certificate's annuity tables.
The Certificate's annuity tables use a 3.5% assumed interest rate. A Variable
Annuity Payment based on a Division will be greater than the previous month, if
the Division's investment return for the month is at an annual rate greater than
3.5%. Conversely, a Variable Annuity Payment will be less than the previous
month, if the Division's investment return is at an annual rate less than 3.5%.
ANNUITY PAYMENT OPTIONS
Sixty to ninety days before the Scheduled Annuity Commencement Date, we will (1)
notify you that the Certificate is scheduled to mature, and (2) request that you
select an Annuity Payment Option.
If you have not selected an Annuity Payment Option ten days before the Annuity
Commencement Date, we will proceed as follows:
. we will extend the Annuity Commencement Date to the Annuitant's 90th
birthday, if the scheduled Annuity Commencement Date is any date before
the Annuitant's 90th birthday; or
. we will pay the Account Value, less any applicable charges and premium
taxes, in one sum to you, if the scheduled Annuity Commencement Date is
the Annuitant's 90th birthday.
The Code imposes minimum distribution requirements on the Annuity Payment Option
you choose in connection with Qualified Certificates. (See "Federal Income Tax
Matters.") We are not responsible for monitoring or advising Owners whether
they are meeting the minimum distribution requirements, unless we have received
a specific Written request to do so.
ELECTION OF ANNUITY PAYMENT OPTION
You may elect an Annuity Payment Option only if the initial annuity payment
meets the following minimum requirements:
. where you elect only Fixed or Variable Annuity Payments, the initial
payment must be at least $20; or
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. where you elect a combination of Variable and Fixed Annuity Payments, the
initial payment must be at least $10 on each basis.
If the initial annuity payment falls below these amounts, we will reduce the
frequency of annuity payments. If the initial payment still falls below these
amounts, we will make a single payment to the Annuitant or other properly
designated payee equal to your Account Value. We will deduct any applicable
Surrender Charge, uncollected Annual Certificate Fee and premium tax.
You may elect the annuity option that will apply for payments to a Beneficiary,
if you or the Annuitant dies. If you have not made this election, the
Beneficiary may do so within 60 days after your or the Annuitant's death. (See
"Death Proceeds.") Thereafter, the Beneficiary will have all the remaining
rights and powers under the Certificate and be subject to all of its terms and
conditions. We will make the first annuity payment at the beginning of the
second month following the month in which we approve the settlement request. We
will credit Annuity Units based on Annuity Unit Values at the end of the
Valuation Period that contains the 10th day before the beginning of that second
month.
When an Annuity Payment Option becomes effective, you must deliver the
Certificate to our Administrative Center, in exchange for a payment contract
providing for the option elected.
We provide information about the relationship between the Annuitant's gender and
the amount of annuity payments, including any requirements for gender-neutral
annuity rates and in connection with certain employee benefit plans under
"Gender of Annuitant" in the Statement. (See "Contents of Statement of
Additional Information.")
AVAILABLE ANNUITY PAYMENT OPTIONS
Each Annuity Payment Option, except Option 5, is available on both a fixed and
variable basis. Option 5 is available on a fixed basis only.
OPTION 1 - LIFE ANNUITY - We make annuity payments monthly during the lifetime
of the Annuitant. These payments stop with the last payment due before the
death of the Annuitant. We do not guarantee a minimum number of payments under
this arrangement. For example, the Annuitant or other payee might receive only
one annuity payment, if the Annuitant dies before the second annuity payment.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN - We make
annuity payments monthly during the lifetime of an Annuitant. In addition, we
guarantee that the Beneficiary will receive monthly payments for the remainder
of the period certain, if the Annuitant dies during that period.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - We make annuity payments
monthly during the lifetime of the Annuitant and another payee and during the
lifetime of the survivor of the two. We stop making payments with the last
payment before the death of the survivor. We do not guarantee a minimum number
of payments under this arrangement. For example, the Annuitant or other payee
might receive only one annuity payment if both die before the second annuity
payment. The election of this option is ineffective if either one dies before
the Annuity Commencement Date. In that case, the
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survivor becomes the sole Annuitant, and we do not pay death proceeds because of
the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR A DESIGNATED PERIOD - We make annuity payments monthly
to an Annuitant or other properly-designated payee, or at his or her death, to
the Beneficiary, for a selected number of years ranging from five to 40. If
this option is selected on a variable basis, the designated period may not
exceed the life expectancy of the Annuitant or other properly-designated payee.
Under the fourth option, we provide no mortality guarantee, even though we
reduce Variable Annuity Payments as a result of a charge to the Separate Account
that is partially for mortality risks. (See "Charge to the Separate Account.")
A payee receiving Variable (but not Fixed) Annuity Payments under Option 4 can
elect at any time to commute (terminate) the option and receive the current
value of the annuity in a single sum. The current value of an annuity under
Option 4 is the value of all remaining annuity payments, assumed to be level,
discounted to present value at an annual rate of 3.5%. We calculate that value
the next time we determine values after receiving your Written request for
payment. The election of a single sum payment under Option 4 is the only way
you may terminate any Annuity Payment Option once annuity payments have started.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - We pay the amount due in equal
monthly installments of a designated dollar amount until the remaining balance
is less than the amount of one installment. The amount of each installment may
not be less than $125 or more than $200 each year per $1,000 of the original
amount due. If the person receiving these payments dies, we continue to make
the remaining payments to the Beneficiary. Payments under this option are
available on a fixed basis only. To determine the remaining balance at the end
of any month, we decrease the balance at the end of the previous month by the
amount of any installment paid during the month. We then apply, to the
remainder, interest at a rate not less than 3.5% compounded annually. If the
remaining balance at any time is less than the amount of one installment, we
will pay the balance as the final payment under the option.
We reduce Variable Annuity Payments as a result of a charge to the Separate
Account that is partially for mortality risks. (See "Charge to the Separate
Account.")
The Code may treat the election of Option 4 or Option 5 in the same manner as a
surrender of the total Account Value. For tax consequences of such treatment,
see "Federal Income Tax Matters." In addition, the Code may not give tax-
deferred treatment to subsequent earnings.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - In the case of Fixed
Annuity Payments under one of the first three Annuity Payment Options described
above, we make a special election available. In that case, the Owner (or the
Beneficiary, if the Owner has not elected a payment option) may elect monthly
payments based on single payment immediate fixed annuity rates we offer at that
time. This provision allows the Annuitant or other properly-designated payee to
receive the fixed annuity purchase rate in effect for new single payment
immediate annuity certificates, if it is more favorable.
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In place of monthly payments, you may elect payments on a quarterly, semi-annual
or annual basis. In that case, we determine the amount of each annuity payment
on a basis consistent with that described above for monthly payments.
TRANSFERS
After the Annuity Commencement Date, the Annuitant or other properly-designated
payee may make one transfer every 180 days among the available Divisions of the
Separate Account or from the Divisions to a Fixed Annuity Payment Option. We
will assess no charge for the transfer. We do not permit transfers from a Fixed
to a Variable Annuity Payment Option. If a transfer causes the value in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division in the same proportion as the transfer request. We
make transfers effective at the end of the Valuation Period in which we receive
the Written transfer request at our Administrative Center. We reserve the right
to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS BEFORE THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Certificate if any of the following events occurs before the Annuity
Commencement Date:
. the Annuitant dies, and no Contingent Annuitant has been named under a
Non-Qualified Certificate;
. the Annuitant dies, and we also receive proof of death of any named
Contingent Annuitant; or
. the Owner (including the first to die in the case of joint Owners) of a
Non-Qualified Certificate dies, regardless of whether the deceased Owner
was also the Annuitant. (However, if the Beneficiary is the Owner's
surviving spouse, or the Owner's surviving spouse is a joint Owner, the
surviving spouse may elect to continue the Certificate as described later
in this Section).
If the deceased Owner was a joint Owner, we will pay the death proceeds to the
surviving joint Owner. In this case, we will treat the surviving joint Owner as
the Beneficiary, and we will not recognize any other designation of Beneficiary.
However, joint Owners may provide written instructions to pay death proceeds in
a different manner.
The death proceeds, before deduction of any applicable premium taxes, will equal
the greatest of:
. the sum of all net purchase payments made (less any premium taxes we
deducted previously and all prior partial withdrawals);
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. the Owner's Account Value as of the end of the Valuation Period in which
we receive, at our Administrative Center, proof of death and the Written
request as to the manner of payment; or
. the "highest anniversary value" before the date of death, as defined
below.
The highest anniversary value before the date of death will be determined as
follows:
. First, we will calculate the Account Values at the end of each of the
past Certificate Anniversaries that occurs before the deceased's 81st
birthday (We will thereafter use only the highest of the Certificate
Anniversary Account Values that occurred before the deceased's 81st
birthday.);
. Second, we will increase each of the Account Values by the amount of net
purchase payments the Owner has made since the end of such Certificate
Years; and
. Third, we will reduce the result by the amount of any withdrawals the
Owner has made since the end of such Certificate Years.
The highest anniversary value will be an amount equal to the highest of such
values. Net purchase payments are purchase payments less applicable taxes
deducted at the time the purchase payment is made.
The death proceeds become payable to the Beneficiary when we receive:
. proof of the Owner's or Annuitant's death, and
. a Written request from the Beneficiary specifying the manner of payment.
If the Owner has not already done so, the Beneficiary may, within 60 days after
the date the death proceeds become payable, elect to receive the death proceeds
as (1) a single sum or (2) in the form of one of the Annuity Payment Options
provided in the Certificate. (See "Annuity Payment Options.") If we do not
receive a request specifying the manner of payment, we will make a single sum
payment, based on values we determine at that time.
If the Owner under a Non-Qualified Certificate dies before the Annuity
Commencement Date, we will distribute all amounts payable under the Certificate
in accordance with the following rules:
. We will distribute all amounts:
(a) within five years of the date of death, or
(b) if the Beneficiary elects, as annuity payments, beginning within one
year of the date of death and continuing over a period not extending
beyond the life or life expectancy of the Beneficiary.
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. If the Beneficiary is the Owner's surviving spouse, the spouse may elect
to continue the Certificate as the new Owner. If the original Owner was
the Annuitant, the surviving spouse may also elect to become the new
Annuitant. This election is also available to the surviving spouse who is
a joint Owner, even if the surviving spouse is not the Beneficiary. In
this case, we will treat the surviving spouse as the Beneficiary, and we
will not recognize any other designation of Beneficiary.
. If the Owner is not a natural person, these distribution requirements
apply at the death of the primary Annuitant, within the meaning of the
Code. Under a parallel section of the Code, similar requirements apply to
retirement plans for which we issue Qualified Certificates.
Failure to satisfy the requirements described in this Section may result in
serious adverse tax consequences.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies on or after the Annuity Commencement Date, the amounts
payable to the Beneficiary or other properly-designated payee are any continuing
payments under the Annuity Payment Option in effect. (See "Annuity Payment
Options.") In such case, the payee will:
. have all the remaining rights and powers under a Certificate, and
. be subject to all the terms and conditions of the Certificate.
Also, if the Annuitant dies on or after the Annuity Commencement Date, no
previously named Contingent Annuitant can become the Annuitant.
If the payee under a Non-Qualified Certificate dies after the Annuity
Commencement Date, we will distribute any remaining amounts payable under the
terms of the Annuity Payment Option at least as rapidly as under the method of
distribution in effect when the payee dies. If the payee is not a natural
person, this requirement applies upon the death of the primary Annuitant, within
the meaning of the Code.
Under a parallel section of the Code, similar requirements apply to retirement
plans for which we issue Qualified Certificates.
Failure to satisfy requirements described in this Section may result in serious
adverse tax consequences.
PROOF OF DEATH
We accept the following as proof of any person's death:
. a certified death certificate;
. a certified decree of a court of competent jurisdiction as to the finding
of death;
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. a written statement by a medical doctor who attended the deceased at the
time of death; or
. any other proof satisfactory to us.
Once we have paid the death proceeds, the Certificate terminates, and our
obligations are complete.
CHARGES UNDER THE CERTIFICATES
PREMIUM TAXES
When applicable, we will deduct premium taxes imposed by certain states. We may
deduct such amount either at the time the tax is imposed or later. We may
deduct the amount as follows:
. from purchase payment(s) when received;
. from the Owner's Account Value at the time annuity payments begin;
. from the amount of any partial withdrawal; or
. from proceeds payable upon termination of the Certificate for any other
reason, including death of the Owner or Annuitant, or surrender of the
Certificate.
If premium tax is paid, USL may reimburse itself for the tax when making the
deduction under the second, third, and fourth items on the list immediately
above, by multiplying the sum of Purchase Payments being withdrawn by the
applicable premium tax percentage.
Applicable premium tax rates depend upon the Owner's then-current place of
residence. Applicable rates currently range from 0% to 3.5%. The rates are
subject to change by legislation, administrative interpretations, or judicial
acts. We will not make a profit on this charge.
SURRENDER CHARGE
The Surrender Charge reimburses us for part of our expenses in distributing the
Certificates. We believe, however, that the amount of our expenses will exceed
the amount of revenues generated by the Surrender Charge. We will pay for extra
expenses out of our general surplus, which might include profits from the charge
for the assumption of mortality and expense risks.
Unless a withdrawal is exempt from the Surrender Charge (as discussed below),
the Surrender Charge is a percentage of the amount of each purchase payment that
you withdraw during the first seven years after we receive that purchase
payment. The percentage declines depending on how many years have passed since
we originally credited the withdrawn purchase payment to your Account Value, as
follows:
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Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ --------------------
1st 6%
2nd 6%
3rd 5%
4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
In computing the Surrender Charge, we deem withdrawals from your Account Value
to consist first of purchase payments, in order of contribution, followed by any
amounts in excess of purchase payments. The Surrender Charge will apply to the
following transactions, which we consider to be withdrawals:
. total surrender;
. partial withdrawal;
. commencement of an Annuity Payment Option; and
. termination due to insufficient Account Value.
The Surrender Charge will NOT apply to withdrawals in the following
circumstances:
. the amount of withdrawals that exceeds the cumulative amount of your
purchase payments;
. death of the Annuitant, at any age, after the Annuity Commencement Date;
. death of the Annuitant, at any age, before the Annuity Commencement Date,
provided no Contingent Annuitant survives;
. death of the Owner, including the first to die in the case of joint
Owners of a Non-Qualified Certificate, unless the Certificate continues
under the special rule for a surviving spouse;
. annuitization over at least five years, or life contingent annuitization
where the life expectancy is at least five years;
. within the 30-day window under the One-Time Reinvestment Privilege;
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. the surrender of a Certificate, or the withdrawal of Certificate Value
(limited to the Variable Account Value and the one year Guarantee Period)
of a Certificate, issued to owners who are bona fide full-time employees
of USL at the time they purchased a Certificate;
. the portion of your first withdrawal or total surrender in any
Certificate Year that does not exceed 15% of the amount of your purchase
payments that (1) have not previously been withdrawn and (2) have been
credited to the Certificate for at least one year. (If you make multiple
withdrawals during a Certificate Year, we will recalculate the amount
eligible for the free withdrawal at the time of each withdrawal. After
the first Certificate Year, you may make non-automatic and automatic
withdrawals in the same Certificate Year subject to the 15% limitation.
For withdrawals under a systematic withdrawal plan, Purchase Payments
credited for 30 days or more are eligible for the 15% free withdrawal);
and
. any amounts withdrawn that are in excess of the amount permitted by the
15% free withdrawal privilege, described above, if you are withdrawing
the amounts to obtain or retain favorable tax treatment. (For example,
under certain circumstances the income and estate tax benefits of a
charitable remainder trust may be available only if you withdraw assets
from a Certificate funding the trust more rapidly than the 15% free
withdrawal privilege permits. This exception is subject to our approval.)
Upon selection of an annuity option that does not qualify for a Surrender Charge
exception above, we use the full amount of the Owner's Account Value to pay for
the annuity option. The amount we use will be the greater of:
. the amount payable to the Owner upon full surrender of a Certificate (see
"Surrenders and Partial Withdrawals"), or
. 95% of what the amount payable to the Owner upon full surrender of a
Certificate would be without a Surrender Charge.
We do not consider a free withdrawal under any of the foregoing Surrender Charge
exceptions to be a withdrawal of purchase payments, except for purposes of
computing the 15% free withdrawal described in the preceding paragraph. The
Code may impose a penalty on distributions if the recipient is under age 59 1/2.
(See "Penalty Tax on Premature Distributions.")
Transfer Charges
We describe the charges to pay the expense of making transfers under "Transfer,
Automatic Rebalancing, Surrender and Partial Withdrawal of Owner Account Value -
Transfers" and "Annuity Period and Annuity Payment Options - Transfers." These
charges are not designed to yield a profit.
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ANNUAL CERTIFICATE FEE
We will deduct an Annual Certificate Fee of $30 from your Account Value at the
end of each Certificate Year before the Annuity Commencement Date. This Fee is
for administrative expenses (which do not include expenses of distributing the
Certificates). We do not expect the revenues we derive from this Fee to exceed
the expenses. Unless paid directly, the Fee will be allocated among the
Guarantee Periods and Divisions in proportion to your Account Value in each. We
will deduct the entire Fee for the year from the proceeds of any full surrender.
We reserve the right to waive the Fee.
CHARGE TO THE SEPARATE ACCOUNT
We deduct from Separate Account assets a daily charge at an annualized rate of
1.40% of the average daily net asset value of the Separate Account attributable
to the Certificates. This charge (1) offsets administrative expenses not
covered by the Annual Certificate Fee discussed above and (2) compensates us for
assuming mortality and expense risks under the Certificates. The 1.40% charge
divides into .15% for administrative expenses and 1.25% for the assumption of
mortality and expense risks.
We do not expect to earn a profit on that portion of the charge that is for
administrative expenses. However, we do expect to derive a profit from the
portion that is for the assumption of mortality and expense risks. There is no
necessary relationship between the amount of administrative charges deducted for
a given Certificate and the amount of expenses actually attributable to that
Certificate.
In assuming the mortality risk, we incur the risks that
. our actuarial estimate of mortality rates may prove erroneous,
. Annuitants will live longer than expected, and
. more Owners or Annuitants than expected will die at a time when the death
benefit we guarantee is higher than the net surrender value of their
interests in the Certificates.
In assuming the expense risk, we incur the risk that the revenues from the
expense charges under the Certificates (charges that we guarantee will not
increase) will not cover our expense of administering the Certificates.
MISCELLANEOUS
Each Series pays charges and expenses out of its assets. The prospectus for
each Series describes the charges and expenses.
We reserve the right to impose charges or establish reserves for any federal or
local taxes that we incur today or may incur in the future and that we deem
attributable to the Certificates.
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SYSTEMATIC WITHDRAWAL PLAN
You may make automatic partial withdrawals, at periodic intervals, through a
systematic withdrawal program. Minimum payments are $100. You may choose from
payment schedules of monthly, quarterly, semi-annual, or annual payments. You
may start, stop, increase, or decrease payments. You may elect to (1) start
withdrawals as early as 30 days after the issue date of the Certificate and (2)
take withdrawals from the Fixed Account or any Division. Systematic withdrawals
are subject to the terms and conditions applicable to other partial withdrawals,
including Surrender Charges and exceptions to Surrender Charges.
ONE-TIME REINVESTMENT PRIVILEGE
If the Account Value is at least $500, you may elect to reinvest all of the
proceeds that you liquidated from the Certificate within the previous 30 days.
In this case, we will credit the Surrender Charge and the Annual Certificate
Fee, if a new Annual Certificate Fee is not then due, back to the Certificate.
We will reinvest the proceeds at the value we next compute following the date of
receipt of the proceeds. Unless you request otherwise, we will allocate the
proceeds among the Divisions and Guarantee Periods in the same proportions as
before surrender. We will compute any subsequent surrender charge as if we had
issued the Certificate at the date of reinvestment for a purchase payment in the
amount of the net surrender proceeds. You may use this privilege only once.
REDUCTION IN SURRENDER CHARGES OR ADMINISTRATIVE CHARGES
We may reduce the Surrender Charges or administrative charges imposed under
certain Qualified Certificates for employer-sponsored plans. Any such
reductions will reflect differences in costs or services and will not be
unfairly discriminatory as to any person. Differences in costs and services
result from factors such as reduced sales expenses or administrative
efficiencies relating to serving a large number of employees of a single
employer and functions assumed by the employer that we otherwise would have to
perform.
OTHER ASPECTS OF THE CERTIFICATES
Only an officer of USL can agree to change or waive the provisions of any
Certificate. The Certificates are non-participating, which means they are not
entitled to share in any dividends, profits or surplus of USL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
You, as the Owner of a Certificate, will be the same as the Annuitant, unless
you choose a different Annuitant when you purchase a Certificate. In the case
of joint ownership, both Owners must join in the exercise of any rights or
privileges under the Certificate. You choose the Annuitant and any Contingent
Annuitant in the application for a Certificate and may not change that choice.
You choose the Beneficiary and any Contingent Beneficiary when you purchase a
Certificate. You may change a Beneficiary or Contingent Beneficiary before the
Annuity Commencement Date, while the Annuitant is still alive. The payee may
make this change after the Annuity Commencement Date.
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We will make any designation of a new Beneficiary or Contingent Beneficiary
effective as of the date it is signed. However, the change in designation will
not affect any payments we make or action we take before we receive the Written
request. We also need the Written consent of any irrevocably-named Beneficiary
or Contingent Beneficiary before we make a change. Under certain retirement
programs, the law may require spousal consent to name or change a Beneficiary to
a person other than the spouse. We are not responsible for the validity of any
designation of a Beneficiary or Contingent Beneficiary.
If the Beneficiary or Contingent Beneficiary is not living at the time we are to
make any payment, you as the Owner will be the Beneficiary. If you are not then
living, your estate will be the Beneficiary.
In the case of joint ownership, we will treat the surviving joint Owner as the
Beneficiary upon the death of a joint Owner. We will not recognize any other
designation of Beneficiary, unless joint Owners provide written instructions to
pay death proceeds in a different manner.
Owners and other payees may assign their rights under Qualified Certificates
only in certain narrow circumstances referred to in the Certificates. Owners
and other payees may assign their rights under Non-Qualified Certificates,
including their ownership rights. We take no responsibility for the validity of
any assignment. Owners must make a change in ownership rights in Writing and
send a copy to our Administrative Center. We will make the change effective on
the date it was made. However, we are not bound by a change until the date we
record it. The rights under a Certificate are subject to any assignment of
record at our Administrative Center. An assignment or pledge of a Certificate
may have adverse tax consequences. (See "Federal Income Tax Matters.")
REPORTS
We will mail to Owners (or anyone receiving payments following the Annuity
Commencement Date), any reports and communications required by applicable law.
We will mail to the last known address of record. You should, therefore, give
us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, we may modify a Certificate to the extent necessary
to:
. reflect a change in the Separate Account or any Division;
. credit new Separate Accounts;
. operate the Separate Account in any form permitted under the 1940 Act or
in any other form permitted by law;
. transfer any assets in any Division to another Division, to one or more
separate accounts, or to the Fixed Account;
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. add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
. add, restrict or remove Guarantee Periods of the Fixed Account;
. make any new Division available to you on a basis we determine;
. substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other
investment permitted by law;
. make any changes required by the Code or by any other law, regulation or
interpretation to continue treatment of the Certificate as an annuity;
. commence deducting premium taxes or adjust the amount of premium taxes
deducted in accordance with state law that applies; or
. make any changes required to comply with the rules of any Series.
When required by law, we will obtain (1) your approval of changes and (2) the
approval of any appropriate regulatory authority.
PAYMENT AND DEFERMENT
We will normally pay amounts surrendered or withdrawn from a Certificate within
seven calendar days after the end of the Valuation Period in which we receive
the Written surrender or withdrawal request at our Administrative Center. A
Beneficiary may request the manner of payment of death proceeds within 60 days
after the death proceeds become payable. If we do not receive a Written request
specifying the manner of payment, we will pay the death benefit as a single sum,
normally within seven calendar days after the end of the Valuation Period that
contains the last day of the 60 day period. We reserve the right, however, to
defer payments or transfers out of the Fixed Account Value for up to six months.
Also, we reserve the right to defer payment of that portion of your Account
Value that is attributable to a purchase payment made by check for a reasonable
period of time (not to exceed 15 days) to allow the check to clear the banking
system.
Finally, we reserve the right to defer payment of any surrender, annuity
payment, or death proceeds out of the Variable Account Value 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
as determined by the SEC;
. the SEC determines that an emergency exists, as a result of which
disposal of securities held in a Division is not reasonably practicable
or it is not reasonably practicable to fairly determine the Variable
Account Value; or
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. the SEC by order permits the delay for the protection of Owners.
We may also postpone transfers and allocations of Account Value among the
Divisions and the Fixed Account under these circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
We cannot comment on all of the federal income tax consequences associated with
the Certificates. Federal income tax law is complex. Its application to a
particular person may vary according to facts peculiar to the person.
Consequently, we do not intend for you to take this discussion as tax advice.
You should consult with a competent tax adviser before purchasing a Certificate.
We base this discussion on our understanding of the law, regulations and
interpretations existing on the date of this Prospectus. Congress, in the past,
has enacted legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets and may do so again in the future. The
Treasury Department may issue new or amended regulations or other
interpretations of existing tax law. The courts may also interpret the tax law
in ways that affect the tax treatment of annuities. Any such change could have
a retroactive effect. We suggest that you consult your legal or tax adviser on
these issues.
The discussion does not address federal estate and gift tax, or social security
tax, or any state or local tax consequences associated with the Certificates.
NON-QUALIFIED CERTIFICATES
Purchase Payments. Purchasers of a Certificate that does not qualify for
special tax treatment and is "Non-Qualified" may not deduct from their gross
income the amount of purchase payments made.
Tax Deferral Before Annuity Commencement Date. Owners who are natural persons
are not taxed currently on (1) increases in their Account Value resulting from
interest earned in the Fixed Account, or (2) the investment experience of the
Separate Account so long as the Separate Account complies with certain
diversification requirements. These requirements mean that the Separate Account
must invest in Series that are "adequately diversified" in accordance with
Treasury Department regulations. We do not control the Series, but we have
received commitments from the investment advisers to the Series to use their
best efforts to operate the Series in compliance with these diversification
requirements. A Certificate investing in a Series that failed to meet the
diversification requirements would subject Owners to current taxation of income
in the Certificate for the period of such diversification failure (and any
subsequent period). Income means the excess of the Account Value over the
Owner's investment in the Certificate (discussed below).
Control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of the Separate Account's assets for tax purposes. However, current regulations
do not provide guidance as to how to avoid this result. We
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reserve the right to amend the Certificates in any way necessary to avoid this
result. The Treasury Department has stated that it may establish standards
through regulations or rulings. These standards may apply only prospectively,
although they could apply retroactively if the Treasury Department considers the
standards not to reflect a new position.
Owners that are not natural persons -- that is, Owners such as corporations --
are taxed currently on annual increases in their Account Value, unless an
exception applies. Exceptions apply for, among other things, Owners that are
not natural persons but that hold a Certificate as an agent for a natural
person.
Taxation of Annuity Payments. Part of each annuity payment received after the
Annuity Commencement Date is excludible from gross income.
In the case of Fixed Annuity Payments, the excludible portion is found by
multiplying:
. the amount paid by,
. the ratio of the investment in the Certificate (discussed below) to the
expected return under the Fixed Annuity Payment Option.
In the case of Variable Annuity Payments, the excludible portion is the
investment in the Certificate divided by the number of expected payments.
In both cases, the remaining portion of each annuity payment, and all payments
made after the investment in the Certificate has been reduced to zero, are
included in the payee's income. Should annuity payments stop on account of the
death of the Annuitant before the investment in the Certificate has been fully
paid out, the payee is allowed a deduction for the unpaid amount. If the payee
is the Annuitant, the deduction is taken on the final tax return. If the payee
is a Beneficiary, that Beneficiary may receive the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Certificate" is the amount equal to the portions of
purchase payments made by or on behalf of the Owner that have not been excluded
or deducted from the individual's gross income, less amounts previously received
under the Certificate that were not included in income.
Taxation of Partial Withdrawals and Total Surrenders. Partial withdrawals from
a Certificate are includible in income to the extent that the Owner's Account
Value exceeds the investment in the Certificate. In the event you surrender a
Certificate in its entirety, the amount of your investment in the Certificate is
excludible from income, and any amount you receive in excess of your investment
in the Certificate is includible in income. All annuity Certificates or
contracts we issue to the same Owner during any calendar year are aggregated for
purposes of determining the amount of any distribution that is includible in
gross income.
Penalty Tax on Premature Distributions. In the case of such a distribution,
there may be imposed a federal tax penalty equal to 10% of the amount treated as
taxable income. The penalty tax will not apply, however, to distributions:
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. made on or after the recipient reaches age 59 1/2,
. made on account of the recipient's becoming disabled,
. that are made after the death of the Owner before the Annuity
Commencement Date or of the payee after the Annuity Commencement Date (or
if such person is not a natural person, that are made after the death of
the primary Annuitant, as defined in the Code), or
. that are part of a series of substantially equal periodic payments made
at least annually over the life (or life expectancy) of the Annuitant or
the joint life (or joint life expectancies) of the Annuitant and the
Beneficiary, provided such payments are made for a minimum of 5 years and
the distribution method is not changed before the recipient reaches age
59 1/2 (except in the case of death or disability).
Premature distributions may result, for example, from the following:
. an early Annuity Commencement Date,
. an early surrender,
. partial withdrawal from a Certificate, including a partial withdrawal
under a systematic withdrawal plan,
. assignment of a Certificate, or
. the early death of an Annuitant, unless the third clause listed above,
involving the death of the Owner, applies.
Payment of Death Proceeds. Special rules apply to the distribution of any death
proceeds payable under the Certificate. (See "Death Proceeds.")
Assignments and Loans. An assignment, loan, or pledge under a Non-Qualified
Certificate is taxed in the same manner as a partial withdrawal, as described
above. Repayment of a loan or release of an assignment or pledge is treated as
a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
Purchase Payments. Individuals who are not active participants in a tax-
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments for an IRA equal to the lesser of $2,000 or 100% of the
individual's earned income. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in
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excess of $31,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $41,000 will not be able to deduct purchase
payments. For those with adjusted gross income in the range between $31,000 and
$41,000, the deduction decreases to zero, based on the amount of income.
Beginning in 2000, that income range will increase, as follows:
2000 2001 2002 2003 2004 2005 and
thereafter
------------------------------------------------------------------------
$32,000 $33,000 $34,000 $40,000 $45,000 $50,000
to to to to to to
$42,000 $43,000 $44,000 $50,000 $55,000 $60,000
------------------------------------------------------------------------
Similarly, the otherwise deductible portion of an IRA purchase payment will be
phased out, in the case of married individuals filing joint tax returns, with
adjusted gross income between $51,000 and $61,000, and in the case of married
individuals filing separately, with adjusted gross income between $0 and
$10,000. (A husband and wife who file separate returns and live apart at all
times during the taxable year are not treated as married individuals.)
Beginning in 2000, the income range over which the otherwise deductible portion
of an IRA purchase payment will be phased out for married individuals filing
joint tax returns will increase as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 and
thereafter
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$52,000 $53,000 $54,000 $60,000 $65,000 $70,000 $75,000 $ 80,000
to to to to to to to to
$62,000 $63,000 $64,000 $70,000 $75,000 $80,000 $85,000 $100,000
--------------------------------------------------------------------------------------------
</TABLE>
A married individual filing a joint tax return, who is not an active participant
in a tax-qualified retirement plan, but whose spouse is an active participant in
such a plan, may, in any year, deduct from his or her taxable income purchase
payments for an IRA equal to the lesser of $2,000 or 100% of the individual's
earned income. For the individual, the adjusted gross income range over which
the otherwise deductible portion of an IRA purchase payment will be phased out
is $150,000 to $160,000.
Tax Free Rollovers. Amounts may be transferred, in a tax-free rollover, from
(1) a tax-qualified plan to an IRA or (2) from one IRA to another IRA if, the
transfer meets certain conditions. All taxable distributions ("eligible
rollover distributions") from tax-qualified plans are eligible to be rolled over
with the exception of:
. annuities paid over a life or life expectancy,
. installments for a period of ten years or more; and
. required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, we may pay an eligible
rollover distribution directly to an IRA (a "direct rollover"). Second, we may
pay the distribution directly to the Annuitant
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and then, within 60 days of receipt, the Annuitant may roll the amount over to
an IRA. However, any amount that was not distributed as a direct rollover will
be subject to 20% income tax withholding.
Distributions from an IRA. Amounts received under an IRA as annuity payments,
upon partial withdrawal or total surrender, or on the death of the Annuitant,
are included in the Annuitant's or other recipients' income. If nondeductible
purchase payments have been made, a pro rata portion of such distributions may
not be includible in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
reaches age 59 1/2 and that are not made on account of death or disability, with
certain exceptions. These exceptions include:
. distributions that are part of a series of substantially equal periodic
payments made at least annually over the life (or life expectancy) of the
Annuitant or the joint lives (or joint life expectancies) of the
Annuitant and the Beneficiary; provided such payments are made for a
minimum of 5 years and the distribution method is not changed before the
recipient reaches age 59 1/2 (except in the case of death or disability),
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received unemployment
compensation under federal or state law for at least 12 consecutive weeks
under certain conditions,
. distributions for qualified first-time home purchases for the individual,
a spouse, children, grandchildren, or ancestor of the individual or the
individual's spouse, subject to a $10,000 lifetime maximum; and
. distributions for higher education expenses for the individual, a spouse,
children, or grandchildren.
Distributions of minimum amounts required by the Code must commence by April 1
of the calendar year following the calendar year in which the Annuitant reaches
age 70 1/2 or retires (whichever is later). Additional distribution rules apply
after the death of the Annuitant. These rules are similar to those governing
distributions on the death of an Owner (or other payee during the Annuity
Period) under a Non-Qualified Certificate. (See "Death Proceeds.") Failure to
comply with the minimum distribution rules will result in a penalty tax of 50%
of the amount by which the minimum distribution required exceeds the actual
distribution.
ROTH IRAS
Individuals may purchase a new type of non-deductible IRA, known as a Roth IRA.
Purchase payments for a Roth IRA are limited to $2,000 per year. This permitted
contribution is phased out for adjusted gross income between $95,000 and
$110,000 in the case of single taxpayers, between $150,000 and $160,000 in the
case of married taxpayers filing joint returns, and between $0 and $10,000 in
the case of married taxpayers filing separately. An overall $2,000 annual
limitation continues to apply to all of a taxpayer's IRA contributions,
including Roth IRAs and non-Roth IRAs.
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An individual may make a rollover contribution from a non-Roth IRA to a Roth
IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or a
previously deductible IRA contribution. There are no similar limitations on
rollovers from a Roth IRA to another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax-free. A qualified
distribution requires that (1) the individual has held the Roth IRA for at least
five years, and (2) the distribution is made either after the individual reaches
age 59 1/2, on the individual's death or disability, or as qualified first-time
home purchase. Qualified Distributions for a qualified first-time home
purchase, are subject to a $10,000 lifetime maximum for the individual, a
spouse, child, grandchild, or ancestor of such individual or the individual's
spouse.
SIMPLIFIED EMPLOYEE PENSION PLANS
Eligible employers may establish an IRA plan known as a simplified employee
pension plan ("SEP"), if certain requirements are met. An employee may make
contributions to a SEP in accordance with the rules applicable to IRAs discussed
above. Employer contributions to an employee's SEP are deductible by the
employer and are not currently includible in the taxable income of the employee,
provided that total employer contributions do not exceed the lesser of 15% of an
employee's compensation or $30,000.
SIMPLE RETIREMENT ACCOUNTS
Eligible employers may establish an IRA plan known as a simple retirement
account ("SRA"), if they meet certain requirements. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $6,000 a
year to the employee's SRA. The employer must, in general, make a fully vested
matching contribution for employee deferrals up to a maximum of 3% of
compensation.
OTHER QUALIFIED PLANS
Purchase Payments. Purchase payments made by an employer under a pension,
profit sharing, or annuity plan qualified under section 401 or 403(a) of the
Code, not in excess of certain limits, are deductible by the employer. The
purchase payments are also excluded from the current income of the employee.
Distributions Before the Annuity Commencement Date. Purchase payments
includible in an employee's taxable income (less any amounts previously received
that were not includible in the employee's taxable income) represent the
employee's "investment in the Certificate." Amounts received before the Annuity
Commencement Date under a Certificate in connection with a section 401 or 403(a)
plan are generally allocated on a pro-rata basis between the employee's
investment in the Certificate, and other amounts. A lump-sum distribution will
not be includible in income in the year of distribution if the employee
transfers, within 60 days of receipt, all amounts received (less the
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employee's investment in the Certificate), to another tax-qualified plan, to an
individual retirement account or an IRA in accordance with the rollover rules
under the Code.
However, any amount that is not distributed as a direct rollover will be subject
to 20% income tax withholding. (See "Tax Free Rollovers.") Special tax
treatment may be available, for tax years beginning before December 31, 1999, in
the case of certain lump-sum distributions that are not rolled over to another
plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee reaches age 59 1/2 and that are not
made on account of death or disability, with certain exceptions. These
exceptions include distributions that are:
. part of a series of substantially equal periodic payments made at least
annually beginning after the employee separates from service and made
over the life (or life expectancy) of the employee or the joint lives (or
joint life expectancies) of the employee and the Beneficiary, provided
such payments are made for at least 5 years and the distribution method
is not changed before the recipient reaches age 59 1/2 (except in the
case of death or disability),
. made after the employee's separation from service on account of early
retirement after attaining age 55,
. made to pay for qualified higher education or first-time home buyer
expenses,
. made to an alternate payee pursuant to a qualified domestic relations
order, if the alternate payee is the spouse or former spouse of the
employee; or
. distributions for medical expenses in excess of 7.5% of the Annuitant's
adjusted gross income and withdrawals for medical insurance (without
regard to the 7.5% AGI floor) if the individual has received unemployment
compensation under federal or state law for at least 12 consecutive weeks
under certain conditions.
Annuity Payments. A portion of annuity payments received under Certificates for
section 401 and 403(a) plans after the Annuity Commencement Date may be
excludible from the employee's income, in the manner discussed above, in
connection with Variable Annuity Payments, under "Non-Qualified Certificates -
Taxation of Annuity Payments." The difference is that, here, the number of
expected payments is determined under a provision in the Code. Distributions of
minimum amounts required by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee reaches age 70
1/2 (or retires, if later). Failure to comply with the minimum distribution
rules will result in a penalty tax of 50% of the amount by which the minimum
distribution required exceeds the actual distribution.
Self-Employed Individuals. Various special rules apply to tax-qualified plans
established by self-employed individuals.
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PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
Purchase Payments. Private taxable employers may establish unfunded, Non-
Qualified deferred compensation plans for a select group of management or highly
compensated employees and/or for independent contractors. To avoid current
taxation these benefits must be subject to a substantial risk of forfeiture.
These types of programs allow individuals to defer (1) receipt of up to 100% of
compensation that would otherwise be includible in income, and (2) payment of
federal income taxes on the amounts.
Deferred compensation plans represent a contractual promise on the part of the
employer to pay current compensation at some future time. The Certificate is
owned by the employer and is subject to the claims of the employer's creditors.
The individual has no right or interest in the Certificate and is entitled only
to payment from the employer's general assets in accordance with plan
provisions. Purchase payments are not currently deductible by the employer until
benefits are included in the taxable income of the employee.
Taxation of Distributions. Amounts that an individual receives from a private
employer deferred compensation plan are includible in gross income for the
taxable year in which such amounts are paid or otherwise made available.
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Certificate, to the extent includible in taxable
income, are subject to federal income tax withholding.
In some cases, if you own more than one Qualified annuity contract, the
contracts may be considered together to determine whether the federal tax law
requirement for minimum distributions after age 70 1/2, or retirement in
appropriate circumstances, has been satisfied. You may rely on distributions
from another annuity contract or certificate to satisfy the minimum distribution
requirement under a Qualified Certificate we issued. However, you must sign a
waiver releasing us from any liability to you for not calculating and reporting
the amount of taxes and penalties payable for failure to make required minimum
distributions under the Certificate.
TAXES PAYABLE BY USL AND THE SEPARATE ACCOUNT
USL is taxed as a life insurance company under the Code. The operations of the
Separate Account are part of the total operations of USL and are not taxed
separately. Under existing federal income tax laws, USL is not taxed on
investment income derived by the Separate Account (including realized and
unrealized capital gains) with respect to the Certificates. USL reserves the
right to allocate to the Certificates any federal, state or other tax liability
that may result in the future from maintenance of the Separate Account or the
Certificates.
Certain Series may elect to pass through to USL any taxes withheld by foreign
taxing jurisdictions on foreign source income. Such an election will result in
additional taxable income and income tax to
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<PAGE>
USL. The amount of additional income tax, however, may be more than offset by
credits for the foreign taxes withheld that the Series will also pass through.
These credits may provide a benefit to USL.
DISTRIBUTION ARRANGEMENTS
Individuals who sell the Certificates will be licensed by state insurance
authorities as agents of USL. The individuals will also be registered
representatives of (1) American General Securities Incorporated ("AGSI"), the
principal underwriter of the Certificates, (2) Van Kampen Funds Inc. ("VK
Funds"), or (3) other broker-dealer firms. However, some individuals may be
representatives of firms that are exempt from broker-dealer regulation. AGSI,
VK Funds and any non-exempt broker-dealer firms are registered with the
Securities and Exchange Commission under the Securities Exchange Act of 1934 as
broker-dealers and are members of the National Association of Securities
Dealers, Inc.
AGSI is an affiliate of USL. AGSI's principal business address is 2727 Allen
Parkway, Houston, Texas 77019-2191.
USL offers the Certificates on a continuous basis. USL and VK Funds have
entered into certain revenue and cost-sharing arrangements in connection with
marketing the Certificates.
USL compensates VK Funds and other broker-dealers that sell the Certificates
according to one or more compensation schedules. The schedules provide for
commissions of up to 7.0% of purchase payments that Owners make. Subject to
approval of the New York Insurance Department, USL may also pay continuing
"trail" commissions of up to 0.75%.
USL also has agreed to pay VK Funds for its promotional activities, such as
solicitation of selling group agreements between broker-dealers and USL, agent
appointments with USL, printing and development of sales literature to be used
by USL appointed agents and related marketing support, and related special
promotional campaigns. From time to time, VK Funds may engage in special
promotions where VK Funds pays additional compensation to one or more of the
broker-dealers that sell the Certificates. None of these distribution expenses
results in any additional charges under the Certificates that are not described
under "Charges under the Certificates."
SERVICES AGREEMENTS
American General Life Companies ("AGLC") is party to a general services
agreement with USL. AGLC, an affiliate of USL, is a corporation incorporated in
Delaware on November 24, 1997. Its address is 2727-A Allen Parkway, Houston,
Texas 77019-2191. Under this agreement, AGLC provides services to USL,
including most of the administrative, data processing, systems, customer
services, product development, actuarial, auditing, accounting and legal
services for USL and the Certificates.
USL has entered into administrative services agreements with the advisers for
the mutual funds that offer shares to the Divisions. USL receives fees for the
administrative services it performs. These fees do not result in any additional
charges under the Certificates that are not described under "Charges under the
Certificates."
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LEGAL MATTERS
We are not involved in any legal matter about the Separate Account that would be
considered material to the interests of Owners. Pauletta P. Cohn, Associate
General Counsel of AGLC has passed upon the legality of the Certificates
described in this Prospectus. Freedman, Levy, Kroll & Simonds, Washington,
D.C., has advised USL on certain federal securities law matters.
YEAR 2000 CONSIDERATIONS
Internal Systems. USL'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 being undertaken by its key business units with
centralized oversight. Each business unit, including USL, 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 our information technology and non-
information technology systems; (2) assess which items in the inventory may
expose us to business interruptions due to Year 2000 issues; (3) reprogram or
replace systems that are not Year 2000 ready; (4) test systems to prove that
they will function into the next century as they do currently; and (5) return
the systems to operations. As of December 31, 1998, substantially all of our
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. 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) USL 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 Year 2000
readiness. We developed a plan to assess and attempt to reduce 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 approximately 700 critical third party dependencies,
including those relating to USL. A more detailed evaluation will be completed
during first quarter 1999 as part of our contingency planning efforts. Due to
the various stages of third parties' Year 2000 readiness, our testing activities
will extend through 1999.
Contingency Plans. USL and its affiliates have 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
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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 action plans. We are currently
developing contingency plans and expect to substantially complete all
contingency planning activities during the second quarter of 1999.
Risks and Uncertainties. Based on our plans to make internal systems ready for
Year 2000, to deal with third party relationships, and to develop contingency
actions, we believe that we will experience at most isolated and minor
disruptions of business processes following the turn of the century. Such
disruptions are not expected to have a material effect on USL's future results
of operations, liquidity, or financial condition. However, due to the size and
complexity of this project, risks and uncertainties exist, and we cannot predict
a most reasonably likely worst case scenario. If conversion of our 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 our plans), or if
critical third parties fail to achieve Year 2000 readiness on a timely basis,
the Year 2000 issues could have a material adverse impact on our operations
following the turn of the century.
Costs. Through December 31, 1998, USL 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 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 not passed to Divisions of the Separate
Account.
OTHER INFORMATION ON FILE
We have filed a Registration Statement with the Securities and Exchange
Commission under the Securities Act of 1933 for the Certificates discussed in
this Prospectus. We have not included all of the information in the
Registration Statement and its exhibits. Statements contained in this
Prospectus concerning the group master contract, Certificates and other legal
instruments are intended to be summaries. For a complete statement of their
terms, you should refer to the documents that we filed with the Securities and
Exchange Commission.
We will send you a Statement on request without charge. To make your request,
you can either call us or send us the form on the last page of this Prospectus.
The Statement's contents are as follows:
51
<PAGE>
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
General Information........................................................................... 2
Regulation and Reserves....................................................................... 2
Independent Auditors.......................................................................... 3
Services...................................................................................... 3
Principal Underwriter......................................................................... 4
Annuity Payments.............................................................................. 4
Gender of Annuitant......................................................................... 4
Misstatement of Age or Gender and Other Errors.............................................. 4
Change of Investment Adviser or Investment Policy............................................. 5
Performance Data for the Divisions............................................................ 5
Average Annual Total Return Calculations.................................................... 5
Total Return Calculations (without Surrender Charge or Annual Certificate Fee).............. 6
Cumulative Total Return Calculations (without Surrender Charge or Annual Certificate Fee)... 6
Hypothetical Performance.................................................................... 6
Yield Calculations.......................................................................... 9
Money Market Division Yield and Effective Yield Calculations................................ 9
Performance Comparisons..................................................................... 10
Effect of Tax-Deferred Accumulation........................................................... 11
Financial Statements.......................................................................... 12
Index to Financial Statements................................................................. 13
</TABLE>
52
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK ("USL")
Administrative Center, Houston, TX
To obtain a Statement of Additional Information, please complete the form below
and mail to:
The United States Life Insurance Company in the City of New York
Attention: Administrative Center
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the Generations Variable
Annuity to me at the following address:
______________________________________
Name
______________________________________
Address
______________________________________
City/State Zip Code
53
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAS ISSUED BY THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK ON OR AFTER JUNE 1, 1999.
This Disclosure Statement is not part of your annuity certificate but contains
general and standardized information which must be furnished to each person who
is issued an Individual Retirement Annuity. You must refer to your certificate
to determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date your
certificate is delivered that you do not desire to retain your IRA, written
notification to the Company must be mailed, together with your certificate,
within that period. If such notice is mailed within 20 days, current
certificate value or contributions if required, without adjustments for any
applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE TO:
The United States Life Insurance Company in the City of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 346-4944 and (713) 831-3505
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse. If
you are an active participant, but have an adjusted gross income (AGI) below a
certain level (see B. below), you may still make a deductible contribution. If,
however, you or your spouse is an active participant and your combined AGI is
above the specified level, the amount of the deductible contribution you may
make to an IRA will be phased down and eventually eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered
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under a profit-sharing plan, certain government plans, a salary reduction
arrangement (such as a tax sheltered annuity arrangement or a 401(k) plan), a
Simplified Employee Pension program (SEP), any Simple Retirement Account or a
plan which promises you a retirement benefit which is based upon the number of
years of service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in your
retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days of
active service, or 2) a volunteer firefighter covered for firefighting service
by a government plan. Of course, if you are covered in any other plan, these
exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with your
spouse at any time during the year, or (ii) filed a joint return and have a
joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but file
a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single individuals
and for married individuals filing jointly will increase as follows:
Threshold Level
----------------------------------
For taxable years beginning in: Single Married (filing jointly)
- - ---------------------------------- ------- ------------------------
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
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A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level (AGI - Threshold Level) is
called your Excess AGI. The Maximum Allowable Deduction is $2,000. In the case
of a married individual filing jointly and earning less than his or her spouse,
the maximum Allowable Deduction is the lesser of $2,000 or the spouse's income,
less any deductible IRA contributions or contributions to a Roth IRA. You can
estimate your Deduction Limit as follows:
(Your Deduction Limit may be slightly higher if you use this formula rather than
the table provided by the IRS.)
$10,000 - Excess AGI x Maximum Allowable Deduction = Deduction Limit
--------------------
$10,000
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - Excess AGI
--------------------
$20,000 x Maximum Allowable Deduction = Deduction Limit
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed 100%
of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has an
AGI of $36,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $36,619
Her Threshold Level is $30,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619 - $30,000) = $6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
----------------
$10,000 x $2,000 = $676 (rounded to $680)
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. Their 1999 combined AGI
is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to each
IRA as follows:
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Their AGI is $55,255
Their Threshold Level is $51,000
Their Excess AGI is (AGI-Threshold Level) or ($55,255-$51,000) = $4,255
The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as follows:
$10,000 - $4,255
----------------
$10,000 x $2,000 = $1,149 (rounded to $1,150)
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation, each
spouse could still contribute to an IRA and calculate their deductible
contribution to each IRA as in Example 2.
EXAMPLE 4: In 1998, Mr. Jones, a married person, files a separate tax
return and is an active participant. He has $1,500 of compensation and
wishes to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or ($1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000
So, his IRA deduction limit is:
$10,000 - $1,500 x $2,000 = $1,700
----------------
$10,000
Even though his IRA deduction limit under the formula is $1,700, Mr. Jones may
not deduct an amount in excess of his compensation, so, his actual deduction is
limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAs
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married individuals
filing a joint return), you may still contribute up to the lesser of 100% of
compensation or $2,000 to an IRA ($4,000 in the case of married individuals
filing a joint return). The amount of your contribution which is not deductible
will be a non-deductible contribution to the IRA. You may also choose to make a
contribution non-deductible even if you could have deducted part or all of the
contribution. Interest or other earnings on your IRA contribution, whether from
deductible or non-deductible contributions, will not be taxed until taken out of
your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the amount
of the non-deductible contribution to the IRS on Form 8606 as a part of your tax
return for the year.
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
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You may withdraw an IRA contribution made for a year any time before April 15 of
the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year for
which the contribution was made. If some portion of your contribution is not
deductible, you may decide either to withdraw the non-deductible amount, or to
leave it in the IRA and designate that portion as a non-deductible contribution
on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are received.
Non-deductible IRA contributions, however, are made using income which has
already been taxed (that is, they are not deductible contributions). Thus, the
portion of the IRA distributions consisting of non-deductible contributions will
not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA(s) will consist of a non-taxable
portion (return of deductible contributions, if any, and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The following
formula is used to determine the non-taxable portion of your distributions for a
taxable year:
Remaining
Non-Deductible Contributions
- - ----------------------------
Year-End Total IRA Balances x Total Distributions = Nontaxable Distributions
(for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a single
IRA. This includes all regular IRAs (whether accounts or annuities), as well as
Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also add back
the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
YEAR DEDUCTIBLE NON-DEDUCTIBLE
---- ----------- --------------
1990................................ $2,000
1991................................ 1,800
1994................................ 1,000 $1,000
1996................................ 600 1,400
------ ------
$5,400 $2,400
Deductible Contributions:.......................... $5,400
Non-Deductible Contributions:...................... 2,400
Earnings on IRAs:.................................. 1,200
------
Total Account Balance of IRA(s) as of 12/31/98:.... $9,000
(before distributions in 1998).
In 1998, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The non-
taxable portion of the distributions for 1998 is figured as follows:
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Total non-deductible contributions $2,400
Total account balance in the IRAs, before distributions ------
$9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1998 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1998.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may not
be rolled over.
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy; (2) installments for a period of ten years or more; and
(3) required minimum distributions under Section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent income tax withholding, and, if you are younger than age 59 1/2, may
result in a 10% excise tax on any amount of the distribution that is included in
income. Questions regarding distribution options under the Act should be
directed to your Plan Trustee or Plan Administrator, or may be answered by
consulting IRS Regulations (S)1.401(a)(31)-1, (S)1.402(c)-2T and
(S)31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code (S)72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for certain
medical care expenses or to an unemployed individual for health insurance
premiums, (c) is received as a part of a series of substantially equal payments
over your life or life expectancy, (d) is received as a part of a series of
substantially equal payments over the lives or life expectancy of you and your
beneficiary, or (e) the distribution is contributed to a rollover IRA, (f) is
used for a qualified first time home purchase for you, your spouse, children,
grandchildren, or ancestor, subject to a $10,000 lifetime maximum, or (g) is for
higher education purposes for you, your spouse, children or grandchildren.
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MINIMUM DISTRIBUTIONS
Under the rules set forth in Code (S)408(b)(3) and (S)401(a)(9), you may not
leave the funds in your certificate indefinitely. Certain minimum distributions
are required. These required distributions may be taken in one of two ways: (a)
by withdrawing the balance of your certificate by a "required beginning date,"
usually April 1 of the year following the date at which you reach age 70 1/2; or
(b) by withdrawing periodic distributions of the balance in your certificate by
the required beginning date. These periodic distributions may be taken over (a)
your life; (b) the lives of you and your named beneficiary; (c) a period not
extending beyond your life expectancy; or (d) a period not extending beyond the
joint life expectancy of you and your named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code (S)4974, you may have to pay a 50% excise tax on the amount not distributed
as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions. Currently,
IRS Form 5329 is used to report such information to the Internal Revenue
Service.
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as that
term is defined in Code (S)4975.
Borrowing any money from this IRA would, under Code (S)408(e)(3), cause the
certificate to cease to be an Individual Retirement Annuity and would result in
the value of the annuity being included in the owner's gross income in the
taxable year in which such loan is made.
Use of this certificate as security for a loan from the Company, if such loan
were otherwise permitted, would, under Code (S)408(e)(4), cause the portion so
used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code (S)4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year over
the lesser of his or her taxable compensation or $2,000. (Different limits
apply in the case of a spousal IRA arrangement.) If the excess contribution is
not withdrawn by the due date of your tax return (including extensions) you will
be subject to the penalty.
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IRS APPROVAL
Your annuity certificate and IRA endorsement have been filed for approval by the
Internal Revenue Service as a tax qualified Individual Retirement Annuity.
Such approval by the Internal Revenue Service is a determination only as to the
form of the annuity and does not represent a determination of the merits of such
annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NO. 98033N)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (certificate form number 98033N) purchased from American General Life
Insurance Company on or after June 1, 1999.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) A maximum annual certificate maintenance charge of $30 deducted at the end
of each certificate year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free transfers
annually, of certificate value between divisions of the Separate Account.
(c) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation Value at
time of annuitization or upon the death of the Annuitant. If a
jurisdiction imposes premium taxes at the time purchase payments are made,
the Company may deduct a charge at that time, or defer the charge until
the purchase payments are withdrawn, whether on account of a full or
partial surrender, annuitization, or death of the Annuitant.
(e) If the certificate is surrendered, or if a withdrawal is made, there may
be a Surrender Charge. The Surrender Charge equals the sum of the
following:
6% of purchase payments for surrenders and withdrawals made during the
first certificate year following receipt of the purchase payments
surrendered;
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6% of purchase payments for surrenders and withdrawals made during the
second certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
third certificate year following receipt of the purchase payments
surrendered;
5% of purchase payments for surrenders and withdrawals made during the
fourth certificate year following receipt of the purchase payments
surrendered;
4% of purchase payments for surrenders and withdrawals made during the
fifth certificate year following receipt of the purchase payments
surrendered;
3% of purchase payments for surrenders and withdrawals made during the
sixth certificate year following receipt of the purchase payments
surrendered;
2% of purchase payments for surrenders and withdrawals made during the
seventh certificate year following receipt of the purchase payments
surrendered.
There will be no charge imposed for surrenders and withdrawals made
during the eighth and subsequent certificate years following receipt
of the purchase payments surrendered.
Under certain circumstances described in the certificate, portions of
a partial withdrawal may be exempt from the Surrender Charge.
(f) To compensate for administrative expenses, a daily charge will be incurred
at an annualized rate of .15% of the average Separate Account Value of the
certificate during the Accumulation and the Payout Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60% and
1.95%.
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(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
ROTH INDIVIDUAL RETIREMENT ANNUITY (IRA) DISCLOSURE STATEMENT
INTRODUCTION
This Disclosure Statement is designed for owners of Roth IRAs issued by The
United States Life Insurance Company in the City of New York on or after June 1,
1999.
This Disclosure Statement is not part of your annuity certificate but contains
general and standardized information which must be furnished to each person who
is issued a Roth IRA. You must refer to your certificate to determine your
specific rights and obligations thereunder.
Revocation. If you are purchasing a new or rollover Roth IRA, then if for any
reason you, as a recipient of this Disclosure Statement, decide within 10 days
from the date your certificate is delivered that you do not desire to retain
your Roth IRA, written notification to the Company must be mailed, together with
your certificate, within that period. If such notice is mailed within 10 days,
current certificate value or contributions if required, without adjustments for
any applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR CERTIFICATE TO:
The United States Life Insurance Company in the City of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
Phone No. (800) 346-4944 and (713) 831-3505).
Deductibility. Contributions to your Roth IRA are not deductible on your
personal income tax return. Your Roth IRA contributions are made with money
that has already been taxed.
Eligibility. You can contribute up to the amount of your earned income, but not
more than $2,000 in any one year, even if you are age 70 1/2 or older. In
addition, non-working spouses can contribute to a Roth IRA, provided the working
spouse has at least as much earned income as both spouses will contribute to
their respective Roth IRAs.
Contribution Limits. Contributions to your Roth IRA are subject to the
limitations described in sections 408A and 219 of the Internal Revenue Code of
1986, as amended (the "Code"). In general, you may contribute up to $2,000 per
year to your Roth IRA. However, contributions to your Roth IRA must be
aggregated with contributions to traditional deductible or non-deductible IRAs
for purposes of the annual $2,000 limit. In addition, your contribution limit
may be lower than $2,000 if your adjusted gross income (AGI) exceeds a certain
amount. For married individuals filing a joint return with AGI between $150,000
and $160,000, single individuals with AGI between $95,000 and $110,000 and
married individuals filing separately with an AGI between $0 and $10,000, the
$2,000 annual contribution limit is gradually phased out. These limits apply
without regard to whether either spouse is an active participant, as that term
is defined in Code section 219.
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Applying the Contribution Limits. If your AGI exceeds the contribution limits
described above, then you may determine the extent to which your contribution is
phased out by using the following formula:
(1) Start with your AGI.
(2) Subtract from the amount in (1):
a) $150,000 if filing a joint return
b) $0 if married filing a separate return
c) $95,000 if single, head of household or married filing a separate
return and you lived apart from your spouse during the entire
year.
(3) Divide the result in (2) by $15,000 ($10,000 if filing a joint
return).
(4) Multiply your contribution limit (after reduction for any
contributions to traditional IRAs) by the result in (3).
(5) Subtract the result in (4) from your contribution limit before this
reduction. The result is your reduced contribution limit.
You may round your reduced contribution limit up to the nearest $10. If your
reduced contribution limit is more than $0, but less than $200, increase the
limit to $200.
Example. You are a single individual with taxable compensation of
$113,000. You want to make the maximum allowable contribution to your Roth
IRA for 1998. Your AGI for 1998 is $100,000. You have not contributed to
any traditional IRA, so your contribution limit before the AGI reduction is
$2,000. Your reduced Roth IRA contribution is $1,350, figured as follows:
(1) Modified AGI = $100,000
(2) $100,000 - $95,000 = $5,000
(3) $5,000 / $15,000 = .3333
(4) $2,000 (contribution limit before adjustment) x .3333 = $667
(5) $2,000 - $667 = $1,333. This figure is reduced up to the nearest $10,
so your reduced Roth IRA contribution limit is $1,340.
Conversions or rollovers. Conversions or rollovers from a traditional IRA are
only permitted for taxpayers whose AGI does not exceed $100,000 in the year of
the conversion or rollover. Neither conversions nor rollovers are permitted for
married individuals filing separate returns. Conversions or rollovers from
traditional IRAs to Roth IRAs are generally taxed entirely in the year of the
conversion or rollover. However, a special rule applies to conversions or
rollovers from traditional IRAs to Roth IRAs during 1998. In these cases, you
can elect instead to be taxed proportionately over the four-year period from
1998 through 2001. Conversions or rollovers to your Roth IRA are permitted only
from a traditional IRA or another Roth IRA. You may not convert or roll over
directly to a Roth IRA from a qualified plan described in section 401(a) or
401(k) of the Code, or from an annuity described in section 403(b) of the Code.
Taxation of Distributions. Distributions from your Roth IRA will be treated
first as withdrawals of your regular contributions, then withdrawals of
conversion or rollover contributions, then finally any earnings. Therefore,
distributions will be non-taxable to the extent of your investment in your Roth
IRA. However, a distribution from your Roth IRA may be subject to a 10% penalty
tax, even if the distribution is not otherwise taxable, if it is a distribution
of a conversion or rollover amount within
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<PAGE>
five years of the conversion or rollover. Your Roth IRA is not subject to the
minimum distribution rules before death or to the incidental benefit rules, both
of which are contained in section 401(a)(9).
Distributions from your Roth IRA which consist of earnings will be taxable
unless they are:
1. Made at least five years after you established your first Roth IRA (whether
the Roth IRA was established with regular contributions or conversion or
rollover contributions); and
2. Made after you attain age 59 1/2, or for qualifying first-time homebuyer
expenses (in accordance with section 72(t)(2)(F), or on account of your
death or disability (as defined in section 72(m)(7)).
Taxable distributions may also be subject to a 10% penalty tax unless you are
over age 59 1/2 or you meet one of several other exceptions to the penalty tax.
In general, the same exceptions to the 10% penalty tax that apply to traditional
IRAs also apply to Roth IRAs. See IRS publication 590 for a discussion of the
exceptions to the penalty tax.
Post-death distributions. Upon your death, distributions from your Roth IRA to
your beneficiary generally must commence by the end of the next calendar year
and be paid over a period no longer than your beneficiary's life expectancy.
Alternatively, your beneficiary can take a complete distribution of the balance
of your Roth IRA account by the end of the fifth calendar year after your death.
Reporting. You are required to report penalty taxes due on excess
contributions, excess accumulations, premature distributions, and prohibited
transactions. Currently, IRS Form 5329 is used to report such information to
the Internal Revenue Service.
Excess contributions. You may be subject to a 6% tax on excess contributions if
(1) contributions to your other individual retirement arrangements have been
made in the same tax year, (2) your adjusted gross income exceeds the applicable
limits in Article II of the endorsement for the tax year, or (3) you and your
spouse's compensation does not exceed the amount contributed for both of you for
the tax year.
IRS Approval. This disclosure statement is intended to provide a general
overview of the applicable tax laws relating to Roth Individual Retirement
Annuities. It is not intended to constitute a comprehensive explanation as to
the tax consequences of your Roth IRA. AS WITH ALL SIGNIFICANT TRANSACTIONS
SUCH AS THE ESTABLISHMENT OR MAINTENANCE OF, OR WITHDRAWAL FROM A ROTH IRA,
APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE CONSULTED. Further information may
also be acquired by contacting your IRS District Office or consulting IRS
Publication 590.
FINANCIAL DISCLOSURE
(GENERATIONS VARIABLE ANNUITY, FORM NO. 98033N)
This Financial Disclosure is applicable to Roth IRAs using a Generations
Variable Annuity (certificate form number 98033N) purchased from The United
States Life Insurance Company in the City of New York on or after June 1, 1999.
Page 3-R
<PAGE>
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) A maximum annual certificate maintenance charge of $30 deducted at the
end of each certificate year.
(b) A maximum charge of $25 for each transfer, in excess of 12 free
transfers annually, of certificate value between divisions of the
Separate Account.
(c) To compensate for mortality and expense risks assumed under the
certificate, variable divisions only will incur a daily charge at an
annualized rate of 1.25% of the average Separate Account Value of the
certificate during both the Accumulation and the Payout Phase.
(d) Premium taxes, if applicable, may be charged against Accumulation
Value at time of annuitization or upon the death of the Annuitant. If
a jurisdiction imposes premium taxes at the time purchase payments are
made, the Company may deduct a charge at that time, or defer the
charge until the purchase payments are withdrawn, whether on account
of a full or partial surrender, annuitization, or death of the
Annuitant.
(e) If the certificate is surrendered, or if a withdrawal is made, there
may be a Surrender Charge. The Surrender Charge equals the sum of the
following:
6% of purchase payments for surrenders and withdrawals made
during the first certificate year following receipt of the
purchase payments surrendered;
6% of purchase payments for surrenders and withdrawals made
during the second certificate year following receipt of the
purchase payments surrendered;
5% of purchase payments for surrenders and withdrawals made
during the third certificate year following receipt of the
purchase payments surrendered;
5% of purchase payments for surrenders and withdrawals made
during the fourth certificate year following receipt of the
purchase payments surrendered;
4% of purchase payments for surrenders and withdrawals made
during the fifth certificate year following receipt of the
purchase payments surrendered;
Page 4-R
<PAGE>
3% of purchase payments for surrenders and withdrawals made
during the sixth certificate year following receipt of the
purchase payments surrendered;
2% of purchase payments for surrenders and withdrawals made
during the seventh certificate year following receipt of the
purchase payments surrendered.
There will be no charge imposed for surrenders and withdrawals
made during the eighth and subsequent certificate years following
receipt of the purchase payments surrendered.
Under certain circumstances described in the certificate,
portions of a partial withdrawal may be exempt from the Surrender
Charge.
(f) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .15% of the average Separate Account
Value of the certificate during the Accumulation and the Payout Phase.
(g) Each variable division will be charged a fee for asset management and
other expenses deducted directly from the underlying fund during the
Accumulation and Payout Phase. Total fees will range between 0.60%
and 1.95%.
Page 5-R
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
GENERATIONS(TM)
FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP DEFERRED ANNUITY CERTIFICATES
OFFERED BY
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-346-4944; (713) 831-3505
STATEMENT OF ADDITIONAL INFORMATION
Dated _______ __, 1999
This Statement of Additional Information ("Statement") is not a prospectus. You
should read it with the Prospectus for The United States Life Insurance Company
in the City of New York Separate Account USL VA-R (the "Separate Account"),
dated _________ ___, 1999, concerning flexible payment variable and fixed group
deferred annuity Generations(TM) Certificates. The Separate Account invests in
certain Series of the Van Kampen Life Investment Trust and the Morgan Stanley
Dean Witter Universal Funds, Inc. You can obtain a copy of the Prospectus for
the Certificates, and any Prospectus supplements, by contacting The United
States Life Insurance Company in the City of New York ("USL") at the address or
telephone numbers given above. You have the option of receiving benefits on a
fixed basis through USL's Fixed Account or on a variable basis through the
Separate Account. Terms have the same meanings in this Statement that they do
in the Prospectus under the heading "Definitions."
TABLE OF CONTENTS
General Information.............................................. 2
Regulation and Reserves.......................................... 2
Independent Auditors............................................. 3
Services......................................................... 3
Principal Underwriter............................................ 4
Annuity Payments................................................. 4
Gender of Annuitant............................................ 4
Misstatement of Age or Gender and Other Errors................. 4
Change of Investment Adviser or Investment Policy................ 5
Performance Data for the Divisions............................... 5
<PAGE>
Average Annual Total Return Calculations....................... 5
Total Return Calculations (without Surrender
Charge or Annual Contract Fee).............................. 6
Cumulative Total Return Calculations (without
Surrender Charge or Annual Contract Fee)..................... 6
Hypothetical Performance....................................... 6
Yield Calculations............................................. 9
Money Market Division Yield and Effective Yield Calculations... 9
Performance Comparisons........................................ 10
Effect of Tax-Deferred Accumulation.............................. 11
Financial Statements............................................. 12
Index to Financial Statements.................................... 13
GENERAL INFORMATION
USL is a stock life insurance company established under the laws of the state
of New York. The Company is a wholly-owned subsidiary of USLIFE Corporation,
which in turn is a wholly-owned subsidiary of AGC Life Insurance Company, a
Missouri corporation ("AG Missouri"). It is engaged primarily in the life
insurance business and annuity business. AG Missouri, in turn, is a wholly-
owned subsidiary of American General Corporation, a Texas holding corporation
engaged primarily in the insurance business.
REGULATION AND RESERVES
USL is subject to regulation and supervision by the State of New York, where it
is licensed to do business. This regulation covers a variety of areas,
including:
. benefit reserve requirements,
. adequacy of insurance company capital and surplus,
. various operational standards, and
. accounting and financial reporting procedures.
USL's operations and accounts are subject to periodic examination by insurance
regulatory authorities.
Under most insurance guaranty fund laws, a state can assess insurers doing
business in the state for covered insurance contract losses incurred by
insolvent companies. State laws set limits for these assessments. However, USL
cannot reasonably estimate the amount of any future assessments of USL under
these laws. Most states have the authority to excuse or defer an assessment, if
it would threaten an insurer's own financial strength. The Account Value held
in the Separate Account may not be covered by insurance guaranty fund laws. The
Account Value held in the Fixed Account is covered by the insurance guaranty
fund laws.
2
<PAGE>
The federal government generally has not directly regulated the business of
insurance. However, federal initiatives often have an impact on the business in
a variety of ways. Federal measures that may adversely affect the insurance
business include:
. employee benefit regulation,
. tax law changes affecting the taxation of insurance companies or of
insurance products,
. changes in the relative desirability of various personal investment
vehicles; and
. removal of impediments on the entry of banking institutions into the
business of insurance.
Also, both the executive and legislative branches of the federal government are
considering various insurance regulatory matters. This could ultimately result
in direct federal regulation of some aspects of the insurance business. USL
cannot predict whether this will occur or, if it does, what the effect on USL
would be.
State insurance law requires USL to carry reserves on its books, as liabilities,
to meet its obligations under outstanding insurance contracts. USL bases these
reserves on assumptions about future claims experience and investment returns,
among other things.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if USL were to incur claims or expenses at rates
significantly higher than expected. This might happen, for example, due to a
spread of acquired immune deficiency syndrome or other infectious diseases or
catastrophes, or significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1998 financial statements of USL included in this Statement were audited by
Ernst & Young LLP, independent auditors, as set forth in their reports,
appearing elsewhere herein, and are included in reliance upon such reports given
on the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP is located at 787 Seventh Avenue, New York, New York 10019. The
financial statements of USL for the three months ended March 31, 1999, included
in this Statement, have not been audited.
SERVICES
USL and American General Life Companies ("AGLC") are parties to a services
agreement. Most of the affiliated companies within the American General
Corporation holding company system, including certain life insurance companies,
are also parties to a similar agreement. AGLC is a corporation incorporated in
Delaware on November 24, 1997, with its home office located at 2727-A Allen
Parkway, Houston, Texas
3
<PAGE>
77019. AGLC provides shared services to USL and certain other life insurance
companies at cost. These services include data processing, systems, customer
services, product development, actuarial, auditing, accounting, and legal. USL
did not pay any fees to AGLC in 1998, because AGLC performed no services under
the agreement.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
for the Contracts. AGSI also serves as principal underwriter to AGL's Separate
Account A, Separate Account D, and Separate Account VL-R and to Separate Account
E of American General Life Insurance Company of New York. All of these other
separate accounts are unit investment trusts registered under the Investment
Company Act of 1940. AGSI, a Texas corporation, is a wholly-owned subsidiary of
AGL and a member of the National Association of Securities Dealers, Inc.
As principal underwriter for the Separate Account, AGSI has not received any
compensation from USL for any of the prior three fiscal years.
USL offers the securities under the Certificates on a continuous basis.
ANNUITY PAYMENTS
GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each annuity
payment ordinarily will be higher if the Annuitant or other measuring life is a
male, as compared with a female, under an otherwise identical Certificate. This
is because, statistically, females tend to have longer life expectancies than
males.
However, Montana, and certain other jurisdictions, do not permit differences in
annuity payment rates between males and females.
In addition, employers should be aware that, under most employer-sponsored
plans, the law prohibits Certificates that make distinctions based on gender.
Under these plans, USL will make available Certificates with no such
differences.
MISSTATEMENT OF AGE OR GENDER AND OTHER ERRORS
If the age or gender of an Annuitant has been misstated to us, any amount
payable will be the amount that the purchase payments paid would have purchased
at the correct age and gender. If we made any overpayments because of incorrect
information about age or gender or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. We will credit or charge the amount of any
adjustment with interest at the assumed interest rate used in the Certificate's
annuity tables.
4
<PAGE>
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise permitted by law or regulation, no Series may change the
investment adviser to any Series or any investment policy without the consent of
the shareholders. If required, we will file approval of or change of any
investment objective with the insurance department of each state where a
Certificate has been delivered. We will notify you (or, after annuity payments
start, the payee) of any material investment policy change we have approved. We
will also notify you of any investment policy change before its implementation
by the Separate Account, if the change requires your comment or vote.
PERFORMANCE DATA FOR THE DIVISIONS
We may quote investment results for the available Divisions of the Separate
Account from time to time. These results will not be an estimate or guarantee of
future investment performance. Nor will they represent the actual experience of
amounts invested by a particular Owner. We will carry performance figures to
the nearest one-hundredth of one percent. We may include in the figures the
effect of voluntary fee waivers and expense reimbursements to the Funds from
their investment adviser and administrator.
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. We calculate each
Division's average annual total return quotation under the following standard
method that the Securities and Exchange Commission ("SEC") prescribes:
. We take a hypothetical $1,000 investment in the Division's Accumulation Units
on the first day of the period at the maximum offering price. This figure is
the Accumulation Unit Value per unit ("initial investment").
. We calculate the ending redeemable value ("redeemable value") of that
investment at the end of the period. The redeemable value reflects the effect
of (1) any applicable Surrender Charge at the end of the period and (2) all
other recurring charges and fees applicable under the Certificate to all Owner
accounts. Other charges and fees include the Mortality and Expense Risk
Charge, the Administrative Expense Charge, and the Annual Certificate Fee. We
do not reflect any premium taxes in the calculation.
. We divide the redeemable value by the initial investment.
. We take this quotient to the Nth root (N representing the number of years in
the period), subtract 1 from the result, and express the result as a
percentage.
5
<PAGE>
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CERTIFICATE FEE)
Each Division may also advertise non-standardized total return. We calculate
non-standardized total return in the same manner and for the same time periods
as standardized average annual total return, which we describe immediately
above. However, in making the redeemable value calculation, we do not deduct
any applicable Surrender Charge that we may impose at the end of the period.
This is because we assume that the Certificate will continue through the end of
each period. We also do not deduct the Annual Certificate Fee. Deducting these
charges would reduce the resulting performance results.
CUMULATIVE TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL
CERTIFICATE FEE)
Each Division may also advertise non-standardized cumulative total return
performance. Cumulative total return performance is the compound rate of return
on a hypothetical initial investment of $1,000 in each Division's Accumulation
Units on the first day of the period at the maximum offering price. This figure
is the Accumulation Unit value per unit ("initial investment"). Cumulative
total return figures (and the related "Growth of a $1,000 Investment" figures
set forth below) do not include the effect of any premium taxes, any applicable
Surrender Charge, or the Annual Certificate Fee. Cumulative total return
figures reflect changes in Accumulation Unit value. We calculate these figures
by finding the cumulative rates of return of the hypothetical initial investment
over various periods, according to the following formula, and then expressing
those rates as a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the applicable
period.
HYPOTHETICAL PERFORMANCE
Each Division may advertise hypothetical performance, based on the calculations
described above, where all or a portion of the actual historical performance of
the corresponding Series in which the Division invests pre-dates the effective
date of the Division.
The tables below provide hypothetical performance information for the available
Divisions of the Separate Account based on the actual historical performance of
the corresponding Series in which each of these Divisions invests. This
information reflects all actual charges and deductions of these Series and the
Separate Account that hypothetically would have been made if the Separate
Account invested assets under the Certificates in these Series for the periods
indicated.
All of the actual historical performance of the corresponding Series, as of the
date of this Statement, predates the effective date of the Division investing in
that series. The tables below will be revised, in future Statements, to show
actual annual historical performance that occurs after the effective date of a
Division.
6
<PAGE>
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1998)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/2/
- - ------------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Domestic Income (0.62)% 6.05% 5.95% N/A
Emerging Growth 29.54% N/A N/A 23.73%
Enterprise 17.16% 19.67% 16.57% N/A
Government 1.00% 4.15% 6.77% N/A
Growth and Income 11.86% N/A N/A 17.69%
Money Market (2.51)% 2.67% 3.74% N/A
Morgan Stanley Real Estate Securities (18.92)% N/A N/A 12.45%
Strategic Stock 8.80% N/A N/A 10.28%
Asian Equity (13.83)% N/A N/A (34.61)%
Emerging Markets Equity (31.33)% N/A N/A (16.17)%
Equity Growth 11.59% N/A N/A 22.00%
Global Equity 5.81% N/A N/A 12.66%
International Magnum 1.37% N/A N/A 3.97%
Fixed Income 0.31% N/A N/A 4.79%
High Yield (2.74)% N/A N/A 4.96%
Mid Cap Value 8.20% N/A N/A 23.87%
Value (9.57)% N/A N/A 4.68%
</TABLE>
Hypothetical Historical Total Returns
(Through December 31, 1998)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/2/
- - ------------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Domestic Income 5.46% 6.69% 6.01% N/A
Emerging Growth 35.65% N/A N/A 24.55%
Enterprise 23.26% 20.09% 16.62% N/A
Government 7.08% 4.83% 6.83% N/A
Growth and Income 17.95% N/A N/A 19.65%
Money Market 3.57% 3.39% 3.81% N/A
Morgan Stanley Real Estate Securities (12.85)% N/A N/A 13.49%
Strategic Stock 14.89% N/A N/A 14.95%
Asian Equity (7.75)% N/A N/A (30.46)%
Emerging Markets Equity (25.27)% N/A N/A (13.63)%
Equity Growth 17.68% N/A N/A 24.30%
Global Equity 11.90% N/A N/A 15.13%
International Magnum 7.45% N/A N/A 6.63%
Fixed Income 6.39% N/A N/A 7.42%
High Yield 3.34% N/A N/A 7.59%
Mid Cap Value 14.29% N/A N/A 26.13%
Value (3.49)% N/A N/A 7.33%
</TABLE>
7
<PAGE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1998)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/2/
- - ------------------- --------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Domestic Income 5.46% 38.21% 79.31% N/A
Emerging Growth 35.65% N/A N/A 115.46%
Enterprise 23.26% 149.71% 365.10% N/A
Government 7.08% 26.58% 93.68% N/A
Growth and Income 17.95% N/A N/A 43.68%
Money Market 3.57% 18.11% 45.36% N/A
Morgan Stanley Real Estate Securities (12.85)% N/A N/A 55.65%
Strategic Stock 14.89% N/A N/A 17.51%
Asian Equity ( 7.75)% N/A N/A (48.54)%
Emerging Markets Equity (25.27)% N/A N/A (28.07)%
Equity Growth 17.68% N/A N/A 54.26%
Global Eqity 11.90% N/A N/A 32.43%
International Magnum 7.45% N/A N/A 13.65%
Fixed Income 6.39% N/A N/A 15.34%
High Yield 3.34% N/A N/A 15.70%
Mid Cap Value 14.29% N/A N/A 58.84%
Value (3.49)% N/A N/A 15.14%
</TABLE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1998)
<TABLE>
<CAPTION>
Since
Series
Investment Division One Year Five Years/1/ Ten Years/1/ Inception/2/
- - ------------------- ------------------ ------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
Domestic Income $1,055 $1,382 $1,793 N/A
Emerging Growth $1,356 N/A N/A $2,155
Enterprise $1,233 $2,497 $4,651 N/A
Government $1,071 $1,266 $1,937 N/A
Growth and Income $1,179 N/A N/A $1,437
Money Market $1,036 $1,181 $1,454 N/A
Morgan Stanley Real Estate Securities $ 872 N/A N/A $1,556
Strategic Stock $1,149 N/A N/A $1,175
Asian Equity $ 922 N/A N/A $ 515
Emerging Markets Equity $ 747 N/A N/A $ 719
Equity Growth $1,177 N/A N/A $1,543
Global Equity $1,119 N/A N/A $1,324
International Magnum $1,075 N/A N/A $1,136
Fixed Income $1,064 N/A N/A $1,153
High Yield $1,033 N/A N/A $1,157
Mid Cap Value $1,143 N/A N/A $1,588
Value $ 965 N/A N/A $1,151
</TABLE>
8
<PAGE>
- - -------------------
1 "N/A" reflects SEC rules that require us to show return information for no
more than 10 years.
2 The inception dates for each Series funding to the Divisions are: April 7,
1986 for the Money Market, Enterprise, and Government Series; November 4, 1987
for the Domestic Income Series; July 3, 1995 for the Emerging Growth and Morgan
Stanley Real Estate Securities Series; October 1, 1996 for the Emerging Markets
Equity Series; December 23, 1996 for the Growth and Income Series; January 2,
1997 for the Equity Growth, Global Equity, International Magnum, Fixed Income,
High Yield, Mid Cap Value, and Value Series; March 3, 1997 for the Asian Equity
Series; and November 3, 1997 for the Strategic Stock Series.
Yield Calculations
We calculate the yields for the Domestic Income, Government, and Growth and
Income Divisions by a standard method that the SEC prescribes. The hypothetical
yields for the Domestic Income, Government, and Growth and Income Divisions,
based upon the one month period ended December 31, 1998, were (1.11)%, (0.40)%,
and (1.19)%, respectively. We calculate the yield quotation by dividing
. the net investment income per Accumulation Unit earned during the specified
one month or 30-day period by the Accumulation Unit values on the last day of
the period, according to the following formula that assumes a semi-annual
reinvestment of income:
YIELD = 2[((a-b)/cd + 1)/6/ - 1]
a = net dividends and interest earned during the period by the Series
attributable to the Division
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of Accumulation Units outstanding during the period
d = the Accumulation Unit value per unit on the last day of the period
The yield of each Division reflects the deduction of all recurring fees and
charges that apply to each Division. These fees and charges include the
Mortality and Expense Risk Charge and the Administrative Expense Charge. They
do not reflect the deduction of Surrender Charges or premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
We calculate the Money Market Division's yield for which we use a standard
method that the SEC prescribes. Under that method, we base the current yield
quotation on a seven-day period and calculate that yield as follows:
. We take the net change in the Accumulation Unit value during the period.
. We divide that net change by the Accumulation Unit value at the beginning
of the period to obtain the base period return.
9
<PAGE>
. We multiply the base period return by the fraction 365/7 to obtain the
current yield figure.
. We carry the current yield figure to the nearest one-hundredth of one
percent.
We do not include realized capital gains or losses and unrealized appreciation
or depreciation of the Division's Portfolio in the calculation. The Money
Market Division's hypothetical historical yield for the seven-day period ended
December 31, 1998, was 3.08%.
We determine the Money Market Division's effective yield by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return +1)/365/7/-1. The Money Market Division's hypothetical historical
effective yield for the seven-day period ended December 31, 1998, was 3.13%.
Yield and effective yield do not reflect the deduction of premium taxes that we
may impose when you redeem Accumulation Units.
PERFORMANCE COMPARISONS
In our advertising and sales literature, we may compare the performance of each
or all of the available Divisions of the Separate Account to the performance of
(1) other variable annuities in general or (2) particular types of variable
annuities that invest in mutual funds, or series of mutual funds, with
investment objectives similar to each of the Divisions of the Separate Account.
Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity Research
and Data Service ("VARDS(R)") are independent services that monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis. Lipper's rankings include
variable life insurance issuers as well as variable annuity issuers. VARDS(R)
rankings compare only variable annuity issuers. The performance analyses
prepared by Lipper and VARDS(R) rank such issuers on the basis of total return.
Total return assumes the reinvestment of dividends and distributions, but does
not take into consideration sales charges, redemption fees or certain expense
deductions at the separate account level. In addition, VARDS(R) prepares risk-
adjusted rankings, which consider the effects of market risk on total return
performance.
In addition, we may compare each Division's performance in advertisements and
sales literature to the following benchmarks:
. the Standard & Poor's 500 Composite Stock Price Index, an unmanaged weighted
index of 500 leading domestic companies that represents approximately 80% of
the market capitalization of the United States equity market,
. the Dow Jones Industrial Average, an unmanaged unweighted average of 30 blue
chip industrial corporations listed on the New York Stock Exchange and
generally considered representative of the United States stock market,
10
<PAGE>
. the Consumer Price Index, published by the U.S. Bureau of Labor Statistics,
a statistical measure of change, over time, in the prices of goods and
services in major spending groups and generally is considered to be a
measure of inflation,
. the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the Merrill
Lynch Government/Corporate Master Index, unmanaged indices that are
generally considered to represent the performance of intermediate and long
term bonds during various market cycles; and
. the Morgan Stanley Capital International Europe Australasia Far East Index,
an unmanaged index that is considered to be generally representative of
major non-United States stock markets.
EFFECT OF TAX-DEFERRED ACCUMULATION
The Certificates qualify for tax-deferred treatment on earnings. This tax-
deferred treatment increases the amount available for accumulation by deferring
taxes on any earnings until the earnings are withdrawn. The longer the taxes are
deferred, the more the potential you have for the assets under your Certificate
to grow over the term of the Certificates.
The hypothetical tables set out below illustrate this potential. The tables
compare accumulations based on a single initial purchase payment of $100,000
compounded annually under:
. a Certificate, under which earnings are not taxed until withdrawn in
connection with a full surrender, partial withdrawal, or annuitization, or
termination due to insufficient Account Value ("withdrawal of earnings") and
. an investment under which earnings are taxed on a current basis ("Taxable
Investment"), based on an assumed tax rate of 28%, and the assumed earning
rates specified.
5 Years 10 Years 20 Years
-------- -------- --------
(7.50% earnings rate)
Certificate $143,563 $206,103 $424,785
Certificate (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
(10.00% earnings rate)
Certificate $161,051 $259,374 $672,750
Certificate (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
The hypothetical tables do not reflect any fees or charges under a Certificate
or Taxable Investment. However, the Certificates impose:
11
<PAGE>
. a Mortality and Expense Risk Charge of 1.25%,
. a Surrender Charge (applicable to withdrawal of earnings for the first seven
Certificate years) up to a maximum of 6%,
. an Administrative Expense Charge of 0.15%, and
. an Annual Certificate Fee of $30.
A Taxable Investment could incur comparable fees or charges. Fees and charges
would reduce the return from a Certificate or Taxable Investment.
Under the Certificates, a withdrawal of earnings is subject to tax, and may be
subject to an additional 10% tax penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred accumulations
and are not a guarantee of future performance.
FINANCIAL STATEMENTS
There are no current financial statements for the Separate Account included in
this Statement, because, as of the date of this Statement, the Separate Account
had funded no Certificates and held no assets.
You should consider the financial statements of USL that we include in this
Statement primarily as bearing on the ability of USL to meet its obligations
under the Certificates.
12
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
USL Financial Statements Page No.
----------
I. Three Months Ended March 31, 1999 and 1998............ Q-1
Report of Independent Auditors........................ Q-3
Balance Sheets........................................ Q-4
Statements of Income.................................. Q-6
Statements of Comprehensive Income.................... Q-7
Statements of Shareholder's Equity.................... Q-8
Statements of Cash Flows.............................. Q-9
Note to Financial Statements.......................... Q-10
II. Years Ended December 31, 1998, 1997, and 1996......... F-1
Report of Independent Auditors........................ F-3
Balance Sheets........................................ F-4
Statements of Income.................................. F-6
Statements of Comprehensive Income.................... F-7
Statements of Shareholder's Equity.................... F-8
Statements of Cash Flows.............................. F-9
Notes to Financial Statements......................... F-10
13
<PAGE>
FINANCIAL STATEMENTS
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Q-1
<PAGE>
The United States Life Insurance Company in the City of New York
Financial Statements
Three months ended March 31, 1999 and 1998
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors...................................... Q-3
Reviewed Financial Statements
Balance Sheets...................................................... Q-4
Statements of Income................................................ Q-6
Statements of Comprehensive Income.................................. Q-7
Statements of Shareholder's Equity.................................. Q-8
Statements of Cash Flows............................................ Q-9
Note to Financial Statements........................................ Q-10
</TABLE>
Q-2
<PAGE>
[ERNST & YOUNG LLP LOGO] . 787 Seventh Avenue . Phone: 212 773 3000
New York, New York 10019
Report of Independent Auditors
Board of Directors and Stockholder
The United States Life Insurance Company
in the City of New York
We have reviewed the accompanying balance sheet of The United States Life
Insurance Company in the City of New York as of March 31, 1999, and the related
statements of income and cash flows for the three-month periods ended March 31,
1999 and 1998. These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheets of The United States Life Insurance Company in the
City of New York as of December 31, 1998 and 1997, and the related statements of
income, shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1998, and in our report dated April 23, 1999, we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying balance sheet as of December 31,
1998, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
New York, New York /s/ ERNST & YOUNG LLP
May 7, 1999 ---------------------
ERNST & YOUNG LLP
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
Q-3
<PAGE>
The United States Life Insurance Company in the City of New York
Balance Sheets
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
--------------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $1,919,000 in 1999 and
$1,897,758 in 1998) $2,021,878 $2,047,519
Equity securities, at fair value (cost - $568
in 1999 and $568 in 1998) 584 584
Mortgage loans on real estate 82,597 84,387
Policy loans 84,537 84,412
Investment real estate 3,929 6,101
Other long-term investments 10,408 1,385
Short-term investments 7 3,005
--------------------------------
Total investments 2,203,940 2,227,393
Cash 4,282 5,045
Indebtedness from affiliates 2,020 6,832
Accrued investment income 41,779 37,227
Accounts and premiums receivable 142,668 231,863
Reinsurance recoverable 688,571 620,661
Deferred policy acquisition costs 108,280 98,552
Property and equipment 4,387 4,318
Other assets 30,020 12,886
--------------------------------
Total assets $3,225,947 $3,244,777
================================
</TABLE>
Q-4
<PAGE>
<TABLE>
<CAPTION>
March 31 DECEMBER 31
1999 1998
-----------------------------------
<S> <C> <C>
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,725,637 $1,729,001
Accident & Health 489,494 407,942
Other policy claims and benefits payable 105,685 116,912
Other policyholders' funds 105,707 109,130
Federal income taxes (17,306) (7,585)
Indebtedness to affiliates 19,993 1,848
Ceded reinsurance payable 139,880 245,576
Other liabilities 139,441 118,339
-----------------------------------
Total liabilities 2,708,531 2,721,163
-----------------------------------
Shareholder's equity:
Common stock, $2 par value, 1,980,658 shares
authorized, issued, and outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income 32,416 53,394
Retained earnings 472,678 457,898
-----------------------------------
Total shareholder's equity 517,416 523,614
-----------------------------------
Total liabilities and shareholder's equity $3,225,947 $3,244,777
===================================
</TABLE>
Q-5
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
--------------------------------------
(In Thousands)
<S> <C> <C>
Revenues:
Premiums and other considerations $51,499 $173,493
Net investment income 45,037 47,720
Net realized investment gains (losses) 37 138
Other 1,109 1,427
--------------------------------------
Total revenues 97,682 222,778
--------------------------------------
Benefits and expenses:
Benefits 52,426 149,375
Operating costs and expenses 23,049 56,764
Total benefits and expenses 75,475 206,139
--------------------------------------
Income before income tax expense 22,207 16,639
Income tax expense 7,427 4,428
--------------------------------------
Net income $14,780 $ 12,211
======================================
</TABLE>
Q-6
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Comprehensive Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
-------------------------------------
(In Thousands)
<S> <C> <C>
Net income $ 14,780 $12,211
-------------------------------------
Other comprehensive income:
Gross change in unrealized (losses)
gains on securities (pretax: 1999:
$(32,148); 1998: $(12,649)) (20,896) (8,222)
Less: gains (losses) realized in net
income 82 -
-------------------------------------
Change in net unrealized (losses) gains
on securities (pretax: 1999:
$(32,274); 1998: $(12,649)) (20,978) (8,222)
-------------------------------------
Comprehensive (loss) income $ (6,198) $ 3,989
=====================================
</TABLE>
Q-7
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Shareholder's Equity
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
-----------------------------------
(In Thousands)
<S> <C> <C>
Common stock:
Balance at beginning of year $ 3,961 $ 3,961
Change during period - -
-----------------------------------
Balance at end of period 3,961 3,961
-----------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361
Change during period - -
-----------------------------------
Balance at end of period 8,361 8,361
-----------------------------------
Accumulated other comprehensive income:
Balance at beginning of year 53,394 53,830
Change in unrealized gains (losses) on
securities (20,978) (436)
-----------------------------------
Balance at end of period 32,416 53,394
-----------------------------------
Retained earnings:
Balance at beginning of year 457,898 483,349
Net income (loss) 14,780 (25,451)
Balance at end of period 472,678 457,898
-----------------------------------
Total shareholder's equity $517,416 $523,614
===================================
</TABLE>
Q-8
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1999 1998
-------------------------------------------
(In Thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 14,780 $ 12,211
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts and premiums receivable 106,813 (3,666)
Change in future policy benefits 73,759 (25,877)
Amortization of policy acquisition costs 9,928 16,135
Policy acquisition costs deferred (7,283) (15,912)
Change in other policyholders' funds (1,531) 3,515
Provision for deferred income tax expense 5,335 (74)
Depreciation 349 205
Amortization (471) (468)
Change in indebtedness to/from affiliates 4,157 8,108
Change in reinsurance balances (173,606) (867)
Net (gain) loss on sale of investments (37) (138)
Other, net (38,484) 13,419
-------------------------------------------
Net cash (used in) provided by operating activities (6,291) 6,591
-------------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (703,914) (563,047)
Sales or maturities of investments and receipts from
repayment of loans 657,247 581,048
Sales and purchases of property, equipment, and
software, net (418) (494)
-------------------------------------------
Net cash (used in) provided by investing activities (47,085) 17,507
-------------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 32,369 33,098
Policyholder account withdrawals (27,940) (86,036)
Short-term collateralized financings 29,384 37,090
-------------------------------------------
Affiliate borrowings 18,800 -
-------------------------------------------
Net cash provided by (used in) financing activities 52,613 (15,848)
-------------------------------------------
(Decrease) increase in cash (763) 8,250
Cash at beginning of period 5,045 4,834
-------------------------------------------
Cash at end of period $ 4,282 $ 13,084
===========================================
</TABLE>
Interest paid amounted to approximately $8 thousand in 1999. There was no
interest paid in 1998.
Q-9
<PAGE>
The United States Life Insurance Company in the City of New York
Note to Financial Statements
March 31, 1999
BASIS OF PRESENTATION
The financial statements for the interim periods herein are unaudited. However,
they have been prepared in accordance with generally accepted accounting
principles for interim financial information and in the opinion of management,
such information reflects all adjustments considered necessary for a fair
presentation. Operating results for the interim period are not necessarily
indicative of the results to be expected for the full year.
These financial statements should be read in conjunction with the audited
financial statements and notes of the Company for the year ended December 31,
1998.
Q-10
<PAGE>
FINANCIAL STATEMENTS
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
F-1
<PAGE>
The United States Life Insurance Company in the City of New York
Financial Statements
Years ended December 31, 1998, 1997, and 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors....... F-3
Audited Financial Statements
Balance Sheets....................... F-4
Statements of Income................. F-6
Statements of Comprehensive Income... F-7
Statements of Shareholder's Equity... F-8
Statements of Cash Flows............. F-9
Notes to Financial Statements........ F-10
</TABLE>
F-2
<PAGE>
[ERNST & YOUNG LLP LOGO] . 787 Seventh Avenue . Phone: 212 773 3000
New York, New York 10019
Report of Independent Auditors
Board of Directors and Stockholder
The United States Life Insurance Company
in the City of New York
We have audited the accompanying balance sheets of The United States Life
Insurance Company in the City of New York (an indirectly wholly owned subsidiary
of American General Corporation) as of December 31, 1998 and 1997, and the
related statements of income, comprehensive income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The United States Life
Insurance Company in the City of New York at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York ---------------------
April 23, 1999 ERNST & YOUNG LLP
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-3
<PAGE>
The United States Life Insurance Company in the City of New York
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1998 1997
------------------------------
<S> <C> <C>
(In Thousands)
ASSETS
Investments:
Fixed maturity securities, at fair value
(amortized cost - $1,897,758 in 1998 and
$2,215,928 in 1997) $2,047,519 $2,352,376
Equity securities, at fair value (cost - $568 in
1998 and $568 in 1997) 584 578
Mortgage loans on real estate 84,387 60,565
Policy loans 84,412 87,726
Investment real estate 6,101 7,731
Other long-term investments 1,385 971
Short-term investments 3,005 55,908
------------------------------
Total investments 2,227,393 2,565,855
Cash 5,045 4,834
Indebtedness from affiliates 6,832 1,711
Accrued investment income 37,227 44,050
Accounts and premiums receivable 231,863 64,717
Reinsurance recoverable 620,661 58,479
Deferred policy acquisition costs 98,552 185,243
Property and equipment 4,318 1,971
Other assets 12,886 9,702
------------------------------
Total assets $3,244,777 $2,936,562
==============================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------
<S> <C> <C>
(In Thousands)
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Future policy benefits
Life and Annuity $1,729,001 $1,876,294
Accident & Health 407,942 186,879
Other policy claims and benefits payable 116,912 115,712
Other policyholders' funds 109,130 86,400
Federal income taxes (7,585) 32,457
Indebtedness to affiliates 1,848 4,746
Ceded reinsurance payable 245,576 5,127
Other liabilities 118,339 79,446
-------------------------------
Total liabilities 2,721,163 2,387,061
-------------------------------
Shareholder's equity:
Common stock, $2 par value, 1,980,658 shares
authorized, issued, and outstanding 3,961 3,961
Additional paid-in capital 8,361 8,361
Accumulated other comprehensive income 53,394 53,830
Retained earnings 457,898 483,349
-------------------------------
Total shareholder's equity 523,614 549,501
-------------------------------
Total liabilities and shareholder's equity $3,244,777 $2,936,562
===============================
</TABLE>
See accompanying notes.
F-5
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Revenues:
Premiums and other considerations $594,155 $666,173 $609,582
Net investment income 185,838 189,262 195,687
Net realized investment (losses)
gains (3,951) (3,116) 3,836
Other 4,901 26,576 8,355
-----------------------------------------------
Total revenues 780,943 878,895 817,460
-----------------------------------------------
Benefits and expenses:
Benefits 514,020 594,021 559,396
Operating costs and expenses 221,115 212,977 225,291
Loss on reinsurance settlements 59,878 - -
Litigation settlement 30,689 - -
Change in control costs - 6,955 -
-----------------------------------------------
Total benefits and expenses 825,702 813,953 784,687
-----------------------------------------------
(Loss) income before income tax
(benefit) expense (44,759) 64,942 32,773
Income tax (benefit) expense (19,308) 22,700 10,943
-----------------------------------------------
Net (loss) income $(25,451) $ 42,242 $ 21,830
===============================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Comprehensive Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Net (loss) income $(25,451) $42,242 $ 21,830
----------------------------------------------
Other comprehensive (loss) income:
Gross change in unrealized (losses)
gains on securities (pretax: 1998:
$(4,920); 1997: $46,905; 1996:
($73,462)) (3,198) 30,488 (47,750)
Less: (losses) gains realized in
net income (2,762) 2,060 1,812
----------------------------------------------
Change in net unrealized (losses)
gains on securities (pretax: 1998:
$(671); 1997: $43,735; 1996:
($76,249) (436) 28,428 (49,562)
----------------------------------------------
Comprehensive (loss) income $(25,887) $70,670 $(27,732)
==============================================
</TABLE>
See accompanying notes.
F-7
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Shareholder's Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
(In Thousands)
Common stock:
Balance at beginning of year $ 3,961 $ 3,961 $ 3,961
Change during year - - -
-----------------------------------------------
Balance at end of year 3,961 3,961 3,961
-----------------------------------------------
Additional paid-in capital:
Balance at beginning of year 8,361 8,361 8,361
Change during year - - -
-----------------------------------------------
Balance at end of year 8,361 8,361 8,361
-----------------------------------------------
Accumulated other comprehensive
income:
Balance at beginning of year 53,830 25,402 74,964
Change in unrealized (losses) gains
on securities (436) 28,428 (49,562)
-----------------------------------------------
Balance at end of year 53,394 53,830 25,402
-----------------------------------------------
Retained earnings:
Balance at beginning of year 483,349 441,107 419,277
Net (loss) income (25,451) 42,242 21,830
-----------------------------------------------
Balance at end of year 457,898 483,349 441,107
-----------------------------------------------
Total shareholder's equity $ 523,614 $549,501 $478,831
===============================================
</TABLE>
See accompanying notes.
F-8
<PAGE>
The United States Life Insurance Company in the City of New York
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
(In Thousands)
OPERATING ACTIVITIES
Net (loss) income $ (25,451) $ 42,242 $ 21,830
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts and premiums receivable (167,146) (6,977) (7,385)
Change in future policy benefits 174,629 82,006 64,811
Amortization of policy acquisition costs 66,331 58,583 85,536
Policy acquisition costs deferred (62,766) (62,651) (63,041)
Change in other policyholders' funds 22,573 21,783 11,452
Provision for deferred income tax expense (45,403) (995) 1,992
Depreciation 1,327 1,100 1,024
Amortization (1,734) (2,360) (2,306)
Change in indebtedness to/from affiliates (8,019) 3,415 732
Change in reinsurance balances (321,733) (9,492) (8,537)
Net (gain) loss on sale of investments 3,951 3,116 (3,836)
Other, net 118,537 39,806 26,497
--------------------------------------------------------------------
Net cash (used in) provided by operating
activities (244,904) 169,576 128,769
--------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of investments and loans made (2,833,731) (2,407,890) (1,246,498)
Sales or maturities of investments and receipts
from repayment of loans 3,183,379 2,507,408 1,280,163
Sales and purchases of property, equipment, and
software, net (3,674) 274 (1,861)
--------------------------------------------------------------------
Net cash provided by investing activities 345,974 99,792 31,804
--------------------------------------------------------------------
FINANCING ACTIVITIES
Policyholder account deposits 131,386 135,668 133,763
Policyholder account withdrawals (232,245) (407,383) (307,065)
--------------------------------------------------------------------
Net cash (used in) financing activities (100,859) (271,715) (173,302)
--------------------------------------------------------------------
Increase (decrease) in cash 211 (2,347) (12,729)
Cash at beginning of year 4,834 7,181 19,910
--------------------------------------------------------------------
Cash at end of year $ 5,045 $ 4,834 $ 7,181
====================================================================
</TABLE>
Interest paid amounted to approximately $5.3 million in 1998. There was no
interest paid in 1997 or 1996.
See accompanying notes.
F-9
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements
December 31, 1998
NATURE OF OPERATIONS
The United States Life Insurance Company in the City of New York (the "Company")
is domiciled in the State of New York. The Company is a wholly owned subsidiary
of USLIFE Corporation. Through the acquisition of USLIFE Corporation by American
General Corporation (the "Parent Company") on June 17, 1997, American General
Corporation became the ultimate parent of the Company.
The Company offers a broad portfolio of individual life and annuity products as
well as group and credit insurance.
The individual life line of business includes universal life, level term, whole
life and interest sensitive whole life as well as annuities. These individual
and annuity products are sold primarily to affluent markets, generally through
independent general agencies and producers as well as financial institutions.
The Company also provides products for preferred international markets and other
target markets through lower cost distribution channels.
Group insurance products include group life, accidental death & dismemberment
("AD&D"), dental, vision and disability coverage and are sold through
independent general agents and producers as well as third party administrators.
These products are marketed nationwide to employers, professional and affinity
associations. The Company also offers managed care medical products to small
employers in four states (New York, New Jersey, Colorado and Illinois).
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP"). Transactions with the Parent Company
and other subsidiaries of the Parent Company are not eliminated from the
financial statements of the Company.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could differ
from those estimates.
1.2 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include both
long-duration and short-duration contracts.
Long-duration contracts include traditional whole life, endowment, guaranteed
renewable term life, universal life, limited payment, and investment contracts.
Long-duration
F-10
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 INSURANCE CONTRACTS (CONTINUED)
contracts generally require the performance of various functions and services
over a period of more than one year.
Short-duration contracts include group major medical, dental, term life, AD&D,
excess major medical, hospital indemnity and long-term and short-term disability
policies. Short-term contracts generally require the performance of various
functions and services over a period of one year or less.
The contract provisions generally cannot be changed or canceled by the insurer
during the contract period; however, most new contracts written by the Company
allow the insurer to revise certain elements used in determining premium rates
or policy benefits, subject to guarantees stated in the contracts.
1.3 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities were classified as available-for-sale
and recorded at fair value at December 31, 1998, 1997, and 1996. After adjusting
related balance sheet accounts as if the unrealized gains (losses) had been
realized, the net adjustment is recorded in accumulated other comprehensive
income within shareholders' equity. If the fair value of a security classified
as available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans and loans for which
management has a concern based on its assessment of risk factors, such as
potential non-payment or non-monetary default. The allowance is based on a loan-
specific review and a formula that reflects past results and current trends.
Loans for which the Company determines that collection of all amounts due under
the contractual terms is not probable are considered to be impaired. The Company
generally looks to the underlying collateral for repayment of impaired loans.
Therefore, impaired loans are considered to be collateral dependent and are
reported at the lower of amortized cost or fair value of the underlying
collateral, less estimated cost to sell.
F-11
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.3 INVESTMENTS (CONTINUED)
POLICY LOANS
Policy loans are reported at unpaid principal balance.
INVESTMENT REAL ESTATE
Investment real estate is classified as held for investment or available for
sale, based on management's intent. Real estate held for investment is carried
at cost, less accumulated depreciation and impairment write-downs. Real estate
available for sale is carried at the lower of cost (less accumulated
depreciation, if applicable) or fair value less cost to sell.
INVESTMENT INCOME
Interest on fixed maturity securities and performing and restructured mortgage
loans is recorded as income when earned and is adjusted for any amortization of
premium or discount. Interest on delinquent mortgage loans is recorded as income
when received. Dividends are recorded as income on ex-dividend dates.
REALIZED INVESTMENT GAINS
Realized investment gains (losses) are recognized using the specific-
identification method.
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including commissions,
underwriting, and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life contracts is charged to expense in
relation to the estimated gross profits of those contracts. DPAC associated with
insurance investment contracts is effectively charged off over the period ending
one year beyond the surrender charge period. DPAC associated with all other
insurance contracts is charged to expense over the premium-paying period or as
the premiums are earned over the life of the contract.
DPAC is adjusted for the impact on estimated future gross profits as if net
unrealized gains (losses) on securities had been realized at the balance sheet
date. The impact of this adjustment is included in accumulated other
comprehensive income within shareholder's equity.
The Company reviews the carrying amount of DPAC on at least an annual basis.
Management considers estimated future gross profits or future premiums, future
lapse
F-12
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
rates, expected mortality/morbidity, interest earned and credited rates,
persistency, and expenses in determining whether the carrying amount is
recoverable.
1.5 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts consist
of mortality, expense, and surrender charges. Policy charges that compensate the
Company for future services are deferred and recognized in income over the
period earned, using the same assumptions used to amortize DPAC (see Note 1.4).
For all other contracts, premiums are recognized when due.
1.6 POLICY AND CONTRACT CLAIMS RESERVES
The Company's insurance and annuity liabilities relate to both long-duration and
short-duration contracts. The contracts normally cannot be changed or canceled
by the Company during the contract period.
For long-duration contracts such as interest-sensitive life and insurance
investment contracts, reserves equal the sum of the policy account balance and
deferred revenue charges. Reserves for other long-duration contracts are based
on estimates of the cost of future policy benefits. Reserves are determined
using the net level premium method. Interest assumptions used to compute
reserves ranged from 2.2% to 11.25% at December 31, 1998.
Short-duration contracts are rated based on attained age and are guaranteed
issue and thus not subject to the normal wear-off mortality/morbidity patterns.
No policy reserves other than unearned premium reserves are held. The unearned
premium reserve is based on gross premium and is calculated on a pro rata basis.
Incurred but not reported claim reserves are based upon patterns demonstrated
through run-out studies. Reserves for open long-term disability claims are based
on the 1964 and 1985 Commissioner Disability Tables, modified for company
experience. The interest assumption is 6%.
1.7 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million by
ceding additional risks through reinsurance contracts with other insurers. The
Company diversifies its risk of reinsurance loss by using a number of reinsurers
that have strong claims-paying ability ratings. The Company remains obligated
for amounts ceded in the
F-13
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.7 REINSURANCE (CONTINUED)
event that the reinsurers do not meet their obligations.
A recoverable is recorded for the portion of benefits paid and insurance
liabilities that have been reinsured. The cost of reinsurance is recognized over
the life of the reinsured policies using assumptions consistent with those used
to account for the underlying policies.
Benefits paid and future policy benefits related to ceded insurance contracts
are recorded as reinsurance recoverables. The cost of reinsurance is recognized
over the life of the underlying reinsured policies using assumptions consistent
with those used to account for the underlying policies.
1.8 PARTICIPATING POLICY CONTRACTS
Participating life insurance accounted for approximately 36.7%, 33.2%, and 24.3%
of individual life insurance in force at December 31, 1998, 1997 and 1996
respectively.
The portion of earnings allocated to participating policyholders that cannot be
expected to inure to shareholders is excluded from net income and shareholder's
equity. Dividends to be paid on participating life insurance contracts are
determined annually based on estimates of the contracts' earnings. Policyholder
dividends were $2.4 million, $2.6 million and $2.8 million in 1998, 1997 and
1996 respectively.
1.9 INCOME TAXES
The Company was acquired by American General Corporation on June 17, 1997.
Following the acquisition, the Company will file a separate life company federal
income tax return for five years.
Deferred tax assets and liabilities are established for temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities, at the enacted tax rates expected to be in effect when the
temporary differences reverse. The effect of a tax rate change is recognized in
income in the period of enactment.
A valuation allowance for deferred tax assets is provided if it is more likely
than not that some portion of the deferred tax asset will not be realized. An
increase or decrease in a valuation allowance that results from a change in
circumstances that causes a change in judgment about the realizability of the
related deferred tax asset is included in income. Changes related to
fluctuations in fair value of available-for-sale securities are included in
accumulated other comprehensive income in shareholder's equity.
F-14
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
1.10 CHANGES IN ACCOUNTING AND REPORTING STANDARDS
During 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) 130, Reporting Comprehensive Income, which establishes standards for
reporting and displaying comprehensive income and its components in the
financial statements. The Company elected to report comprehensive income and its
components in a separate statement of comprehensive income. Adoption of this
statement did not change recognition or measurement of net income and,
therefore, did not impact the Company's results of operations or financial
position.
Effective January 1, 1998, the Company adopted SFAS 132, Employers' Disclosures
about Pension and Other Postretirement Benefits, which revised disclosure
requirements for employers' pension and other retiree benefits. SFAS 132 did not
change the measurement or recognition of pension or other postretirement benefit
plans. The Company has restated disclosures for earlier years presented, as
required under SFAS 132.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities, which requires all
derivative instruments to be recognized at fair value as either assets or
liabilities in the balance sheet. Changes in the fair value of a derivative
instrument are to be reported as earnings or other comprehensive income,
depending upon the intended use of the derivative instrument. This statement is
effective for years beginning after June 15, 1999. Adoption of SFAS 133 is not
expected to have a material impact on the Company's results of operations or
financial position.
F-15
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
Investment income by type of investment was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Investment income:
Fixed maturities $176,449 $176,714 $183,290
Equity securities 49 49 49
Mortgage loans on real estate 5,766 7,277 7,644
Investment real estate 1,556 1,365 1,530
Policy loans 5,521 5,683 5,649
Other long-term investments 310 652 1,691
Short-term investments 2,742 1,280 1,164
Investment income from affiliates 57 - -
---------------------------------------------
Gross investment income 192,450 193,020 201,017
Investment expenses 6,612 3,758 5,330
---------------------------------------------
Net investment income $185,838 $189,262 $195,687
=============================================
</TABLE>
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 2,860 $ 6,704 $ 15,241
Gross losses (7,111) (3,534) (12,230)
------------------------------------------------
Total fixed maturities (4,251) 3,170 3,011
Equity securities - - (259)
Other investments 300 (6,286) 1,084
------------------------------------------------
Net realized investment gains
(losses) before tax (3,951) (3,116) 3,836
Income tax expense (benefit) (1,383) (1,090) 1,344
------------------------------------------------
Net realized investment gains
(losses) after tax $(2,568) $(2,026) $ 2,492
================================================
</TABLE>
F-16
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.3). Amortized cost and fair value at
December 31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Fixed maturity securities:
Corporate securities:
Investment-grade $1,626,339 $131,810 $(1,684) $1,756,465
Below investment-grade 112,767 3,415 (1,173) 115,009
Mortgage-backed securities* 50,036 912 - 50,948
U.S. government obligations 19,968 4,238 - 24,206
Foreign governments 79,794 11,944 - 91,738
State and political
subdivisions 6,469 139 - 6,608
Redeemable preferred stocks 2,385 160 - 2,545
-------------------------------------------------------------
Total fixed maturity
securities $1,897,758 $152,618 $(2,857) $2,047,519
=============================================================
Equity securities $ 568 $ 25 $ (9) $ 584
=============================================================
</TABLE>
*Primarily include pass-through securities guaranteed by the U.S. government and
government agencies.
F-17
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
-----------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Fixed maturity securities:
Corporate securities:
Investment-grade $1,969,450 $118,880 $(1,019) $2,087,311
Below investment-grade 113,181 2,745 (426) 115,500
Mortgage-backed securities* 3,725 459 - 4,184
U.S. government obligations 20,916 3,001 (24) 23,893
Foreign governments 96,162 12,254 - 108,416
State and political
subdivisions 9,992 293 (1) 10,284
Redeemable preferred stock 2,502 286 - 2,788
-----------------------------------------------------------------
Total fixed maturity
securities $2,215,928 $137,918 $(1,470) $2,352,376
=================================================================
Equity securities $ 568 $ 22 $ (12) $ 578
=================================================================
</TABLE>
*Primarily include pass-through securities guaranteed by the U.S. government and
government agencies.
F-18
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in accumulated
comprehensive income in shareholders' equity at December 31 were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
(In Thousands)
<S> <C> <C>
Gross unrealized gains $152,643 $137,940
Gross unrealized losses (2,866) (1,482)
DPAC and other fair value adjustments (67,632) (53,643)
Deferred federal income taxes (28,751) (28,985)
-------------------------------
Net unrealized gains on securities $ 53,394 $ 53,830
===============================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C>
Fixed maturity
securities, excluding
mortgage-backed
securities:
Due in one year or
less $ 193,010 $ 196,606 $ 91,283 $ 91,461
Due after one year
through five years 551,151 579,964 762,673 795,257
Due after five years
through ten years 357,288 382,038 521,239 542,858
Due after ten years 746,273 837,963 837,008 918,616
Mortgage-backed
securities 50,036 50,948 3,725 4,184
------------------------------------------------------------
Total fixed maturity
securities $1,897,758 $2,047,519 $2,215,928 $2,352,376
============================================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $587.3 million,
$576.2 million, and $404.5 million during 1998, 1997, and 1996, respectively.
F-19
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property collateralizing
mortgage loans reduces the concentration of credit risk. For new loans, the
Company requires loan-to-value ratios of 75% or less, based on management's
credit assessment of the borrower. The mortgage loan portfolio was distributed
as follows at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
--------------------------------------------------
(In Millions)
<S> <C> <C> <C>
DECEMBER 31, 1998
Geographic distribution:
South Atlantic $16 19.0% - %
Pacific 7 8.3 27.6
Mid-Atlantic 32 38.1 -
East North Central 14 16.7 -
Mountain 3 3.6 -
West South Central 5 6.0 -
East South Central - - -
West North Central 1 1.2 -
New England 11 13.1 -
Allowance for losses (5) (6.0) -
-------------------------------
Total $84 100.0% 2.4%
===============================
Property type:
Office $39 46.4% - %
Retail 28 33.3 6.5
Industrial 16 19.0 -
Apartments 2 2.4 -
Other 4 4.9 -
Allowance for losses (5) (6.0) -
-------------------------------
Total $84 100.0% 2.4%
===============================
</TABLE>
F-20
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
OUTSTANDING PERCENT OF PERCENT
AMOUNT TOTAL NONPERFORMING
---------------------------------------------
(In Millions)
DECEMBER 31, 1997
Geographic distribution:
South Atlantic $ 2 3.3% -%
Pacific 2 3.3 95.5
Mid-Atlantic 39 65.0 -
East North Central 9 15.0 -
Mountain 4 6.7 -
West South Central 3 5.0 -
East South Central - - -
West North Central 1 1.7 -
New England 5 8.3 -
Allowance for losses (5) (8.3) -
-------------------
Total $60 100.0% 3.1%
===================
Property type:
Office $15 25.0% -%
Retail 28 46.7 6.5
Industrial 15 25.0 -
Apartments 2 3.3 -
Other 5 8.3 -
Allowance for losses (5) (8.3) -
-------------------
Total $60 100.0% 3.1%
===================
F-21
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
-----------------------------------------------------------------------------------------------
CARRYING CARRYING
COST FAIR VALUE AMOUNT COST FAIR VALUE AMOUNT
-----------------------------------------------------------------------------------------------
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and
government agencies and
authorities $ 19,968 $ 24,206 $ 24,206 $ 20,916 $ 23,893 $ 23,893
States, municipalities, and
political subdivisions 6,469 6,608 6,608 9,992 10,284 10,284
Foreign governments 79,794 91,738 91,738 96,162 108,416 108,416
Public utilities 320,947 345,320 345,320 392,640 411,186 411,186
Mortgage-backed securities 50,036 50,948 50,948 3,725 4,184 4,184
All other corporate bonds 1,418,159 1,526,154 1,526,154 1,689,991 1,791,625 1,791,625
Redeemable preferred stocks 2,385 2,545 2,545 2,502 2,788 2,788
-----------------------------------------------------------------------------------------------
Total fixed maturities 1,897,758 2,047,519 2,047,519 2,215,928 2,352,376 2,352,376
Equity securities:
Nonredeemable preferred stocks 568 584 584 568 578 578
-----------------------------------------------------------------------------------------------
Total fixed maturities and
equity securities 1,898,326 $2,048,103 2,048,103 2,216,496 $2,352,954 2,352,954
========== ==========
Mortgage loans on real estate* 84,387 84,387 60,565 60,565
Investment real estate 6,101 6,101 7,731 7,731
Policy loans 84,412 84,412 87,726 87,726
Other long-term investments 1,385 1,385 971 971
Short-term investments 3,005 3,005 55,908 55,908
---------- --------------------------- ----------
Total investments $2,077,616 $2,227,393 $2,429,397 $2,565,855
========== =========================== ==========
</TABLE>
* Amount is net of allowance for losses of $5 million at both December 31,
1998 and 1997.
F-22
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS
The balance of DPAC at December 31 and the components of the change reported in
operating costs and expenses for the years then ended were as follows:
1998 1997 1996
---------------------------------------
(In Thousands)
Balance at January 1 $185,243 $197,572 $199,268
Capitalization 62,766 62,651 63,041
Amortization (66,331) (58,583) (85,536)
Effect of unrealized gains (losses)
on securities (13,832) (15,656) 20,799
Effect of realized gains (losses) (85) (741) -
Reinsurance transfer (69,209) - -
---------------------------------------
Balance at December 31 $ 98,552 $185,243 $197,572
=======================================
On January 29, 1996, USLIFE Corporation announced that the Company would
discontinue new sales of traditional indemnity major medical products. Further,
it would only offer major medical coverage through managed care plans in
selected markets where it has both a significant presence and an appropriate
managed care network in place, while continuing to provide full support and
service to all existing indemnity customers regardless of location.
Concurrently, USLIFE Corporation announced that it would carefully monitor
persistency experience of its group insurance lines in order to determine
whether financial statement adjustments would become necessary.
Recoverability of deferred policy acquisition costs depends on future revenues
and gross profits from the business to which it relates. Evaluation of this
asset, as well as the reserve for policy benefits, requires assumptions as to
the amount and timing of these future revenues and gross profits. USLIFE
Corporation's continuing study disclosed that persistency on this business
deteriorated to a point that a revision in assumptions was necessary.
During the second quarter of 1996, the Company recorded a pre-tax charge of
$49.6 million to recognize revised assumptions reflecting current experience on
its traditional indemnity group major medical and related products, including
group life insurance cases sold in tandem with these major medical policies. The
charge includes a $37.2 million writedown of deferred policy acquisition costs
on this block of business and a related adjustment of the reserve for policy
benefits amounting to $12.4 million which is included in Benefits in the
accompanying statements of income. The charge, on an after-tax basis, amounts to
$32.3 million. The impact of this charge on 1996 pre-tax results of the group
life and group health lines was $6.2 million and $43.4 million, respectively.
F-23
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
4. OTHER ASSETS
Other assets consisted of the following:
DECEMBER 31
1998 1997
----------------------
(In Thousands)
Prepaid expenses $ 9,225 $7,384
Deferred systems costs 1,218 -
Supply inventory 826 1,298
Other 1,617 1,020
----------------------
Total other assets $12,886 $9,702
======================
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
DECEMBER 31
1998 1997
----------------------
(In Thousands)
Current tax payable $ 6,208 $ 613
Deferred tax liabilities, applicable to:
Net income (42,544) 2,859
Net unrealized investment gains 28,751 28,985
----------------------
Total deferred tax liabilities (13,793) 31,844
----------------------
Total current and deferred tax (assets) liabilities $ (7,585) $32,457
======================
F-24
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 Tax Liabilities (continued)
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
(In Thousands)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 32,544 $ 40,279
Basis differential of investments 54,056 49,421
Other 8,619 26,940
-----------------------
Total deferred tax liabilities 95,219 116,640
Deferred tax assets applicable to:
Policy reserves (56,269) (69,968)
Other (52,743) (14,828)
-----------------------
Total deferred tax assets before valuation
allowance (109,012) (84,796)
Valuation allowance - -
-----------------------
Total deferred tax assets, net of valuation
allowance (109,012) (84,796)
-----------------------
Net deferred tax (assets) liabilities $ (13,793) $ 31,844
=======================
</TABLE>
A portion of life insurance income earned prior to 1984 is not taxable unless it
exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $37.8 million at
December 31, 1998 and 1997. At current corporate rates, the maximum amount of
tax on such income is approximately $13.2 million. Deferred taxes on these
accumulations are not required because no distributions are expected.
F-25
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.2 TAX EXPENSE
Components of income tax (benefit) expense for the years were as follows:
1998 1997 1996
------------------------------------
(In Thousands)
Current tax expense $ 26,095 $23,695 $ 8,951
Deferred tax (benefit) expense:
Deferred policy acquisition cost 2,673 749 (5,314)
Policy reserves (12,552) 3,160 (3,027)
Basis differential of investments 132 (3,168) 595
Litigation settlement (10,272) - -
Reinsurance transaction (22,133) - -
Other, net (3,251) (1,736) 9,738
------------------------------------
Total deferred tax (benefit) expense (45,403) (995) 1,992
------------------------------------
Income tax (benefit) expense $(19,308) $22,700 $10,943
====================================
A reconciliation between the income tax expense computed by applying the federal
income tax rate (35%) to income before taxes and the income tax expense reported
in the financial statement is presented below.
1998 1997 1996
------------------------------------
(In Thousands)
Income tax at statutory percentage
of GAAP pretax income $(15,666) $22,730 $11,471
Tax-exempt investment income (121) (134) (149)
Other (3,521) 104 (379)
------------------------------------
Income tax (benefit) expense $(19,308) $22,700 $10,943
====================================
F-26
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $20.5 million, $17.2 million, and
$13.8 million in 1998, 1997, and 1996, respectively.
5.4 TAX RETURN EXAMINATIONS
The Internal Revenue Service ("IRS") has completed examinations of the Company's
tax returns through 1991. The IRS is currently examining tax returns for 1992
through 1994. Although the final outcome of any issues raised in examination is
uncertain, the Company believes that the ultimate liability, including interest,
will not materially exceed amounts recorded in the financial statements.
6. TRANSACTIONS WITH AFFILIATES
American General Corporation and certain affiliated companies provide services
to the Company, principally data processing, investment management, professional
and administrative services. During 1998 and 1997 the Company incurred $25.3
million and $20.5 million, respectively, for these services. In addition, the
Company provides services to certain affiliated companies. During 1998 and 1997
the Company was reimbursed $3.5 million and $6.1 million, respectively, for
these services.
The Company periodically borrows funds from the Parent Company under an
intercompany short-term borrowing agreement entered into during 1997. These
borrowings are on demand and are unsecured. Interest is charged on the average
borrowing based on the commercial paper rate. At December 31, 1998, no amounts
were outstanding under the borrowing agreement.
Affiliated accounts receivable were $6.8 million and $1.7 million in 1998 and
1997, respectively.
Following regulatory approval from the necessary authorities, the Company
reinsured 49% of its credit life and credit accident and health business to
American General Assurance Company, an affiliate, effective January 1, 1998.
This transaction resulted in the cession of approximately 218,000 life policies
representing $379.5 million of insurance in-force and approximately 41,000 A&H
policies. Assets of approximately $10 million were transferred, which resulted
in a pretax loss of approximately $4 million.
Following regulatory approval from the necessary authorities, the Company also
reinsured 49% of its New York and 100% of its non-New York group life (excluding
permanent policies), group accident and health, and individual accident and
health business to American General Assurance Company effective October 1, 1998.
This transaction resulted in the cession of approximately 21,000 life policies
representing
F-27
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$32.6 billion of insurance in-force and approximately 24,000 A&H policies.
Assets of approximately $254 million were transferred. The Company received a
$13 million ceding commission on this transaction, which resulted in a pretax
loss of approximately $56 million.
The losses on these transactions resulted from the pricing of the business to
yield a competitive market return.
Amounts recoverable of $400 million and amounts payable of $106 million,
relating to this affiliated reinsurance, are included under the captions
"Reinsurance recoverable" and "Ceded reinsurance payable" in the balance sheets
at December 31, 1998.
7. ACCIDENT AND HEALTH RESERVES
Activity in the liability for unpaid claims and claim adjustment expenses for
the Company's accident and health coverage is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
---------------------------------------
(In Thousands)
<S> <C> <C> <C>
Balance as of January 1, net of reinsurance recoverable $ 85,974 $ 72,744 $ 55,450
---------------------------------------
Reinsurance settlements (1) (43,736) - -
---------------------------------------
Add: Incurred losses (2) 179,158 263,015 278,413
---------------------------------------
Deduct: Paid losses related to:
Current year 78,575 82,470 87,119
Prior years 123,039 167,315 174,000
---------------------------------------
Total paid losses 201,614 249,785 261,119
---------------------------------------
Balance as of December 31, net of reinsurance recoverable 19,782 85,974 72,744
Reinsurance recoverable 45,419 1,413 1,094
---------------------------------------
Balance as of December 31, gross of reinsurance recoverable $ 65,201 $ 87,387 $ 73,838
=======================================
</TABLE>
(1) See Note 6.
(2) Substantially all of the Company's incurred claims and claim adjustment
expenses relate to the respective current year.
F-28
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
7. ACCIDENT AND HEALTH RESERVES (CONTINUED)
The liability for unpaid claims and claim adjustment expenses relating to the
Company's accident and health business is based on the estimated amount payable
on claims reported prior to the date of the balance sheets which have not yet
been settled: claims reported subsequent to the date of the balance sheets which
have been incurred during the period than ended, and an estimate (based on past
experience) of incurred but unreported claims relating to such periods.
8. BENEFIT PLANS
8.1 PENSION PLANS
The Company has non-contributory defined benefit pension plans covering most
employees. Pension benefits are based on the participant's compensation and
length of credited service.
Equity and fixed maturity securities were 56% and 30%, respectively, of the
plans' assets at the plans' most recent balance sheet dates. Additionally, 1% of
plan assets were invested in general investment accounts of the Parent Company's
subsidiaries through deposit administration insurance contracts.
The benefit plans have purchased annuity contracts from American General
Corporation's subsidiaries to provide benefits for certain retirees. These
contracts are expected to provide future annual benefits to certain retirees of
American General Corporation and its subsidiaries of approximately $52 million.
The components of pension expense and underlying assumptions were as follows:
1998 1997 1996
-----------------------------------
(In Thousands)
Service cost (benefits earned) $ 193 $ 1,065 $ 2,031
Interest cost 1,205 2,593 2,652
Expected return on plan assets (1,714) (3,331) (2,421)
Amortization (309) (418) (47)
-----------------------------------
Pension (income) expense $ (625) $ (91) $ 2,215
===================================
Discount rate on benefit obligation 7.00% 7.25% 7.60%
Rate of increase in compensation 4.25% 4.00% 6.00%
levels
Expected long-term rate of return on
plan assets 10.25% 10.00% 7.50%
F-29
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.1 PENSION PLANS (CONTINUED)
The Company's funding policy is to contribute annually no more than the maximum
deductible for federal income tax purposes. The funded status of the plans and
the prepaid pension expense included in other assets at December 31 were as
follows:
1998 1997
--------------------
(In Thousands)
Projected benefit obligation (PBO) $18,022 $26,337
Plan assets at fair value 18,110 23,757
--------------------
Plan assets at fair value in excess of (less 88 (2,580)
than) PBO
Other unrecognized items, net (198) 3,154
--------------------
(Accrued) prepaid pension expense $ (110) $ 574
====================
The change in PBO was as follows:
1998 1997
--------------------
(In Thousands)
PBO at January 1 $26,337 $27,245
Service and interest costs 1,398 3,658
Benefits paid (915) (870)
Actuarial loss (gain) 638 (932)
Transfers and other (9,436) (2,764)
--------------------
PBO at December 31 $18,022 $26,337
====================
The change in the fair value of plan assets was as follows:
1998 1997
--------------------
(In Thousands)
Fair value of plan assets at January 1 $23,757 $22,222
Actual return on plan assets 1,175 2,405
Benefits paid (915) (870)
Transfers (5,907) -
--------------------
Fair value of plan assets at December 31 $18,110 $23,757
====================
F-30
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
8. BENEFIT PLANS (CONTINUED)
8.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has life, medical, supplemental major medical, and dental plans for
certain retired employees and agents. Most plans are contributory, with retiree
contributions adjusted annually to limit employer contributions to predetermined
amounts. The Company has reserved the right to change or eliminate these
benefits at any time.
The life plans are insured through December 31, 1999. A portion of the retiree
medical and dental plans is funded through a voluntary employees' beneficiary
association (VEBA); the remainder is unfunded and self-insured. All of the
retiree medical and dental plans' assets held in the VEBA were invested in
readily marketable securities at its most recent balance sheet date.
Postretirement benefit expense (benefit) in 1998, 1997, and 1996 was $(290)
thousand, $(43) thousand, and $440 thousand, respectively. The accrued liability
for postretirement benefits was $3.7 million and $13.7 million at December 31,
1998 and 1997, respectively. These liabilities were discounted at the same rates
used for the pension plans.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and fair values for certain of the Company's financial
instruments at December 31 are presented below. Care should be exercised in
drawing conclusions based on fair value, since (1) the fair values presented do
not include the value associated with all the Company's assets and liabilities,
and (2) the reporting of investments at fair value without a corresponding
evaluation of related policyholders liabilities can be misinterpreted.
1998 1997
----------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE AMOUNT VALUE AMOUNT
----------------------------------------------
(In Millions) (In Millions)
Assets:
Fixed maturity and
equity securities $2,048 $2,048 $2,353 $2,353
Mortgage loans on real
estate $ 91 $ 84 $ 68 $ 61
Policy loans $ 84 $ 84 $ 86 $ 88
Indebtedness from
affiliates $ 7 $ 7 $ 2 $ 2
Liabilities:
Insurance investment
contracts $ 541 $ 560 $ 737 $ 732
F-31
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair value of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on quoted
market prices, where available. For investments not actively traded, fair
values were estimated using values obtained from independent pricing
services or, in the case of some private placements, by discounting
expected future cash flows using a current market rate applicable to yield,
credit quality, and average life of investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted cash
flows, based on contractual maturities and risk-adjusted discount rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows and
actuarially determined assumptions, incorporating market rates.
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable from
affiliates. Due to the short-term nature of accounts receivable, fair value
is assumed to equal carrying value.
INSURANCE INVESTMENT CONTRACTS
Fair value of insurance investment contracts was estimated using cash flows
discounted at market interest rates.
F-32
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
10. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY
The Company's statutory basis financial statements are prepared in accordance
with accounting practices prescribed or permitted by the State of New York
Insurance Department. "Prescribed" statutory accounting practices include state
laws, regulations and general administrative rules, as well as a variety of
publications by the NAIC. "Permitted" statutory accounting practices encompass
all accounting practices that are not prescribed; such practices may differ from
state to state, from company to company within a state, and may change in the
future. There were no material permitted practices utilized by the Company in
1998, 1997 or 1996.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification"). Codification will likely change, to some extent, prescribed
accounting practices and may result in changes to the accounting practices that
the Company uses to prepare its statutory financial statements. Codification
will require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. Accordingly, before Codification becomes effective for the Company, the
State of New York must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory basis results to the
Insurance Department. At this time, it is unclear whether the State of New York
will adopt Codification.
Policyholder's surplus and net income, as reported to the domiciliary state
insurance department in accordance with its prescribed or permitted statutory
accounting practices is summarized as follows:
1998 1997 1996
--------------------------------------
(In Thousands)
Statutory net income for the year $ 31,151 $ 24,961 $ 13,132
Statutory surplus at year-end $212,130 $218,111 $180,405
Statutory accounting practices require acquisition costs on new business
(including commissions and underwriting and issue costs) to be charged to
expense when incurred. Regulatory net income includes income (loss) attributed
to participating policyholders of $(6.0) million, $(6.8) million and $(8.4)
million in 1998, 1997 and 1996, respectively, with the 1998, 1997 and 1996
losses primarily a result of higher levels of sales of participating term
insurance products. Regulatory equity capital includes capital attributed to
participating policyholders of $(37.0) million, $(24.9) million and $(13.3)
million at December 31, 1998, 1997 and 1996 respectively. Capital attributed to
participating policyholders is not available for payment of dividends to
shareholders.
F-33
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
10. STATUTORY FINANCIAL INFORMATION; DIVIDEND PAYING CAPABILITY (CONTINUED)
The Company is subject to New York Business Corporation Law, which imposes
restrictions on shareholder dividends. In addition, New York State Insurance Law
requires that no dividend may be declared without prior approval of the State of
New York Insurance Department. New York Law also states that no New York
domiciled company shall declare or distribute dividends to shareholders which
exceeds the lesser of: (1) 10% of surplus as regards policyholders or (2) 100%
of adjusted net investment income, unless the superintendent approves a greater
dividend payment. The Company did not pay any dividends in 1998, 1997 or 1996.
11. LEASES
The Company has various leases, substantially all of which are for office space
and facilities. At December 31, 1998 the future minimum rental commitments under
all of the Company's noncancellable leases were as follows:
YEAR ENDED OFFICE
DECEMBER 31 SPACE EQUIPMENT TOTAL
- - -------------------------------------------------------------------------
(In Thousands)
1999 $ 4,892 $452 $ 5,344
2000 4,693 183 4,876
2001 4,685 93 4,778
2002 4,517 - 4,517
2003 4,368 - 4,368
Thereafter 5,342 - 5,342
----------------------------------------
Total $28,497 $728 $29,225
========================================
Rent expense incurred in 1998, 1997 and 1996 was $4.6 million, $3.6 million and
$3.7 million, respectively.
12. COMMITMENTS AND CONTINGENCIES
In recent years, various life insurance companies have been named as defendants
in class action lawsuits relating to life insurance pricing and sales practices,
and a number of these lawsuits have resulted in substantial settlements. On
December 16, 1998, American General Corporation announced that certain of its
life insurance subsidiaries had entered into agreements to resolve all pending
market conduct class action lawsuits. The settlements are not final until
approved by the courts and any appeals are resolved. If court approvals are
obtained and appeals are not taken, it is expected the settlements will be final
in third quarter 1999.
F-34
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In conjunction with the proposed settlements, the Company recorded a charge of
$30.7 million ($19.9 million after-tax) in the fourth quarter of 1998. The
charge covers the cost of policyholder benefits and other anticipated expenses
resulting from the proposed settlements, as well as other administrative and
legal costs.
The litigation liability was reduced by payments of $1.3 million, and the
remaining balance of $29.4 million was included in other liabilities on the
Company's balance sheet at December 31, 1998.
In addition to the charges recorded in 1998, the Company will incur additional
expenses for claim administration, outside counsel and actuarial services, and
regulatory expenses, related to the resolution of the litigation, which will be
recorded as incurred. Such expenses are not expected to have a material adverse
effect on the Company's financial position or results of operations.
The Company is party to various other lawsuits and proceedings arising in the
ordinary course of business. Many of these lawsuits and proceedings arise in
jurisdictions, such as Alabama and Mississippi, that permit damage awards
disproportionate to the actual economic damages incurred. Based upon information
presently available, the Company believes that the total amounts that will
ultimately be paid, if any, arising from these lawsuits and proceedings will not
have a material adverse effect on the Company's results of operations and
financial position. However, it should be noted that the frequency of large
damage awards, including large punitive damage awards, that bear little or no
relation to actual economic damages incurred by plaintiffs in jurisdictions like
Alabama and Mississippi continues to create the potential for an unpredictable
judgment in any given suit.
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments may
be partially recovered through a reduction in future premium taxes in certain
states. At December 31, 1998 and 1997, the Company has accrued $876 thousand and
$1.1 million, respectively, for guaranty fund assessments, and applied $236
thousand and $293 thousand, respectively, for premium tax deductions. The
Company has recorded receivables of $352 thousand and $334 thousand at December
31, 1998 and 1997, respectively, for expected recoveries against the payment of
future premium taxes. Expenses incurred for guaranty fund assessments were $191
thousand, $358 thousand, and $557 thousand in 1998, 1997, and 1996,
respectively.
F-35
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
13. REINSURANCE
Reinsurance transactions for the years ended December 31, 1998, 1997, and 1996
were as follows:
1998 1997 1996
-----------------------------------------------
(In Thousands)
LIFE INSURANCE IN FORCE
Gross $70,948,300 $61,407,508 $52,300,927
Assumed - 11,314,869 9,773,886
Ceded 44,441,277 9,321,704 5,674,223
-----------------------------------------------
Net $26,507,023 $63,400,673 $56,400,590
===============================================
Life and Annuity Premiums
Gross $ 214,384 $ 178,251 $ 154,569
Assumed 22,020 26,171 24,468
Ceded 58,924 19,332 5,467
-----------------------------------------------
Net $ 177,480 $ 185,090 $ 173,570
===============================================
A&H PREMIUMS
Written
Gross $ 459,562 $ 422,886 $ 379,171
Assumed 170,120 1,704 2,190
Ceded 285,628 16,243 12,281
-----------------------------------------------
Net $ 344,054 $ 408,347 $ 369,080
===============================================
Earned
Gross $ 452,348 $ 403,717 $ 378,390
Assumed 168,331 1,503 2,190
Ceded 276,313 15,616 12,252
-----------------------------------------------
Net $ 344,366 $ 389,604 $ 368,328
===============================================
Reinsurance recoverable on paid losses was approximately $10.6 million, $2.4
million, and $3.7 million at December 31, 1998, 1997, and 1996, respectively.
Reinsurance recoverable on unpaid losses was approximately $81.7 million, $3.2
million, and $3.1 million at December 31, 1998, 1997, and 1996, respectively.
The effect of reinsurance on benefits to policyholders and beneficiaries was
$131 million, $13 million, and $20 million during 1998, 1997, and 1996,
respectively.
The Company terminated its participation in both the Federal Employee Government
Life Insurance (FEGLI) and State Government Life Insurance (SGLI) pools in 1998.
The assumed premiums for these pools in 1998 were $19.5 million and $2.5
million, respectively.
F-36
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
13. REINSURANCE (CONTINUED)
The Company participates in several reinsurance pools. These pools are managed
and administered by reinsurance intermediaries on behalf of the Company. The
pools involved various coverages including life, medical and disability.
14. YEAR 2000 CONTINGENCY (UNAUDITED)
INTERNAL SYSTEMS
The Company's ultimate parent, American General Corporation, (AGC) has numerous
technology systems that are managed on a decentralized basis. AGC's Year 2000
readiness efforts are therefore being undertaken by its key business units with
centralized oversight. Each business unit, including the Company, has developed
and is implementing a plan to minimize the risk of a significant negative impact
on its operations.
While the specifics of the plans vary, the plans include the following
activities: (1) perform an inventory of the Company's information technology and
non-information technology systems; (2) assess which items in the inventory may
expose the Company to business interruptions due to Year 2000 issues; (3)
reprogram or replace systems that are not Year 2000 ready; (4) test systems to
prove that they will function into the next century as they do currently; and
(5) return the systems to operations. As of December 31, 1998, these activities
had been completed for substantially all of the Company's critical systems,
making them Year 2000 ready. Vendor upgrades for a small number of systems were
either completed in the first quarter 1999 or are expected to be completed by
June 30, 1999; therefore, activities (3) through (5) are ongoing for some
systems.
The Company will continue to test its systems throughout 1999 to maintain Year
2000 readiness. In addition, the company is developing plans for the century
transition, which will restrict systems modifications from November 1999 through
January 2000, create rapid response teams to address problems and limit
vacations for key technical personnel.
THIRD PARTY RELATIONSHIPS
The Company has relationships with various third parties who must also be Year
2000 ready. These third parties provide (or receive) resources and services to
(or from) the Company and include organizations with which the Company exchanges
information. Third parties include vendors of hardware, software, and
information services; providers of infrastructure services such as voice and
data communications and utilities for office facilities; investors; customers;
distribution channels; and joint venture partners. Third parties differ from
internal systems in that the Company exercises less, or no, control over
F-37
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
THIRD PARTY RELATIONSHIPS (CONTINUED)
Year 2000 readiness. The Company has developed a plan to assess and attempt to
mitigate the risks associated with the potential failure of third parties to
achieve Year 2000 readiness. The plan includes the following activities (1)
identify and classify third party dependencies; (2) research, analyze, and
document Year 2000 readiness for critical third parties; and (3) test critical
hardware and software products and electronic interfaces. As of April 30, 1999,
AGC has identified and assessed its critical third party dependencies, including
those related to the Company. Of these critical dependencies, approximately 300
have been assessed to have a high probability of failure and have been covered
in the Company's contingency planning efforts. Due to the various stages of Year
2000 readiness for these critical third-party dependencies, the Company's
testing activities with critical third parties will extend throughout 1999.
CONTINGENCY PLANS
The Company has commenced contingency planning to reduce the risk of Year 2000-
related business failures. The contingency plans, which address both internal
systems and third party relationships, include the following activities: (1)
evaluate the consequences of failure of critical business processes with
significant exposure to Year 2000 risk; (2) determine the probability of a Year
2000 related failure for those critical processes that have a high consequence
of failure; (3) develop an action plan to complete contingency plans for those
critical processes that rank high in consequence and probability of failure; and
(4) complete the applicable contingency plans. These plans will be tested during
the second and third quarters of 1999.
RISKS AND UNCERTAINTIES
Based on its plans to make internal systems ready for Year 2000, to deal with
third party relationships, and to develop contingency actions, the Company
believes that it will experience at most isolated and minor disruptions of
business processes following the turn of the century. Such disruptions are not
expected to have a material effect on the Company's future results of
operations, liquidity, or financial condition. However, due to the magnitude and
complexity of this project, risks and uncertainties exist and the Company is not
able to predict a most reasonably likely worst case scenario. If Year 2000
readiness is not achieved due to the Company's failure to maintain critical
systems as Year 2000 ready, failure of critical third parties to achieve Year
2000 readiness on a timely basis, failure of contingency plans to reduce Year
2000-related business failures, or other unforeseen circumstances in completing
the Company's plans, the Year 2000 issues could have a material adverse impact
on the Company's operations following the turn of the century.
F-38
<PAGE>
The United States Life Insurance Company in the City of New York
Notes to Financial Statements (continued)
14. YEAR 2000 CONTINGENCY (UNAUDITED) (CONTINUED)
COSTS
Through March 31, 1999, Company has incurred, and anticipates that it will
continue to incur, costs for internal staff, third-party vendors, and other
expenses to achieve Year 2000 readiness. The cost of activities related to Year
2000 readiness has not had a material adverse effect on the Company' results of
operations or financial condition. In addition, the Company has elected to
accelerate the planned replacement of certain systems as part of the Year 2000
plans. Costs of the replacement systems are being capitalized and amortized over
their useful lives, in accordance with the Company's normal accounting policies.
F-39
<PAGE>
PART C
OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B: (1) Financial Statements of The United States Life
Insurance Company in the City of New York; three months
ended March 31, 1999 and 1998:
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets for the three month period ended March 31,
1999 and the year ended December 31, 1998
Statements of Income for the three months ended March 31,
1999 and 1998
Statements of Comprehensive Income for the three months
ended March 31, 1999 and 1998
Statements of Shareholder's Equity for the three month
period ended March 31, 1999 and the year ended
December 31, 1998
Statements of Cash Flows for the three months ended March
31, 1999 and 1998
Note to Financial Statements
(2) Financial Statements of The United States Life
Insurance Company in the City of New York; years ended
December 31, 1998, 1997, and 1996:
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets as of December 31, 1998 and 1997
Statements of Income for the years ended December 31, 1998,
1997 and 1996
Statements of Shareholder's Equity for the years ended
December 31, 1998, 1997 and 1996
Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996
Notes to Financial Statements
PART C: None
(b) Exhibits
(1) The United States Life Insurance Company in the City of
New York Board of Directors resolution authorizing the
establishment of The United States Life Insurance Company
in the City of New York Separate Account USL VA-R and
among other things the marketing of variable annuity
products in New York, previously filed in the initial
filing of this Registration Statement (File No. 333-
63673), filed on September 18, 1998.
C-1
<PAGE>
(2) None
(3)(a) Master Marketing and Distribution Agreement By and Among
The United States Life Insurance Company in the City of
New York, American General Securities Incorporated and
Van Kampen Distributors, Inc. (Filed herewith)
(b)(i) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, American
General Securities Incorporated, Van Kampen Life
Investment Trust, Van Kampen Asset Management, Inc., and
Van Kampen Distributors, Inc. (Filed herewith)
(ii) Participation Agreement by and among The United States
Life Insurance Company in the City of New York, Morgan
Stanley Universal Funds, Inc., Morgan Stanley Asset
Management, Inc., and Miller Anderson & Sherrerd (Filed
herewith)
(3)(c) Specimen form of Selling Group Agreement by and among
The United States Life Insurance Company in the City of
New York, American General Securities Incorporated, and
Van Kampen Funds, Inc. (Filed herewith)
(4)(a) Form of Group Annuity Master Contract (Form
No. 98034N), previously filed in the initial filing of
this Registration Statement (File No. 333-63673), filed
on September 18, 1998.
.
(b)(i) Form of Group Annuity Certificate (Form No. 98033N),
previously filed in the initial filing of this
Registration Statement (File No. 333-63673), filed on
September 18, 1998
(b)(ii) Form of Qualified Certificate Endorsement. (Filed
herewith)
(b)(iii) Form of Individual Retirement Annuity Disclosure
Statement for Certificate Form No. 98033N, included in
Part A of this Amendment.
(b)(iv) Form of Roth Individual Retirement Annuity Disclosure
Statement for Certificate Form No. 98033N, included in
Part A of this Amendment.
(b)(v) Form of Eligible Rollover Distribution Endorsement.
(Filed herewith)
(b)(vi) Form of Individual Retirement Annuity (IRA) Endorsement.
(Filed herewith)
(b)(vii) Form of Roth Individual Retirement Annuity Endorsement.
(Filed herewith)
(5)(a)(i) Form of Application for Certificate (Form No. USL 8771-
33), previously filed in the initial filing of this
Registration Statement (File No. 333-63673), filed on
September 18, 1998.
C-2
<PAGE>
(a)(ii) Form of Application for Certificate, amended (Form No.
USL 8771-33 REV 0499). (Filed herewith)
(b) Specimen form of Generations Service Request. (Filed
herewith)
(c) Specimen form of Special Request for Surrender Charge
Waiver under Certificate Form No. 98033N. (Filed
herewith)
(d) Form of 1035 Exchange Instructions. (Filed herewith)
(e) Form of Change of Beneficiary Form. (Filed herewith)
(f) Form of Amendment and Transfer Request. (Filed herewith)
(g) Form of Election of Annuity Payment Option/Change Form for
Variable Annuities. (Filed herewith)
(h) Form of Dollar Cost Averaging Form under Certificate Form
No. 98033N. (Filed herewith)
(i) Form of Confirmation of Initial Purchase Payment under
Certificate Form No. 98033N. (Filed herewith)
(6)(a) Copy of the Charter and all amendments thereto of The
United States Life Insurance Company in the City of New
York), previously filed in the initial filing of this
Registration Statement (File No. 333-6363), filed on
September 18, 1998.
(b) Copy of the Bylaws, as amended, of The United States Life
Insurance Company in the City of New York), previously
filed in the initial filing of this Registration Statement
(File No. 333-63673), filed on September 18, 1998.
(7) None
(8)(a) Form of Administrative Services Agreement between The
United States Life Insurance Company in the City of New
York and American General Life Companies, limited to terms
which describe registered and non-registered product
services. (Filed herewith)
(b) Administrative Services Agreement between The United
States Life Insurance Company in the City of New York and
Van Kampen Asset Management Inc. dated as of December 1,
1998. (Filed herewith)
(c) Administrative Services Agreement between The United
States Life Insurance Company in the City of New York,
Morgan Stanley Asset Management Inc., and Miller Anderson
& Sherred, LLP, dated as of December 1, 1998. (Filed
herewith)
(9) Opinion and Consent of Counsel. (Filed herewith )
C-3
<PAGE>
(10) Consent of Independent Auditors. (Filed herewith)
(11) None
(12) None
(13)(a) Computations of hypothetical historical average annual
total returns for the Divisions available under
Certificate Form No 98033N for the one, five and ten year
periods ended December 31, 1998, and since inception.
(Filed herewith).
(b) Computations of hypothetical historical total returns for
the Divisions available under Certificate Form No. 98033N
for the one, five and ten year periods ended December 31,
1998, and since inception. (Filed herewith)
(c) Computations of hypothetical historical cumulative total
returns for the Divisions available under Certificate Form
No. 98033N for the one, five and ten year periods ended
December 31, 1998, and since inception. (Filed herewith)
(d) Computations of hypothetical historical 30 day yield for
the Domestic Income, Government, and Growth and Income
Divisions available under Certificate Form No. 98033N for
the one month period ended December 31, 1998. (Filed
herewith)
(e) Computations of hypothetical historical seven day yield
and effective yield for the Money Market Division,
available under Certificate Form No. 98033N for the seven
day period ended December 31, 1998. (Filed herewith)
(14) Financial Data Schedule. (See Exhibit 27 below.)
(27) (Inapplicable, because, notwithstanding Item 24.(b) as to
Exhibits, the Commission staff has advised that no such
Schedule is required.)
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent responsible for
variable annuity operations, other officers of the depositor are listed below.
Positions and Offices
Name and Principal with the
Business Address Depositor
------------------- ---------------------------
Jon P. Newton Director and Senior Chairman
2929 Allen Parkway
Houston, TX 77019
C-4
<PAGE>
Rodney O. Martin, Jr. Director and Chairman
2929 Allen Parkway
Houston, TX 77019
David J. Dietz Director, President
125 Maiden Lane and Chief Executive Officer -
New York, NY 10018 Individual Insurance Options
William M. Keeler Director, President and
3600 Route 66 Chief Executive Officer -
Neptune, NJ 07784 Group Insurance Operations
David A. Fravel Director and Executive
2727-A Allen Parkway Vice President
Houston, TX 77019
Gary D. Reddick Director and Executive
2929 Allen Parkway Vice President
Houston, TX 77019
Felix C. Curcura Director and Senior
3600 Route 66 Vice President - Group
Neptune, NJ 07784 Actuarial and Underwriting
Robert F. Herbert, Jr. Director, Senior
2727-A Allen Parkway Vice President,
Houston, TX 77019 Controller and Treasurer
R. Stephen Watson Director, Senior Vice President
125 Maiden Lane and Chief Administrative Officer
New York, NY 10038
William A. Bacas Director
182 Ridge Street
Glens Falls, NY 12801
John R. Corcoran Director
12 Hawthorne Drive
Sudbury, MA 01776
Dr. Patricia O. Ewers Director
Pace University
Pace Plaza
New York, NY 10038
Thomas H. Fox Director
1016 East Bay Drive
Northport, MI 49670
C-5
<PAGE>
William J. O'Hara, Jr. Director
AJ Tech
2590 Pioneer Avenue
Vista, CA 92083
George B. Trotta Director
541 East 20th Street
Apartment 14F
New York, NY 10010
John V. LaGrasse Executive Vice President and
2727-A Allen Parkway Chief Technology Officer
Houston, TX 77019
Wayne A. Barnard Senior Vice President
2727-A Allen Parkway and Chief Actuary
Houston, TX 77019
Ross D. Friend Senior Vice President
2727-A Allen Parkway and Chief Compliance Officer
Houston, TX 77019
William F. Guterding Senior Vice President and
125 Maiden Lane Chief Underwriting Officer
New York, NY 10018
Kevin Hartz Senior Vice President and
125 Maiden Lane Chief Agency Officer
New York, NY 10018
Simon J. Leech Senior Vice President -
2727-A Allen Parkway Houston Service Center
Houston, TX 77019
Randy J. Marash Senior Vice President and Actuary
3600 Rt. 66
Neptune, NJ 07754
Robert D. Stuchiner Senior Vice President -
125 Maiden Lane Marketing
New York, NY 10038
Thomas M. Zurek Senior Vice President
2929 Allen Parkway and General Counsel
Houston, TX 77019
Terry Freeman Vice President-
125 Maiden Lane Marketing Support
New York, NY 10038
C-6
<PAGE>
Althea R. Johnson Vice President, Assistant Controller
2727-A Allen Parkway and Assistant Secretary
Houston, TX 77019
Richard W. Scott Vice President and
2929 Allen Parkway Chief Investment Officer
Houston, TX 77019
Larry M. Robinson Vice President
2727-A Allen Parkway
Houston, TX 77019
Don M. Ward Vice President
2727 Allen Parkway
Houston, TX 77019
Pauletta P. Cohn Secretary
2727-A Allen Parkway
Houston, TX 77019
Jane K. Rushton Associate General Counsel and
125 Maiden Lane Assistant Secretary
New York, NY 10038
Sandra M. Smith Associate General Counsel and
300 South State Street Assistant Secretary
Syracuse, NY 13202
Joyce Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Laura Milazzo Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Linda Price Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Assistant Tax Officer
2727-A Allen Parkway
Houston, TX 77019
C-7
<PAGE>
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
The following is a list of subsidiaries of American General
Corporation/1,2,3,4,5/ as of April 30, 1999. All subsidiaries listed are
corporations, unless otherwise indicated. Subsidiaries of subsidiaries are
indicated by indentations and unless otherwise indicated, all subsidiaries are
wholly owned. Inactive subsidiaries are denoted by an asterisk (*).
Jurisdiction of
Name Incorporation
---- ---------------
AGC Life Insurance Company.................................. Missouri
American General Property Insurance Company/16/............ Tennessee
American General Property Insurance Company of Florida.... Florida
American General Life and Accident Insurance Company/6/.... Tennessee
Stylistic Distribution Corporation........................ Delaware
Millennium Distribution Corporation......................... Delaware
New Age Distribution Corporation......................... Delaware
Good-To-Great Distribution Corporation................... Delaware
Next Generation Distribution Corporation................. Delaware
New Technology Distribution Corporation.................. Delaware
Life Application Distribution Corporation................ Delaware
American General Exchange, Inc........................... Tennessee
American General Life Insurance Company/7/................. Texas
American General Annuity Service Corporation............. Texas
American General Life Companies.......................... Delaware
American General Life Insurance Company of New York...... New York
The Winchester Agency Ltd.............................. New York
The Variable Annuity Life Insurance Company.............. Texas
PESCO Plus, Inc/14/.................................... Delaware
American General Gateway Services, L.L.C./15/.......... Delaware
The Variable Annuity Marketing Company................. Texas
VALIC Investment Services Company...................... Texas
VALIC Retirement Services Company...................... Texas
VALIC Trust Company.................................... Texas
The Franklin Life Insurance Company........................ Illinois
The American Franklin Life Insurance Company............. Illinois
Franklin Financial Services Corporation.................. Delaware
HBC Development Corporation................................ Virginia
Templeton American General Life of Bermuda, Ltd./13/....... Bermuda
Western National Corporation............................... Delaware
WNL Holding Corp......................................... Delaware
American General Annuity Insurance Company............. Texas
American General Assignment Corporation................ Texas
AGA Brokerage Services, Inc................................ Delaware
A.G. Investment Advisory Services, Inc................. Delaware
American General Financial Institution Group, Inc...... Delaware
WNL Insurance Services, Inc............................ Delaware
American General Corporation*............................... Delaware
C-8
<PAGE>
American General Delaware Management Corporation/1/.......... Delaware
American General Finance, Inc................................ Indiana
HSA Residential Mortgage Services of Texas, Inc............. Delaware
AGF Investment Corp......................................... Indiana
American General Auto Finance, Inc. ........................ Delaware
American General Finance Corporation/8/..................... Indiana
American General Finance Group, Inc....................... Delaware
American General Financial Services, Inc./9/............ Delaware
The National Life and Accident Insurance Company...... Texas
Merit Life Insurance Co................................... Indiana
Yosemite Insurance Company................................ Indiana
American General Finance, Inc............................... Alabama
American General Financial Center........................... Utah
American General Financial Center, Inc.*.................... Indiana
American General Financial Center, Incorporated*............ Indiana
American General Financial Center Thrift Company*........... California
Thrift, Incorporated*....................................... Indiana
American General Investment Advisory Services, Inc.*......... Texas
American General Investment Holding Corporation/10/.......... Delaware
American General Investment Management Corporation/10/....... Delaware
American General Realty Advisors, Inc........................ Delaware
American General Realty Investment Corporation............... Texas
AGLL Corporation/11/........................................ Delaware
American General Land Holding Company....................... Delaware
AG Land Associates, LLC/11/............................... California
GDI Holding, Inc.*/12/...................................... California
Pebble Creek Service Corporation............................ Florida
SR/HP/CM Corporation........................................ Texas
Green Hills Corporation...................................... Delaware
Knickerbocker Corporation.................................... Texas
American Athletic Club, Inc................................. Texas
Pavilions Corporation........................................ Delaware
USLIFE Corporation........................................... Delaware
All American Life Insurance Company......................... Illinois
American General Assurance Company.......................... Illinois
American General Indemnity Company........................ Nebraska
USLIFE Credit Life Insurance Company of Arizona........... Arizona
American General Life Insurance Company of Pennsylvania..... Pennsylvania
I.C. Cal*................................................... California
The Old Line Life Insurance Company of America.............. Wisconsin
The United States Life Insurance Company in the
City of New York........................................... New York
USLIFE Agency Services, Inc................................. Illinois
USMRP, Ltd................................................ Turks & Caicos
USLIFE Financial Institution Marketing Group, Inc........... California
USLIFE Insurance Services Corporation....................... Texas
C-9
<PAGE>
USLIFE Realty Corporation................................... Texas
USLIFE Real Estate Services Corporation................. Texas
USLIFE Systems Corporation.................................. Delaware
American General Finance Foundation, Inc. is not included on this list. It is a
non-profit corporation.
NOTES
/1/ The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by AGC and AGDMC and the business and affairs of each are
managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
/2/ On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a Delaware
business trust, was created. Both AG Cap Trust A's and AG Cap Trust B's
business and affairs are conducted through their trustees: Bankers Trust
Company and Bankers Trust (Delaware). Capital securities of each are held by
non-affiliated third party investors and common securities of AG Cap Trust A
and AG Cap Trust B are held by AGC.
/3/ On November 14, 1997, American General Capital I, American General Capital
II, American General Capital III, and American General Capital IV
(collectively, the "Trusts"), all Delaware business trusts, were created.
Each of the Trusts' business and affairs are conducted through its trustees:
Bankers Trust (Delaware) and James L. Gleaves (not in his individual
capacity but solely as Trustee).
/4/ On July 10, 1997, the following insurance subsidiaries of AGC became the
direct owners of the indicated percentages of membership units of SBIL B,
L.L.C. ("SBIL B"), a U.S. limited liability company: VALIC (22.6%), FL
(8.1%), AGLA (4.8%) and AGL (4.8%).
Through their aggregate 40.3% interest in SBIL B, VALIC, FL, AGLA and AGL
indirectly own approximately 28% of the securities of SBI, an English
company, and 14% of the securities of ESBL, an English company, SBP, an
English company, and SBFL, a Cayman Islands company. These interests are
held for investment purposes only.
/5/ Effective December 5, 1997, AGC and Grupo Nacional Provincial, S.A. ("GNP")
completed the purchase by AGC of a 40% interest in Grupo Nacional Provincial
Pensions S.A. de C.V., a new holding company formed by GNP, one of Mexico's
largest financial services companies.
/6/ AGLA owns approximately 12% of Whirlpool Financial Corp. ("Whirlpool")
preferred stock. AGLA's holdings in Whirlpool represents approximately 3% of
the voting power of the capital stock of Whirlpool. The interests in
Whirlpool (which is a corporation that is not associated with AGC) are held
for investment purposes only.
C-10
<PAGE>
/7/ AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but not
owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of AGL
under applicable holding company laws, but they are part of the AGC group
of companies under other laws.
/8/ American General Finance Corporation is the parent of an additional 48
wholly-owned subsidiaries incorporated in 30 states and Puerto Rico for the
purpose of conducting its consumer finance operations, including those
noted in footnote 10 below.
/9/ American General Financial Services, Inc. is the parent of an additional 7
wholly-owned subsidiaries incorporated in 4 states and Puerto Rico for the
purpose of conducting its consumer finance operations.
/10/ American General Investment Management, L.P., a Delaware limited
partnership, is jointly owned by AGIHC and AGIMC. AGIHC holds a 99% limited
partnership interest, and AGIMC owns a 1% general partnership interest.
/11/ AG Land Associates, LLC is jointly owned by AGLH and AGLL. AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
/12/ AGRI owns a 75% interest in GDI Holding, Inc.
/13/ AGCL owns 50% of the common stock of TAG Life. Templeton International,
Inc., a Delaware corporation, owns the remaining 50% of TAG Life. Templeton
International, Inc. is not affiliated with AGC.
/14/ VALIC holds 900 (90%) of the outstanding common shares. The Florida
Education Association/United, a Florida teachers union and unaffiliated
third party, holds the remaining 100 (10%) of the outstanding common
shares.
/15/ VALIC holds (90%) of the outstanding common shares. Gateway Investment
Services, Inc., a California corporation and an unaffiliated third party,
holds the remaining 10% of the outstanding common shares.
C-11
<PAGE>
/16/ AGPIC is jointly owned by AGCL and AGLA. AGCL owns 51.85% and AGLA owns
48.15% of the issued and outstanding shares of AGPIC.
COMPANY ABBREVIATIONS AS USED IN
REGISTRATION STATEMENT AMENDMENT
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
- - -------------------- ------------------------------------------------------- -----------
<S> <C> <C>
AAL All American Life Insurance Company.................... IL
AAth American Athletic Club, Inc............................ TX
AFLI The American Franklin Life Insurance Company........... IL
AGA American General Annuity Insurance Company............. TX
AGAC American General Assurance Company..................... IL
AGAS American General Annuity Service Corporation........... TX
AGBS AGA Brokerage Services, Inc............................ DE
AGC American General Corporation........................... TX
AGCL AGC Life Insurance Company............................. MO
AGDMC American General Delaware Management Corporation....... DE
AGF American General Finance, Inc.......................... IN
AGFC American General Finance Corporation................... IN
AGFCI American General Financial Center, Incorporated........ IN
AGFCT American General Financial Center Thrift Company....... CA
AGFG American General Finance Group, Inc.................... DE
AGF Inv AGF Investment Corp.................................... IN
AGFn American General Financial Center...................... UT
AGFnC American General Financial Center, Inc................. IN
AGFS American General Financial Services, Inc............... DE
AGGS American General Gateway Services, L.L.C............... DE
AGIA American General Insurance Agency, Inc................. MO
AGIAH American General Insurance Agency of Hawaii, Inc....... HI
AGIAM American General Insurance Agency of
Massachusetts, Inc..................................... MA
AGIAO American General Insurance Agency of Ohio, Inc......... OH
AGIAOK American General Insurance Agency of Oklahoma, Inc..... OK
AGIAS A.G. Investment Advisory Services, Inc................. DE
AGIAT American General Insurance Agency of Texas, Inc........ TX
AGIHC American General Investment Holding Corporation........ DE
AGIM American General Investment Management, L.P............ DE
AGIMC American General Investment Management Corporation..... DE
AGIND American General Indemnity Company..................... NE
AGFIG American General Financial Institution Group, Inc...... DE
AGL American General Life Insurance Company................ TX
AGLC American General Life Companies ....................... DE
AGLA American General Life and Accident Insurance Company... TN
AGLH American General Land Holding Company.................. DE
AGLL AGLL Corporation....................................... DE
AGNY American General Life Insurance Company of New York.... NY
AGPA American General Life Insurance Company of Pennsylvania PA
AGPIC American General Property Insurance Company............ TN
AGRA American General Realty Advisors, Inc.................. DE
AGRI American General Realty Investment Corporation......... TX
AGSI American General Securities Incorporated............... TX
AGX American General Exchange, Inc......................... TN
ASGN American General Assignment Corporation................ TX
FFSC Franklin Financial Services Corporation................ DE
FL The Franklin Life Insurance Company.................... IL
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
State/Jur.
Abb. Company of Domicile
- - -------------------- ------------------------------------------------------- -----------
<S> <C> <C>
GHC Green Hills Corporation................................ DE
GGDC Good-To-Great Distribution Corporation................. DE
HBDC HBC Development Corporation............................ VA
KC Knickerbocker Corporation.............................. TX
LADC Life Application Distribution Corporation.............. DE
MDC Millennium Distribution Corporation.................... DE
ML Merit Life Insurance Co................................ IN
NADC New Age Distribution Corporation....................... DE
NGDC Next Generation Distribution Corporation............... DE
NLA The National Life and Accident Insurance Company....... TX
NTDC New Technology Distribution Corporation................ DE
OLL The Old Line Life Insurance Company of America......... WI
PAV Pavilions Corporation.................................. DE
PCSC Pebble Creek Service Corporation....................... FL
PIFLA American General Property Insurance Company of Florida. FL
PPI PESCO Plus, Inc........................................ DE
RMST HSA Residential Mortgage Services of Texas, Inc........ DE
SDC Stylistic Distribution Corporation..................... DE
SRHP SR/HP/CM Corporation................................... TX
TAG Life Templeton American General Life of Bermuda, Ltd........ BA
TI Thrift, Incorporated................................... IN
UAS USLIFE Agency Services, Inc............................ IL
UC USLIFE Corporation..................................... DE
UCLA USLIFE Credit Life Insurance Company of Arizona........ AZ
UFI USLIFE Financial Institution Marketing Group, Inc...... CA
UIS USLIFE Insurance Services Corporation.................. TX
URC USLIFE Realty Corporation.............................. TX
USC USLIFE Systems Corporation............................. DE
USL The United States Life Insurance Company in the City of
New York............................................... NY
USMRP USMRP, Ltd............................................. T&C
VALIC The Variable Annuity Life Insurance Company............ TX
VAMCO The Variable Annuity Marketing Company................. TX
VISCO VALIC Investment Services Company...................... TX
VRSCO VALIC Retirement Services Company...................... TX
VTC VALIC Trust Company.................................... TX
WA The Winchester Agency Ltd.............................. NY
WIS WNL Insurance Services, Inc............................ DE
WNC Western National Corporation........................... DE
WNLH WNL Holding Corp....................................... DE
YIC Yosemite Insurance Company............................. IN
</TABLE>
ITEM 27. NUMBER OF CERTIFICATE OWNERS
As May 31, 1998, there were no owners of Certificates offered by this
Registration Statement.
ITEM 28. INDEMNIFICATION
USL's By-Laws, as amended, include provisions concerning the
indemnification of its officers and directors, and certain other persons, which
provide in substance as follows:
Article XI of USL's By-Laws provide, in part, that USL, except to the
extent expressly prohibited by the New York Business Corporation law or New York
Insurance law, shall have the power to indemnity each person made or threatened
to be made a party to or called as a witness in or asked to provide information
in connection with any pending or threatened action,
C-13
<PAGE>
proceeding, hearing or investigation, whether civil or criminal, and whether
judicial, quasi-judicial, administrative, or legislative, and whether or not for
or in the right of USL or any other enterprise, by reason of the fact that such
person or such person's testator or intestate is or was a director or officer of
USL, or is or was a director or officer of USL who also serves or served at the
request of USL, any other corporation, partnership, joint venture, trust,
employee benefit plan or otherwise enterprise in any capacity, against
judgments, fines, penalties, amounts paid in settlement and reasonable expenses,
including attorneys' fees, incurred in connection with such action or
proceeding, or any appeal therein, provided that no such indemnification shall
be made if a judgment or other final adjudication adverse to such person
establishes that his or her acts were committed in a bad faith or were the
result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that he or she personally gained in fact a financial
profit or other advantages to which he or she was not legally entitled, and
provided further that no such indemnification shall be required with respect to
any settlement or other nonadjudicated disposition of any threatened or pending
action or proceeding unless USL has given its prior consent to such settlement
or other disposition.
Under Article XI, USL shall advance or promptly reimburse, upon request of
any person entitled to indemnification, all expenses, including attorneys' fees,
reasonably incurred in defending any action or proceeding in advance of its
final disposition upon receipt of a written undertaking by or on behalf of such
person to repay such amount if such person is ultimately found not to be
entitled to indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such person is
entitled, provided, however, that such person shall cooperate in good faith with
any request by USL that common counsel be utilized by the parties to an action
or proceeding who are similarly situated unless to do so would be inappropriate
due to a actual or potential differing interests between or amount such parties.
USL agrees under Article XI that it shall not, except by elimination or
amendment of the By-Laws, take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of the By-Laws. The
indemnification of any person provided by the By-Laws shall continue after such
person has ceased to be a director or officer of USL and shall inure to the
benefit of such person's heirs, executors, administrators and legal
representatives.
USL is authorized to enter into agreements with any of its directors,
officers or employees extending rights to indemnification and advancement of
expenses to such person to the fullest extent permitted by applicable law, but
the failure to enter into any such agreement shall not affect or limit the
rights of such person pursuant to the By-Laws.
A person who has been successful, on the merits or otherwise, in the
defense of a civil or criminal action or proceeding of the character described
in Article XI of USL's By-Laws shall be entitled to indemnification as
authorized by Article XI. Except as provided in the preceding sentence and
unless ordered by a court, any indemnification under Article XI shall be made by
USL if, and only if, authorized in the specific case:
(1) By the Board of Directors acting by a quorum consisting of directors
who are not parties to such action or proceeding upon a finding that
the director or officer has met the standard of conduct set forth in
the first paragraph of
C-14
<PAGE>
Article XI (and which is described in the first paragraph of this Item
28); or
(2) If such a quorum is not obtainable or, even if obtainable, a quorum of
disinterested directors so directs;
(a) By the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the
circumstances because the standard of conduct set forth in the
first paragraph of Article XI has been met by such director or
officer; or
(b) By the shareholders upon a finding that the directors or officer
has met the applicable standard of conduct set forth in such
paragraph.
USL shall make no payments under Article XI until it shall have complied
with all provisions then in force of New York Insurance law with respect to
indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such 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.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American General Life
Insurance Company Separate Account A, American General Life Insurance
Company Separate Account D, American General Life Insurance Company
Separate Account VL-R, and American General Life Insurance Company of New
York Separate Account E.
C-15
<PAGE>
(b) The directors and principal officers of the principal underwriter are:
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
----------------- -----------------------
F. Paul Kovach, Jr. Director and Chairman,
American General Securities President and Chief Executive
Incorporated 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
John A. Kalbaugh Vice President - Chief Marketing
American General Life Officer
Companies
2727 Allen Parkway
Houston, TX 77019
Robert M. Roth Vice President -
American General Securities Administration and Compliance,
Incorporated Treasurer and Secretary
2727 Allen Parkway
Houston, TX 77019
Pauletta P. Cohn 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
C-16
<PAGE>
K. David Nunley Assistant Associate Tax Officer
American General Life
Companies
2727-A Allen Parkway
Houston, Texas 77019
(c) Not Applicable.
Item 30. Location of Records
All records referenced under Section 31(a) of the 1940 Act, and Rules 31a-
1 through 31a-3 thereunder, are maintained and in the custody of American
General Life Companies at its principal executive office located at 2727-A Allen
Parkway, Houston, Texas 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the audited
financial statements in the Registration Statement are never more than 16 months
old for so long as payments under the Certificates may be accepted; B) to
include either (1) as part of any application to purchase a Certificate offered
by a prospectus, a space that an applicant can check to request a Statement of
Additional Information, or (2) a toll-free number or a post card or similar
written communication affixed to or included in the applicable prospectus that
the applicant can remove to send for a Statement of Additional Information; C)
to deliver any Statement of Additional Information and any financial statements
required to be made available under this form promptly upon written or oral
request.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26(E)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940
USL represents that the fees and charges deducted under the Contract that
is identified as Contract Form No. 98034N and the Certificates that are
identified as Certificate Form No.98033N and comprehended by this Registration
Statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by USL.
C-17
<PAGE>
POWERS OF ATTORNEY
Each person whose signature appears below hereby appoints Robert F.
Herbert, Jr., Thomas M. Zurek and Pauletta P. Cohn and each of them, any one of
whom may act without the joinder of the others, as his/her attorney-in-fact to
sign on his/her behalf and in the capacity stated below and to file all
amendments to this Registration Statement, which amendment or amendments may
make such changes and additions to this Registration Statement as such attorney-
in-fact may deem necessary or appropriate.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, The United States Life Insurance Company in the City of
New York Separate Account USL VA-R, has duly caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of Houston, and
State of Texas on this 25th day of May, 1999.
THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
SEPARATE ACCOUNT USL VA-R
(Registrant)
BY: THE UNITED STATES LIFE INSURANCE
COMPANY IN THE CITY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ Robert F. Herbert, Jr.
------------------------------------------
Robert F. Herbert, Jr.
Senior Vice President
[SEAL]
ATTEST: /s/ Pauletta P. Cohn
-------------------------
Pauletta P. Cohn
Secretary
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following officers and directors
of The United States Life Insurance Company in the City of New York in the
capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
/s/ David J. Dietz Principal Executive Officer May 25, 1999
- - ----------------------------
David J. Dietz
/s/ Robert F. Herbert, Jr. Principal Financial and May 25, 1999
- - ---------------------------- Accounting Officer
Robert F. Herbert, Jr.
Directors
- - ---------
/s/ William A. Bacas May 25, 1999
- - -------------------------
William A. Bacas
/s/ John R. Corcoran May 25, 1999
- - --------------------------
John R. Corcoran
/s/ Felix C. Curcuru May 25, 1999
- - ----------------------------
Felix C. Curcuru
/s/ David J. Dietz May 25, 1999
- - -----------------------------
David J. Dietz
/s/ Patricia O. Ewers May 25, 1999
- - --------------------------
Patricia O. Ewers
<PAGE>
/s/ Thomas H. Fox May 25, 1999
- - ---------------------------
Thomas H. Fox
/s/ David A. Fravel May 25, 1999
- - -----------------------------
David A. Fravel
/s/ Robert F. Herbert. Jr. May 25, 1999
- - --------------------------
Robert F. Herbert, Jr.
/s/ William M. Keeler May 25, 1999
- - -------------------------
William M. Keeler
/s/ Rodney O. Martin, Jr. May 25, 1999
- - -------------------------
Rodney O. Martin, Jr.
- - ------------------------- May __, 1999
Jon P. Newton
/s/ William J. O'Hara, Jr. May 25, 1999
- - --------------------------
William J. O'Hara, Jr.
/s/ Gary D. Reddick May 18, 1999
- - ---------------------------
Gary D. Reddick
/s/ George B. Trotta May 25, 1999
- - ---------------------------
George B. Trotta
/s/ R. Stephen Watson May 25, 1999
- - --------------------------
R. Stephen Watson
<PAGE>
EXHIBIT INDEX
(3)(a) Form of Master Marketing and Distribution Agreement By and Among
The United States Life Insurance Company in the City of New York,
American General Securities Incorporated and Van Kampen
Distributors, Inc.
(3)(b)(i) Participation Agreement by and among The United States Life
Insurance Company in the City of New York, American General
Securities Incorporated, Van Kampen Life Investment Trust, Van
Kampen Asset Management, Inc., and Van Kampen Distributors, Inc.
(3)(b)(ii) Participation Agreement by and among The United States Life
Insurance Company in the City of New York, Morgan Stanley Universal
Funds, Inc., Morgan Stanley Asset Management, Inc., and Miller
Anderson & Sherrerd
(3)(c) Specimen form of Selling Group Agreement by and among The United
States Life Insurance Company in the City of New York, American
General Securities Incorporated, and Van Kampen Funds, Inc.
(4)(b)(ii) Form of Qualified Certificate Endorsement.
(4)(b)(v) Form of Eligible Rollover Distribution Endorsement. (Filed
herewith)
(4)(b)(vi) Form of Individual Retirement Annuity (IRA) Endorsement.
(4)(b)(vii) Form of Roth Individual Retirement Annuity Endorsement.
(5)(a)(ii) Form of Application for Certificate, amended (Form No. USL 8771-33
REV 0499). (Filed herewith)
(5)(b) Specimen form of Generations Service Request.
(5)(c) Specimen form of Special Request for Surrender Charge Waiver under
Certificate Form No. 98033N.
(5)(d) Form of 1035 Exchange Instructions. (Filed herewith)
(5)(e) Form of Change of Beneficiary Form. (Filed herewith)
(5)(f) Form of Assignment and Transfer Request. (Filed herewith)
(5)(g) Form of Election of Annuity Payment Option/Change Form for Variable
Annuities. (Filed herewith)
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(5)(h) Form of Dollar Cost Averaging Form under Certificate Form No.
98033N. (Filed herewith)
(5)(i) Form of Confirmation of Initial Purchase Payment under Certificate
Form No. 98033N. (Filed herewith)
(8)(a) Form of Administrative Services Agreement, between The United
States Life Insurance Company in the City of New York and American
General Life Companies, limited to terms which describe registered
and non-registered product services.
(8)(b) Administrative Services Agreement, between The United States Life
Insurance Company in the City of New York and Van Kampen Asset
Management Inc. dated as of December 1, 1998.
(8)(c) Administrative Services Agreement, between The United States Life
Insurance Company in the City of New York and Morgan Stanley Asset
Management Inc., and Miller Anderson & Sherred, LLP, dated as of
December 1, 1998.
(9) Opinion and Consent of Counsel.
(10) Consent of Independent Auditors.
(13)(a) Computations of hypothetical historical average annual total
returns for the Divisions available under Certificate Form No
98033N for the one, five and ten year periods ended December 31,
1998, and since inception.
(13)(b) Computations of hypothetical historical total returns for the
Divisions available under Certificate Form No. 98033N for the one,
five and ten year periods ended December 31, 1998, and since
inception.
(13)(c) Computations of hypothetical historical cumulative total returns
for the Divisions available under Certificate Form No. 98033N for
the one, five and ten year periods ended December 31, 1998, and
since inception.
(13)(d) Computations of hypothetical historical 30 day yield for the
Domestic Income, Government, and the Growth and Income Divisions
available under Certificate Form No. 98033N for the one month
period ended December 31, 1998.
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(13)(e) Computations of hypothetical historical seven day yield and
effective yield for the Money Market Division, available under
Certificate Form No. 98033N for the seven day period ended December
31, 1998.
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EXHIBIT 3(a)
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MASTER MARKETING AND DISTRIBUTION AGREEMENT
BY AND AMONG
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED,
AND Van Kampen Funds Inc.
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TABLE OF CONTENTS
-----------------
Description Page
- - ----------- ----
SECTION 1. AVAILABLE CONTRACTS........................ 2
1.1 Availability.................................... 2
1.2 Modification of Contracts....................... 2
1.3 Suspension or Restriction of Sales.............. 2
1.4 Reinsurance of Contracts........................ 2
SECTION 2. CONTRACT DISTRIBUTION....................... 2
2.1 Exclusive Appointment........................... 2
2.2 Best Efforts.................................... 3
2.3 Selling Groups.................................. 4
2.4 Suitability Determinations...................... 4
2.5 Sales Persons/Associated Agencies............... 4
2.6 Insurance Agent Licensing....................... 5
2.7 Compliance, Training, and Supervision........... 5
2.8 Marketing Materials............................. 6
2.9 Marketing Services.............................. 7
2.10 Non-Marketing Materials......................... 8
2.11 Information About USL and DISTRIBUTOR........... 9
2.12 Complaints...................................... 10
2.13 Premium Payments................................ 10
2.14 Limitations on Authority........................ 10
2.15 Independent Contractor.......................... 11
SECTION 3. ADMINISTRATION AND RECORDKEEPING........... 11
3.1 Contract Administration......................... 11
3.2 Performance Standards........................... 11
3.3 Recordkeeping................................... 11
SECTION 4. REPRESENTATIONS AND WARRANTIES............. 12
4.1 By USL.......................................... 12
4.2 By AGSI......................................... 14
4.3 By DISTRIBUTOR.................................. 15
SECTION 5. COMPENSATION; COSTS AND EXPENSES........... 16
5.1 Compensation.................................... 16
5.2 Registration Fees............................... 16
5.3 Each Party To Bear Own Costs.................... 16
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SECTION 6. INDEMNIFICATION............................. 16
6.1 Indemnification by USL and AGSI................. 16
6.2 Indemnification by DISTRIBUTOR.................. 18
6.3 Limitation on Liability......................... 19
6.4 Injunctive Relief............................... 20
SECTION 7. TERM AND TERMINATION........................ 20
7.1 Term............................................ 20
7.2 Events of Termination........................... 20
7.3 Remedy of Events of Default..................... 22
7.4 Parties to Cooperate Respecting Termination..... 22
SECTION 8. ASSIGNMENT BY DISTRIBUTOR.................... 22
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC.. 22
SECTION 10. CONFIDENTIALITY............................. 23
SECTION 11. ARBITRATION OF DISPUTES..................... 23
11.1 Arbitration Binding............................. 23
11.2 Initiation of Arbitration....................... 23
11.3 Selection of Arbitrators........................ 23
11.4 Impartiality.................................... 24
11.5 Hearing Date and Time........................... 24
SECTION 12. TRADEMARKS.................................. 24
12.1 DISTRIBUTOR Trademarks.......................... 24
12.2 USL Trademarks.................................. 25
12.3 Grant of License................................ 25
12.4 Prior Approval.................................. 25
12.5 Sample Materials................................ 25
12.6 Trademarks Valid and Enforceable................ 26
SECTION 13. BONDING AND INSURANCE....................... 26
SECTION 14. NOTICES..................................... 26
14.1 Manner of Notices............................... 26
14.2 Notice of Regulatory Proceedings................ 27
SECTION 15. MISCELLANEOUS............................... 27
15.1 Amendment....................................... 27
15.2 Governing Law................................... 28
15.3 Survival of Provisions.......................... 28
15.4 Severability.................................... 28
15.5 Waiver.......................................... 28
15.6 Force Majeure................................... 28
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15.7 Parties to Cooperate........................... 28
15.8 Entire Agreement............................... 29
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MASTER MARKETING AND DISTRIBUTION AGREEMENT
This Master Marketing and Distribution Agreement (the "Agreement") is made
on this ________ day of ___________________, 1998, by and among THE UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a New York insurance
company ("USL"), on behalf of itself and each of its separate accounts listed on
Schedule A hereto, as the same may be amended from time to time (each, an
"Account"), AMERICAN GENERAL SECURITIES INCORPORATED, a Texas corporation
("AGSI"), and Van Kampen Funds Inc., a Delaware corporation ("DISTRIBUTOR")
(each, a "Party," collectively, the "Parties").
RECITALS
WHEREAS, USL and DISTRIBUTOR (including certain affiliates of DISTRIBUTOR)
are jointly developing a variable annuity group contract and certificate known
as the Generations Annuity ("New Contract"), which is to be issued through USL's
Separate Account USL VA-R ("Separate Account USL VA-R");
WHEREAS, USL and DISTRIBUTOR (including certain affiliates of DISTRIBUTOR)
may in the future jointly develop other annuity and/or life insurance contracts
(collectively referred to, together with the New Contract and any certificates
under any group contract, as the "Contracts") to be issued through one or more
separate accounts established by USL for such purposes (collectively referred
to, together with Separate Account USL VA-R, as the "Accounts");
WHEREAS, USL hereby appoints AGSI the principal underwriter of the New
Contract and currently intends to appoint AGSI the principal underwriter of all
other Contracts;
WHEREAS, USL and AGSI desire to retain DISTRIBUTOR (and any insurance
agency associated with DISTRIBUTOR and to whom it may assign certain rights or
obligations under this Agreement pursuant to Section 8 hereof (each a "VK Funds
Associated Agency")), on an exclusive basis, to market and distribute the
Contracts and DISTRIBUTOR desires to provide such services; and
WHEREAS, USL, AGSI, and DISTRIBUTOR desire to allocate among themselves
certain functions relating to the administration of the Contracts.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and of the mutual expectations of benefit occurring from the activities herein
contemplated, the Parties hereto agree as follows:
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SECTION 1. AVAILABLE CONTRACTS
1.1 AVAILABILITY. USL shall make available for offer and sale by
DISTRIBUTOR, pursuant to the terms and conditions of this Agreement, the
Contracts described in Schedule A attached hereto and incorporated by reference
herein, as the Parties may amend from time to time by mutual agreement.
1.2 MODIFICATION OF CONTRACTS. USL, in its sole discretion, may modify
or delete the terms of any Contract, to the extent permitted by the Contracts
and applicable law. DISTRIBUTOR may, from time to time, propose modifications to
the terms of any Contract, and USL agrees to consider any such proposed
modification in good faith, provided, however, that any implementation of such
proposed modification shall remain in USL's sole discretion.
1.3 SUSPENSION OR RESTRICTION OF SALES. USL, in its sole discretion,
may suspend or restrict the sale of any Contract in any state or other
jurisdiction upon 30 days' prior written notice to DISTRIBUTOR or upon such
shorter notice period as may be required by applicable law, without incurring
any liability or obligation to DISTRIBUTOR. Upon such notice, DISTRIBUTOR agrees
to immediately cease, and shall instruct all Selling Group Members (as defined
below) to immediately cease, all solicitation activity with respect to the
Contracts in those states or other jurisdictions where USL has suspended or
restricted the sale of Contracts. In addition, notwithstanding any provision
herein to the contrary, USL may refuse to sell any Contract to any applicant for
any reason.
1.4 REINSURANCE OF CONTRACTS. USL may reinsure any of the Contracts
with a reinsurer of its choice at any time, to the extent permitted by
applicable law.
SECTION 2. CONTRACT DISTRIBUTION
2.1 EXCLUSIVE APPOINTMENT.
(a) USL, as the issuer of the Contracts, and AGSI, as the principal
underwriter of the Contracts, hereby appoint DISTRIBUTOR (including any VK Funds
Associated Agency) the exclusive distributor, during the term of this Agreement,
for the marketing and distribution of the Contracts.
(b) The foregoing appointment shall be limited to those states and other
jurisdictions in which the Contracts may lawfully be offered and sold and in
which DISTRIBUTOR and any Associated Agency (as defined below) are properly
licensed as provided in Section 2.5 below, registered or otherwise qualified to
offer and sell the Contracts under the applicable federal securities laws and
the applicable insurance and other laws and regulations of each such state or
other jurisdiction. USL shall periodically provide DISTRIBUTOR with notice
pursuant to Section 14 hereof of all states and other jurisdictions in which the
Contracts may lawfully be
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offered and sold.
(c) As exclusive distributor for the Contracts, DISTRIBUTOR shall:
(i) assist in servicing the Contracts by, in its sole discretion,
either (A) communicating, as appropriate, with Contract owners, annuitants,
beneficiaries, and participants (collectively, "Contract owners") regarding
such matters as the exercise of rights and privileges available to them
under the terms of the Contracts or offered to them by USL; or by (B)
referring Contract owners to USL as appropriate; and
(ii) enter into agreements ("selling group agreements") with other
persons ("Selling Group Members"), pursuant to which such Selling Group
Members will offer, sell, and service Contracts in those states and other
jurisdictions where they and their Associated Agencies (as defined below)
are properly licensed, registered or otherwise qualified to offer and sell
the Contracts under the applicable insurance and other laws of each such
state or other jurisdiction.
(d) DISTRIBUTOR hereby expressly acknowledges and consents to the offer,
sale, and servicing of Contracts directly by AGSI and AGSI's own Sales Persons
(as defined below). The Parties hereby agree to enter into a selling group
agreement in order to support such activity. This Agreement does not limit the
rights of USL or AGSI to offer or sell insurance contracts, including, without
limitation, variable annuity contracts and variable life insurance policies,
other than the Contracts.
In addition, DISTRIBUTOR authorizes AGSI to enter into agreements to sell
the Contracts with persons who are qualified to sell as described in Section
2.3. DISTRIBUTOR shall bear no responsibility or liability for any activity
related to sales under such agreements, and in this regard shall be held
harmless by USL and AGSI. AGSI shall receive DISTRIBUTOR's specific written
consent before entering into any such agreement, which consent, if not withheld
by DISTRIBUTOR, shall be provided within ten calendar days after AGSI has given
notice of its intent to enter into the agreement. Notwithstanding the
foregoing, DISTRIBUTOR, in its sole discretion, may refuse to consent to the
appointment of any Selling Group Member or any Sales Person (as defined below),
or may require revocation of such appointment for any reason. DISTRIBUTOR shall
consult with USL prior to refusing to consent to an appointment or renewal of an
appointment, or requiring a revocation, as to the reasons for such decision.
DISTRIBUTOR shall not incur any obligation to compensate or reimburse any
expenses of USL or AGSI as a result of any such refusal to approve the
appointment of any Selling Group Member or Sales Person for which AGSI seeks
approval.
2.2 BEST EFFORTS. DISTRIBUTOR shall use its reasonable best efforts to
recruit Selling Group Members to offer, sell, and service Contracts.
2.3 SELLING GROUPS. Each Selling Group Member shall be registered with
the
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Securities and Exchange Commission ("SEC") as a broker-dealer under the
Securities Exchange Act of 1934 ("1934 Act") and shall be a member in good
standing of the National Association of Securities Dealers, Inc. ("NASD"),
unless the Selling Group Member is exempt from the broker-dealer registration
requirements of the 1934 Act. In addition, each Selling Group Member shall have
received an appropriate appointment or license by or through USL and, unless
exempt, a level of qualification with the NASD appropriate to enable it to offer
and sell Contracts. Each Selling Group Member shall enter into a selling group
agreement the form of which shall be as agreed to by the Parties from time to
time. DISTRIBUTOR shall not enter into any selling group agreement unless and
until USL has given written approval of the Selling Group Member, which approval
shall be provided within ten calendar days after DISTRIBUTOR has given notice of
its intent to enter into the agreement.
2.4 SUITABILITY DETERMINATIONS. USL, AGSI and DISTRIBUTOR wish to ensure
that the Contracts, the applications for which will be solicited by Selling
Group Members and their respective registered sales representatives (Selling
Group Members and registered sales representatives may be referred to
collectively as "Sales Persons"; if the context so warrants, registered sales
representatives may be referred to as "Sales Persons.") will be issued to
persons for whom the Contracts will be suitable. Each Selling Group Member
shall take reasonable steps to ensure that neither it nor any other Sales Person
makes recommendations to an applicant to purchase any of the Contracts, or to
select any investment option thereunder, in the absence of reasonable grounds to
believe that the purchase of the Contracts or selection of that option is
suitable for such applicant in compliance with federal securities law
requirements governing suitability obligations. While not limited to the
following, a determination of suitability shall be based on information
furnished to Sales Persons after reasonable inquiry of such applicant concerning
the applicant's insurance and investment objectives and financial situation and
needs, including the likelihood that the applicant will make sufficient premium
payments to derive the benefits thereof, and tax status. The responsibility of
Sales Persons to take such reasonable steps and make such determinations of
suitability shall be a requirement of each selling group agreement entered into
by DISTRIBUTOR.
2.5 SALES PERSONS/ASSOCIATED AGENCIES. DISTRIBUTOR shall enter into a
separate selling agreement whereby Selling Group Members will represent that
such Selling Group Member and its Sales Persons are duly registered and
qualified pursuant to the 1934 Act, NASD regulations, and any other securities
regulatory requirements. DISTRIBUTOR shall insure that any VK Funds Associated
Agency is and remains properly licensed under the applicable insurance laws and
regulations or each state of jurisdiction in which such VK Funds Associated
Agency is engaged in the offer or sale of the Contracts. DISTRIBUTOR shall
assist in ensuring that any insurance agency associated with a Selling Group
Member (each, an "Associated Agency") is and remains properly licensed under the
applicable insurance laws and regulations of each state or jurisdiction in which
the Associated Agency is engaged in the offer or sale of the Contracts by
including this obligation in each selling group agreement entered into by
DISTRIBUTOR.
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2.6 INSURANCE AGENT LICENSING.
(a) Neither DISTRIBUTOR nor any Selling Group Member or other Sales Person
thereof, shall engage in any activities with respect to the offer or sale of
Contracts that would require insurance agent licensing in the state or
jurisdiction where such activities are performed, unless and until such Sales
Persons are properly licensed to perform such services in the particular state
or other jurisdiction.
(b) DISTRIBUTOR shall immediately notify USL if the license of any VK Funds
Associated Agency is revoked, suspended, or terminated, and shall immediately
notify USL at such time DISTRIBUTOR becomes aware that the license of any Sales
Person or Associated Agency has been revoked, suspended, or terminated.
(c) USL agrees to take all actions necessary to effect the appointment of
the Sales Persons as insurance agents of USL, and to effect renewals thereof,
all as required for the business of this Agreement.
(d) DISTRIBUTOR shall, from time to time, advise USL of the Sales Persons
that DISTRIBUTOR wishes USL to appoint as USL insurance agents. USL shall
forward all approved agent appointment forms that it receives in a timely manner
to the appropriate state insurance departments.
(e) DISTRIBUTOR and USL shall cooperate in making arrangements with each
Selling Group Member in order to help to keep costs associated with the
appointment of Sales Persons at reasonable levels.
(f) Notwithstanding the foregoing, USL, in its sole discretion, may refuse
to appoint or renew the appointment of any Sales Person, or may revoke such
appointment for any reason. USL shall consult with DISTRIBUTOR prior to refusing
to appoint, renew appointment, or revoking an appointment, as to the reasons for
such decision. Neither USL nor AGSI shall incur any obligation to compensate or
reimburse any expenses of DISTRIBUTOR as a result of any such refusal to appoint
or renew an appointment of a Sales Person.
2.7 COMPLIANCE, TRAINING, AND SUPERVISION
(a) Compliance. DISTRIBUTOR shall require each Selling Group Member to
ensure that their respective Sales Persons comply with all applicable federal
and state laws and regulations and the rules of the NASD relating to the offer
and sale of the Contracts. This responsibility shall be a requirement of each
selling group agreement entered into by DISTRIBUTOR.
(b) Training. DISTRIBUTOR agrees to conduct initial and periodic training
and education of the Sales Persons in their solicitations of applications for
the Contracts and all of their activities relating to this Agreement.
DISTRIBUTOR agrees to train the Sales Persons as to the Contracts in accordance
with any guidelines furnished by USL or AGSI. USL
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or AGSI may assist DISTRIBUTOR by assisting in the training and education of
DISTRIBUTOR's training personnel in product specifications and markets.
(c) Supervision. Selling Group Members shall be responsible for the
supervision of the Sales Persons in their solicitation of applications for the
Contracts and all of their activities relating to this Agreement and that are
provided for under the Selling Group Agreement. DISTRIBUTOR shall establish
reasonable procedures to be implemented by Selling Group Members for periodic
inspection and supervision of sales practices of the Sales Persons and
DISTRIBUTOR, after consultation with Selling Group Members, shall submit reports
to USL or AGSI as may be reasonably requested from time to time on the result of
such inspections and the compliance with such procedures.
2.8 MARKETING MATERIALS
(a) DISTRIBUTOR, at its sole cost, shall be responsible for developing
(with the assistance of USL), printing and distributing all marketing materials
to be used in connection with the offer and sale of the Contracts, except for
(i) any prospectus for the Contracts, including any related statement of
additional information ("SAI"), and any amendments or supplements to the
foregoing (collectively, as the context requires, "Contract Prospectus") and
(ii) any annual or semi-annual reports for an Account ("Account Reports"), the
preparation of which shall be the sole responsibility of USL. As used herein,
"marketing materials" shall mean any "advertisement" or "sales literature," as
those terms are defined in Section 35(a) of the NASD's Rules of Fair Practice,
as amended from time to time, including, without limitation, any so-called
"dealer only" materials.
(b) The responsibility for (i) printing and distributing Contract
Prospectuses (including any related SAI) and Account Reports used as marketing
materials and (ii) the costs of printing and distributing such Contract
Prospectuses and Account Reports shall be set forth in the Amended and Restated
Fund Participation Agreement by and among USL, DISTRIBUTOR, and other parties
thereto ("Participation Agreement"). DISTRIBUTOR shall deliver the current
Contract Prospectus together with the current prospectus of the investment
vehicles available under the Contracts, including any supplements thereto ("Fund
Prospectus") (generally attached thereto) to every applicant for the related
Contract at or prior to the time that an application form or other marketing
materials are submitted to the applicant (other than materials submitted in
compliance with Rules 134 or 482 of the Securities Act of 1933 ("1933 Act").
DISTRIBUTOR shall deliver the current SAI related to the Contracts promptly to
any applicant or Selling Group Member who requests one and USL shall promptly
forward all such requests that it receives to DISTRIBUTOR. USL shall at all
times keep DISTRIBUTOR informed of the dates of the appropriate current Contract
Prospectus and SAI.
(c) USL and DISTRIBUTOR shall submit by telecopy or overnight delivery
definitive copies of all marketing materials to the other for its approval,
which approval, unless denied or withheld, shall be provided within at least ten
(10) business days of receipt or such period to which the Parties may agree from
time to time.
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(d) DISTRIBUTOR shall, to the extent required, file in a timely manner all
marketing materials with the NASD, the SEC, and any other regulatory body (other
than state insurance regulatory bodies), as appropriate, and shall obtain any
necessary approval of these regulatory bodies of such marketing materials. USL
shall, to the extent required, file in a timely manner all marketing materials
with the various state insurance regulatory bodies, as appropriate, and shall
obtain any necessary approval of these regulatory bodies of such marketing
materials.
(e) Notwithstanding the foregoing, USL acknowledges that Selling Group
Members, at their own cost, may from time to time develop, print, and distribute
marketing materials that are not jointly developed by USL and DISTRIBUTOR
("supplemental marketing materials"). In no event shall DISTRIBUTOR utilize, or
permit or encourage Selling Group Members to utilize, any supplemental marketing
materials unless USL has provided its written approval of such materials prior
to their intended first use. The responsibility of Selling Group Members to
obtain USL's prior written approval of supplemental marketing materials shall be
a requirement of each selling group agreement entered into by DISTRIBUTOR.
2.9 MARKETING SERVICES. In connection with the offer and sale of
Contracts, DISTRIBUTOR agrees to:
(a) develop a marketing plan for the introduction and continuing sale of
the Contracts through Selling Group Members;
(b) provide USL on an ongoing basis with information concerning the
marketability of the Contracts and the usefulness of the marketing materials
jointly prepared by USL and DISTRIBUTOR or any other documents prepared by USL,
and advise USL with regard to the desirability of revising or redesigning the
same;
(c) provide USL on an ongoing basis with comparative data regarding
products offered by other life insurance companies and mutual fund groups;
(d) initiate and maintain contact with existing and potential Selling Group
Members for purposes of advising USL on the desirability of developing and
implementing new Contract features;
(e) receive written and oral inquiries from Selling Group Members with
respect to the Contracts and coordinate responses to the same with USL;
(f) provide assistance to Selling Group Members in arranging for the
insurance licensing and appointment of the Members' Sales Persons;
(g) distribute to Selling Group Members copies of all marketing and non-
marketing materials, described herein, that are approved or prepared by USL
pursuant to this Agreement;
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(h) maintain a toll-free number and support and service unit to render
assistance to Selling Group Members in connection with the offer and sale of
Contracts;
(i) provide Selling Group Members, to the extent requested, with technical
assistance at the time of sale of the Contracts;
(j) participate in seminars for customers and potential customers of
Selling Group Members; and
(k) provide such other marketing services and support as USL may
reasonably request from time to time.
2.10 NON-MARKETING MATERIALS.
(a) USL, at its sole cost, shall be responsible for preparing, printing
in quantity and delivering to DISTRIBUTOR: (i) all Contract forms, applications
and related materials, (ii) all documents pertaining to the processing of
premium payments, refunds and other monies, and (iii) all documents pertaining
to transactions, claims, and other features available under the Contracts,
including, but not limited to, full or partial surrenders, exchanges, transfers,
loans, systematic purchases, death claims, changes in premium allocations, and
changes in beneficiary.
(b) USL, at its sole cost, shall be responsible for preparing, printing,
and distributing all correspondence with Contract owners, except for
correspondence prepared, printed, and distributed by DISTRIBUTOR pursuant to
USL's prior approval.
(c) The responsibility for printing and distributing Contract
Prospectuses to existing Contract owners shall be set forth in the Participation
Agreement.
(d) USL, at its sole cost, shall be responsible for preparing, printing,
distributing to existing Contract owners, and, to the extent required, filing
with any appropriate regulatory body, in a timely manner, or causing the same to
be done: (i) all Contract owner account statements, (ii) Account Reports, (iii)
voting cards, as appropriate; and (iv) all reports, forms, and other information
necessary to comply with applicable federal and state tax law.
(e) USL shall provide to DISTRIBUTOR or its designated agent at least one
complete copy of all SEC registration statements, Contract Prospectuses, Account
Reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(f) USL, as agent for AGSI and DISTRIBUTOR shall, upon or prior to the
completion of each Contract transaction for which a confirmation is legally
required, send a written confirmation to the Contract owner for each such
transaction, in a form and manner
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which complies with the requirements of the 1934 Act, state laws and
regulations, and the disclosure requirements of the NASD. Such confirmations
shall be furnished to all Contract owners in accordance with securities laws,
shall reflect the facts of the transaction, and, if applicable, shall show that
they are being sent by USL on behalf of AGSI and DISTRIBUTOR.
2.11 INFORMATION ABOUT USL AND DISTRIBUTOR
(a) Neither USL nor any of its affiliates will give any information or make
any representations or statements on behalf of or concerning DISTRIBUTOR or its
affiliates in connection with the sale of the Contracts other than the
information or representations provided by or on behalf of DISTRIBUTOR and its
affiliates that are contained (i) in the registration statement, including the
Contract Prospectus contained therein, as such registration statement and
Prospectus may be amended from time to time; (ii) in Account Reports or voting
instruction solicitation materials for each Account; or (iii) marketing
materials prepared, except with the express written permission of DISTRIBUTOR.
As used herein, the term "affiliate" shall have the same meaning as defined in
Section 2(a)(3) of the Investment Company Act of 1940 ("1940 Act").
(b) Neither DISTRIBUTOR nor any of its affiliates will give any information
or make any representations or statements on behalf of or concerning USL, AGSI,
or their respective affiliates in connection with the sale of the Contracts
other than the information or representations provided by or on behalf of USL,
AGSI, or their respective affiliates that are contained in (i) the registration
statement, including the Contract Prospectus contained therein, as such
registration statement and Prospectus may be amended from time to time; (ii) in
Account Reports or voting instruction solicitation materials for each Account;
or (iii) in marketing material, except with the express written permission of
USL.
2.12 COMPLAINTS.
In the case of an oral or written consumer or regulatory agency complaint,
USL, AGSI, and DISTRIBUTOR shall each promptly notify the others and shall
coordinate and fully cooperate in responding to such complaints. USL, AGSI, and
DISTRIBUTOR shall jointly develop procedures to coordinate, investigate and
respond to such complaints. USL, AGSI and DISTRIBUTOR agree to consult with
one another with respect to the disposition of any complaints or grievances and
DISTRIBUTOR shall use its best efforts to obtain the cooperation of any Sales
Person in the disposition thereof. AGSI and DISTRIBUTOR shall maintain customer
complaint files pursuant to applicable NASD rules.
2.13 PREMIUM PAYMENTS. DISTRIBUTOR and USL shall enter into agreements
with Selling Group Members setting forth the method for, and responsibilities
with respect to, the handling and processing of premium payments or other monies
received in connection with the sale of the Contracts.
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2.14 LIMITATIONS ON AUTHORITY. DISTRIBUTOR and Sales Persons shall have
no authority to, and shall not:
(a) alter or substitute USL's Contract applications or forms in any manner;
(b) guarantee the issuance of any Contract or the reinstatement of any
lapsed Contract (in the case of life insurance Contracts), or the reinvestment
of any Contract (in the case of annuity Contracts);
(c) add, alter, waive or discharge any Contract provision, including,
without limitation, any forfeiture provision, or represent that such can be done
by USL;
(d) make any settlement of any claim or claims or bind USL or any of its
affiliates in any way;
(e) extend the time of making any premium payments, or pay or allow any
inducement not specified in the Contracts to any Contract owner or applicant, or
rebate any portion of a premium payment, in any manner whatsoever;
(f) incur any indebtedness or liability on behalf of or expend or contract
for the expenditure of the funds by USL;
(g) enter into legal proceedings in connection with any matter pertaining
to the business of USL without the prior written consent of USL, unless
DISTRIBUTOR or any Sales Person, as the case may be, is named in such
proceedings;
(h) give or offer to give, on behalf of USL, any tax or legal advice
related to the purchase of a Contract; or
(i) exercise any authority on behalf of USL other than that expressly
conferred on DISTRIBUTOR or any Sales Person by this Agreement.
2.15 INDEPENDENT CONTRACTOR. DISTRIBUTOR shall at all times function as,
and be deemed to be, an independent contractor. Nothing contained herein shall
be construed as creating the relationship of employer and employee between or
among USL, AGSI, and DISTRIBUTOR (or any Sales Person or Associated Agency
thereof).
SECTION 3. ADMINISTRATION AND RECORDKEEPING
3.1 CONTRACT ADMINISTRATION. Each Party agrees to perform the
administrative duties assigned to such Party under Schedule B attached hereto
and incorporated by reference herein, as the Parties may amend from time to time
by mutual agreement. Each party acknowledges that the other party may
subcontract its rights and responsibilities enumerated in
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Schedule B to one or more third party vendors. Although such duties may be
delegated, each party agrees that it is legally liable for the performance of
the same.
3.2 PERFORMANCE STANDARDS. Each Party agrees to use its reasonable
best efforts to meet or exceed the standards for performing the various
administrative duties set out in Schedule B attached hereto and incorporated by
reference herein, as the Parties may amend from time to time by mutual
agreement.
3.3 RECORDKEEPING.
(a) Each Party agrees to keep, at its principal office, all accounts, books
and other records (collectively, "records") required by and in accordance with
applicable federal and state law, and the regulations of any regulatory body
having jurisdiction over such records, including, without limitation, Rules
31a-1 and 31a-2 under the 1940 Act and Rules 17a-3 and 17a-4 under the 1934 Act.
In the case of USL, records may be kept at another location in accordance with
procedures approved by the New York Superintendent of Insurance.
(b) Each Party agrees to maintain any and all records as may pertain to the
Contracts and this Agreement in a manner that clearly and accurately discloses
the precise nature and details of Contract transactions or any transactions
related thereto.
(c) Each Party agrees to assist the others in the timely preparation of
records. In this regard, each Party shall promptly furnish to any other Party
hereto any reports and information that such other Party may request for the
purpose of meeting reporting and recordkeeping requirements under the insurance
laws of the state of New York or any other state and under the federal or state
securities laws or the rules of the NASD.
(d) To the extent that records maintained by USL, AGSI or DISTRIBUTOR
(each, a "Maintaining Party" as the case may be) are necessary to satisfy the
recordkeeping requirements imposed by federal securities laws and regulations on
any other Party to this Agreement (the "Responsible Party"), the Responsible
Party hereby appoints the Maintaining Party as its agent for the purpose of
keeping and maintaining such records. As required by 1940 Act Rule 31a-3(a) and
1934 Act Rule 17a-4(i), such records will be the exclusive property of the
Responsible Party, but this shall not preclude the Maintaining Party from having
access to such records or keeping copies of such records for its own files. In
addition, as required by 1940 Act Rule 31a-3(a) and 1934 Act Rule 17a-4(i), the
Maintaining Party shall, promptly upon the request of the Responsible Party,
surrender or provide reasonable access to, as requested, all records held by it
for the Responsible Party pursuant to this Agreement in a form mutually agreed
to by such Parties. In order to comply with 1934 Act Rule 17a-4(i), with respect
to books and records maintained or preserved subject thereto, the Maintaining
Party hereby undertakes to permit examination of such books and records at any
time or from time to time during business hours by representatives or designees
of the SEC, and to promptly furnish to the SEC or its designee true, correct,
complete and current hard copy of any or all of any part of such books and
records.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 BY USL
USL represents and warrants that:
(a) it is an insurance company duly organized, validly existing and in good
standing under the laws of the State of New York and has full corporate power,
authority and legal right to execute, deliver and perform its duties and comply
with its obligations under this Agreement,
(b) it has legally and validly established and maintains each Account as a
segregated asset account under New York statutes and the regulations thereunder,
(c) the Contracts comply in all material respects with all other
applicable federal and state laws and regulations,
(d) interests in each Account pursuant to the Contracts will be registered
under the 1933 Act to the extent required by the 1933 Act,
(e) the Contracts will be duly authorized for issuance and sold in
compliance with all applicable federal and state laws, including, without
limitation, the 1933 Act, the 1934 Act, the 1940 Act, New York law, and the laws
of any other state in which the Contracts are offered and sold,
(f) each Account is and will remain registered under the 1940 Act, to the
extent required by the 1940 Act, and each Account does and will comply in all
material respects with the requirements of the 1940 Act and the rules
thereunder, to the extent required,
(g) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder,
(h) USL will amend the registration statement for its Contracts under the
1933 Act and for its Accounts under the 1940 Act from time to time as required
in order to effect the continuous offering of its Contracts or as may otherwise
be required by applicable law, and
(i) each Contract Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder, but
excluding information contained or omitted in reliance upon and in conformity
with information furnished to USL or AGSI by or on behalf of DISTRIBUTOR.
USL further represents that:
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(a) the Contracts currently are and will be treated as annuity,
endowment, or life insurance contracts under applicable provisions of the
Internal Revenue Code of 1986, as amended ("Code"), that it will use its best
efforts to maintain such treatment, and that it will notify DISTRIBUTOR
immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future, and
(b) that each Account is a "segregated asset account," that interests in
the Account are offered exclusively through the purchase of or transfer into a
"variable contract," within the meaning of such terms under Section 817 of the
Code and the regulations thereunder, that it will use its best efforts to
continue to meet such definitional requirements, and that it will notify
DISTRIBUTOR immediately upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be met in the future.
4.2 BY AGSI
AGSI represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Texas and has full power, authority, and
legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement,
(b) it is a member in good standing of the NASD and that it has obtained
all approvals necessary to offer the Contracts and otherwise enter into and
carry out all transactions contemplated by this Agreement, has obtained or will
obtain all approvals, licenses, authorizations, orders or consents, and shall be
duly registered or otherwise qualified under the securities laws of any state or
other jurisdiction where offers or sales of the Contracts may be made,
(c) it is bonded as required by all applicable laws and regulations and
that it will carry out its sales and underwriting obligations hereunder in
continued compliance with the NASD Rules of Fair Practice and federal and state
securities laws and regulations and state insurance laws and regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR and Sales Persons in connection with
the offer and sale of Contracts shall be in compliance with applicable federal
and state securities laws and regulations in all material respects,
(e) in its capacity as principal underwriter of the Contracts it has
performed due diligence in order to discharge its obligations to all Selling
Group Members, and further that the Contracts are the subject of a bona fide
offering and that after a reasonable examination of the Contracts, it has
determined that the representations contained in the Contract prospectuses are
true and correct,
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(f) it shall at all times provide appropriate supervision for those home
office employees of USL who are registered representatives of AGSI and who are
required by USL to execute duties on behalf of USL which are related to the
Contracts, and
(g) it shall take all actions necessary to obtain and maintain all
regulatory approvals required to underwrite the Contracts for sale in all states
and jurisdictions in which the Contracts may be sold.
4.3 BY DISTRIBUTOR.
DISTRIBUTOR represents and warrants that:
(a) it is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has full power, authority,
and legal right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement,
(b) it is a member in good standing of the NASD and that it or the VK Funds
Associated Agencies have or will have obtained all approvals necessary to offer
the Contracts and otherwise enter into and carry out all transactions
contemplated by this Agreement, have obtained or will obtain all approvals,
licenses, authorizations, orders or consents, and shall be duly registered or
otherwise qualified under the securities and insurance laws of any state or
other jurisdiction where offers or sales of the Contracts may be made,
(c) it or each VK Funds Associated Agency is bonded as required by all
applicable laws and regulations and will carry out its or their sales and
underwriting obligations hereunder in continued compliance with the NASD Rules
of Fair Practice and federal and state securities laws and regulations and state
insurance laws and regulations,
(d) it is duly registered with the SEC as a broker-dealer under the 1934
Act, and that the activities of DISTRIBUTOR shall be in compliance with
applicable federal and state securities laws and regulations in all material
respects,
(e) neither it nor any of its Sales Persons or the VK Funds Associated
Agencies shall make any representations concerning the Contracts, except those
contained in or reasonably derived from the Contract Prospectus, registration
statements, annual or semi-annual reports of each Account, or in other written
materials prepared or approved by or on behalf of USL, and
(f) to the extent that DISTRIBUTOR assigns rights or obligations under this
Agreement to an Associated Agency pursuant to Section 8 hereof, DISTRIBUTOR
represents and warrants that such Associated Agency will have and maintain all
governmental approvals, licenses, authorizations, orders or consents that are
necessary for it to be assigned such rights and perform any such obligations. In
addition, the representations and warranties made by
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DISTRIBUTOR in this Section 4.3 shall be read to apply to each VK Funds
Associated Agency where the context so requires.
SECTION 5. COMPENSATION; COSTS AND EXPENSES
5.1 COMPENSATION.
(a) USL agrees to compensate DISTRIBUTOR for its services hereunder in
accordance with Schedule C attached hereto and incorporated herein by reference,
as the Parties may amend from time to time by mutual agreement.
(b) DISTRIBUTOR agrees that neither it nor any of its Sales Persons or the
VK Funds Associated Agencies will pay any commission, or portion thereof, or
other compensation based upon a percentage of premium payments or other valuable
consideration for services rendered in soliciting the sale of the Contracts to
any person or entity (i) that is not duly licensed or appointed by USL to sell
the Contracts under the applicable laws of any state or jurisdiction or (ii)
that is not duly registered or otherwise qualified under the 1934 Act and rules
thereunder or under any applicable state laws and rules governing broker-dealers
and their Sales Persons, unless exempt therefrom; provided, however, that this
representation shall not prohibit the payment of compensation to the widow(er)
or other beneficiary of a person lawfully entitled to receive such compensation
pursuant to a bona fide contract that calls for such payment.
5.2 REGISTRATION FEES. The fees imposed by the SEC pursuant to Rule
24f-2 under the 1940 Act in connection with the registration of an Account's
units of interest under the 1933 Act shall be borne equally by USL and
DISTRIBUTOR.
5.3 EACH PARTY TO BEAR OWN COSTS. Except as otherwise expressly
provided, each Party to this Agreement shall bear all expenses of fulfilling its
duties and obligations hereunder. To the extent one Party initially bears any
costs or expenses that are the responsibility of another Party, that other Party
shall reimburse the Party that initially bore such expenses promptly upon
request.
SECTION 6. INDEMNIFICATION
6.1 INDEMNIFICATION BY USL AND AGSI
(a) Except as limited by and in accordance with the provisions of Sections
6.1(c) and 6.1(d) below, USL and AGSI, jointly and severally, shall indemnify
and hold harmless DISTRIBUTOR against any loss, claim, damage or liability
(including amounts paid in settlement with the written consent of DISTRIBUTOR),
or litigation (including reasonable counsel fees and other costs of
investigating or defending any alleged loss, claim, damage, or liability) to
which DISTRIBUTOR may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, or liabilities are
related to the sale of the Contracts and:
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(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Contract, the
registration statement relating to the Contracts, the Contract Prospectus,
or in any published marketing materials or communications with any Contract
owner (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 or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party, as defined below, if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to USL or AGSI by or on behalf of DISTRIBUTOR or
any VK Funds Associated Agency thereof for use in the foregoing materials;
or
(ii) arise out of the failure of USL, AGSI, or any of their
respective affiliates, officers, directors, or employees, to comply with
any applicable securities, insurance, or other laws and regulations in
connection with its rendering of Contract issue, recordkeeping,
confirmation or other services under this Agreement; or
(iii) arise out of USL's or AGSI's negligence or misconduct, or that of
their respective affiliates, officers, directors, or employees in the
performance of its duties hereunder; or
(iv) arise as a result of any failure by USL or AGSI to substantially
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 USL or AGSI in this Agreement or arise
out of or result from any other material breach of this Agreement by USL or
AGSI.
(b) The indemnities in this Section 6.1 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer, Sales
Person and affiliate of DISTRIBUTOR or any VK Funds Associated Agency and any
person controlling DISTRIBUTOR within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act (each an "Indemnified Party").
(c) USL and AGSI 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.
(d) Neither USL or AGSI shall be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified USL and AGSI, if appropriate, 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
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such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify USL and
AGSI of any such claim shall not relieve USL and AGSI from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against an Indemnified Party, USL and AGSI shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from USL and AGSI to such party of USL's and AGSI's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and USL 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.
6.2 INDEMNIFICATION BY DISTRIBUTOR
(a) Except as limited by and in accordance with the provisions of Sections
6.2(c) and 6.2(d) below, DISTRIBUTOR shall indemnify and hold harmless USL and
AGSI against any loss, claim, damage or liability (including amounts paid in
settlement with the written consent of USL and AGSI), or litigation (including
reasonable counsel fees and other costs of investigating or defending any
alleged loss, claim, damage, or liability) to which USL or AGSI may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, or liabilities are related to the sale of 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 Contract, the
registration statement relating to the Contracts, the Contract Prospectus,
or in any published marketing materials or communications with any Contract
owner (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 or necessary to make the statements therein not misleading, if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to USL or AGSI
by or on behalf of DISTRIBUTOR or any VK Funds Associated Agency thereof
for use in the foregoing materials; or
(ii) arise out of the failure of DISTRIBUTOR or any VK Funds Associated
Agency, including affiliates, officers, directors, or employees of the
foregoing, to comply with any applicable securities or other laws and
regulations in connection with its rendering of Contract marketing,
distribution, recordkeeping, or other services under this Agreement; or
(iii) arise out of the negligence or misconduct of DISTRIBUTOR or any
VK Funds Associated Agency, or that of any affiliate, officer, director, or
employee of the foregoing, in the performance of its duties hereunder; or
(iv) arise as a result of any failure by DISTRIBUTOR to substantially
provide
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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 DISTRIBUTOR in this Agreement or arise
out of or result from any other material breach of this Agreement by
DISTRIBUTOR.
(b) The indemnities in this Section 6.2 shall, upon the same terms and
conditions, extend to and inure to the benefit of each director, officer, and
affiliate of USL or AGSI and any person controlling USL or AGSI within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act (each an
"Indemnified Party").
(c) DISTRIBUTOR 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.
(d) DISTRIBUTOR 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 DISTRIBUTOR in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify DISTRIBUTOR of any such claim shall not
relieve DISTRIBUTOR from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, DISTRIBUTOR shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After notice from
DISTRIBUTOR to such party of DISTRIBUTOR's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and DISTRIBUTOR 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.
6.3 LIMITATION ON LIABILITY. In no event shall any Party under this
Agreement be liable for lost profits or for exemplary, special, punitive or
consequential damages alleged to have been sustained by the other Party, as
opposed to a third party.
6.4 INJUNCTIVE RELIEF. The Parties each agree that monetary damages may
be an inadequate remedy in the event of a breach by any Party of any of the
covenants in this Agreement, and that any such breach by a Party may cause the
other Parties great and irreparable injury and damage. Accordingly, the Parties
agree that the non-breaching Parties shall be entitled, without waiving any
additional rights or remedies otherwise available to it at law or in equity or
by statute, to injunctive and other equitable relief in the event of a breach or
intended or threatened breach by any other Party of any of said covenants.
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SECTION 7. TERM AND TERMINATION
7.1 TERM. This Agreement shall be effective as of the date first above
written and shall, unless earlier terminated pursuant to Section 7.2 or 7.3,
remain in full force and effect thereafter with respect to all Contracts of each
particular form type until no Contracts of that particular form type remain
outstanding.
7.2 EVENTS OF TERMINATION.
(a) This Agreement shall terminate at any Party's option, without penalty:
(i) with or without cause, on not less than 180 days' written notice to
the other Parties;
(ii) upon the mutual written consent of the Parties;
(iii) upon written notice of one Party to the other Parties in the
event of bankruptcy or insolvency of such party to which notice is given;
or
(iv) in the event of an assignment of this Agreement, subject to the
provisions of Section 8.
(b) This Agreement shall terminate at the option of DISTRIBUTOR, subject to
Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by USL or AGSI;
(ii) the dissolution or disqualification of USL or AGSI to do business
under any applicable state or federal law where USL or AGSI's ability to
perform is materiallyimpaired; however, such termination shall extend only
to the jurisdiction(s) where USL or AGSI is prohibited from doing business;
(iii) the suspension or revocation of any material license or permit
held by USL or AGSI by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
USL or AGSI is prohibited from doing business;
(iv) the sale (without the prior written consent of DISTRIBUTOR, which
consent shall not be unreasonably withheld) of the USL or AGSI business
relating to the
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Contracts, which sale is to an unaffiliated person or entity, whether by
merger, consolidation, or sale of substantially all of USL or AGSI's
assets, during the term of, and any extension of, this Agreement; or
(v) upon the institution of formal proceedings against USL or AGSI by
the NASD, SEC, or any other regulatory body regarding USL or AGSI's duties
under this Agreement, the sale of the Contracts, or the operation of any
Account, provided that such proceedings result in a finding of material
wrongdoing by USL or AGSI.
(c) This Agreement shall terminate at the option of USL or AGSI, subject to
Section 7.3, in the event of:
(i) fraud, misrepresentation, conversion or unlawful withholding of
funds by DISTRIBUTOR;
(ii) the dissolution or disqualification of DISTRIBUTOR to do business
under any applicable state or federal law where DISTRIBUTOR's ability to
perform is materially impaired; however, such termination shall extend only
to the jurisdiction(s) where DISTRIBUTOR is prohibited from doing business;
(iii) the suspension or revocation of any material license or permit
held by DISTRIBUTOR by the appropriate governmental agency or authority;
however, such termination shall extend only to the jurisdiction(s) where
DISTRIBUTOR is prohibited from doing business;
(iv) the sale (without the prior written consent of USL, which consent
shall not be unreasonably withheld) of DISTRIBUTOR's business to an
unaffiliated person or entity, whether by merger, consolidation, or sale of
substantially all of DISTRIBUTOR'S assets during the term of, and any
extension of, this Agreement (Notwithstanding this subsection 7.2(c)(iv),
USL and AGSI specifically consent to the transactions contemplated by the
Merger Agreement.); or
(v) upon the institution of formal disciplinary proceedings against
DISTRIBUTOR by the NASD, SEC, or any other regulatory body, regarding
DISTRIBUTOR's duties under this Agreement or the sale of the Contracts,
provided that such proceedings result in a finding of material wrongdoing
by DISTRIBUTOR.
7.3 REMEDY OF EVENTS OF DEFAULT. If any Party breaches this Agreement or
is in default in the performance of any of its duties and obligations hereunder
(the "defaulting Party"), including, without limitation, a breach in any
representation or warranty made by the defaulting
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Party, the non-defaulting Parties may give written notice thereof to the
defaulting Party, and if such breach is not remedied within 30 days after such
written notice is given, then the non-defaulting Parties may terminate this
Agreement by giving 30 days' written notice of such termination to the
defaulting Party.
7.4 PARTIES TO COOPERATE RESPECTING TERMINATION. The Parties agree to
cooperate and give reasonable assistance to each other in effecting an orderly
transition following termination.
SECTION 8. ASSIGNMENT BY DISTRIBUTOR
DISTRIBUTOR may, with the prior written consent of USL and prior
notification to the New York Insurance Department, assign its rights or
obligations under this Agreement to a VK Funds Associated Agency to the extent
deemed necessary or appropriate by DISTRIBUTOR in order to comply with
applicable laws or regulations. If obligations under this Agreement are
assigned to a VK Funds Associated Agency as permitted herein, DISTRIBUTOR shall
not be relieved of any of such obligations.
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC.
During the term of this Agreement and for two (2) years following the
termination of this Agreement, neither DISTRIBUTOR nor any of its VK Funds
Associated Agencies or Sales Persons, or any affiliate, director, officer or
employee of the foregoing, shall induce or cause, or attempt to induce or cause,
directly or indirectly, any Contract owner (a) to lapse, terminate, surrender,
exchange, or cancel his or her Contract, (b) to cease or discontinue making
premium payments thereunder, or (c) to direct cash value or premium payments
thereunder to any other financial product without the prior written consent of
USL, unless such act is in response to an enactment of federal or state
legislation, order or decision of any court or regulatory authority, or a change
in circumstances that makes the Contracts or insurance contracts of that type
(e.g., annuity contracts or life insurance contracts) an unsuitable investment
for existing Contract owners. USL shall have the right to cease compensation
payments to DISTRIBUTOR in the event this provision is violated; provided,
however, that this Section 9 shall have no effect in the event USL undertakes
either (1) a formal exchange offer of the Contracts, or (2) a substitution of
any series of a fund or funds advised or sub-advised by an affiliate of
DISTRIBUTOR pursuant to Section 26(b) of the Investment Company Act of 1940, and
neither (1) nor (2) is undertaken as a result of DISTRIBUTOR's or such
affiliates inability to perform their respective obligations hereunder.
SECTION 10. CONFIDENTIALITY
Each Party to this Agreement shall keep confidential any information about
each other Party, or its operations obtained pursuant to this Agreement or the
transactions contemplated herein and shall disclose such information only if
such other Party has authorized such
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disclosure, or if such disclosure is required by federal, state or any other
applicable regulatory bodies. If any Party hereto receives a request from such
regulatory body requiring such disclosure, that Party shall immediately notify
the other Parties of the request.
SECTION 11. ARBITRATION OF DISPUTES
11.1 ARBITRATION BINDING. Any controversy or claim arising out of or
relating to this Agreement, or the breach hereof, shall be settled by
arbitration under the rules of the NASD in effect at that time. If the NASD
refuses jurisdiction, or the Parties mutually agree in writing, the arbitration
procedure described herein shall be used. In either event, the decision of the
arbitrator(s) shall be final and judgment upon the award rendered may be entered
in any court having jurisdiction thereof.
11.2 INITIATION OF ARBITRATION. To initiate arbitration, the Party
seeking arbitration ("Claimant") shall notify the Party(ies) (each, a
"Respondent") in writing of its desire to arbitrate, stating the nature of its
dispute and the remedy sought. The Respondent(s) shall respond to the
notification in writing within 10 days of its receipt.
11.3 SELECTION OF ARBITRATORS.
(a) The arbitration hearing shall be before a panel of three arbitrators,
each of whom must be (i) a present or former officer of a life insurance or
reinsurance company and/or (ii) an officer and principal of a registered broker-
dealer. The panel must contain at least one representative from each of (i) and
(ii). An arbitrator may not be a present or former affiliate, director, officer,
employee, attorney, or consultant of USL, AGSI, and DISTRIBUTOR (or any
Associated Agency or Sales Person thereof).
(b) Claimant and Respondent shall each name five (5) candidates to serve as
an arbitrator. Claimant and Respondent shall each choose one candidate from the
other Party's list, and these two candidates shall serve as the first two
arbitrators. Claimant and Respondent shall each present their initial lists of
five (5) candidates by written notification to the other Party within 25 days of
the date of the mailing of the notification initiating the arbitration. Any
subsequent additions to the list that are required shall be presented within 10
days of the date the naming Party receives notice that a candidate that has been
chosen declines to serve.
(c) The two arbitrators shall then select the third arbitrator from the
eight (8) candidates remaining on the lists of the Claimant and Respondent
within 14 days of the acceptance of their positions as arbitrators. If the two
arbitrators cannot agree on the choice of a third, then this choice shall be
referred back to the Parties. Claimant and Respondent shall take turns striking
thename of one of the remaining candidates from the initial eight (8) candidates
until only one candidate remains. If the candidate so chosen shall decline to
serve as the third arbitrator, the candidate whose name was stricken last shall
be nominated as the third arbitrator. This process shall continue until a
candidate has been chosen and accepted. This candidate shall
22
<PAGE>
serve as the third arbitrator. The first turn at striking the name of a
candidate shall belong to the Respondent. Once chosen, the arbitrators are
empowered to decide all substantive and procedural issues by a majority of
votes.
11.4 IMPARTIALITY. The Parties agree that each of the three arbitrators
should be impartial regarding the dispute. Therefore, at no time will any Party
contact or otherwise communicate with any person who is to be or who has been
designated as a candidate to serve as an arbitrator concerning the dispute,
except upon the basis of jointly drafted communications provided by the Parties
to inform those candidates actually chosen as arbitrators of the nature and
facts of the dispute. Likewise, any written or oral arguments provided to the
arbitrators concerning the dispute shall be coordinated with the other
Party(ies) and shall be provided simultaneously to the other Party(ies) or shall
take place in the presence of the other Party(ies). Further, at no time shall
any arbitrator be informed that the arbitrator has been named or chosen by one
Party or another.
11.5 HEARING DATE AND TIME. The arbitration hearing shall be held on a
date fixed by the arbitrators. In no event shall this date be later than six
(6) months after the appointment of the third arbitrator. As soon as possible,
the arbitrators shall establish pre-arbitration procedures as warranted by the
facts and issues of the particular case. At least 10 days prior to the
arbitration hearing, each Party shall provide the other Party(ies) and the
arbitrators with a detailed statement of the facts and arguments that it will
present at the arbitration hearing. The arbitrators may consider any relevant
evidence; they shall give the evidence such weight as they deem it entitled to
after consideration of any objections raised concerning it. The Claimant shall
have the burden of proving its case by a preponderance of the evidence. Each
Party may examine any witnesses who testify at the arbitration hearing. Each
Party shall bear its own costs of arbitration, except that the arbitrators shall
apportion their own reasonable fees and expenses between or among the Parties,
as they deem appropriate.
SECTION 12. TRADEMARKS
12.1 DISTRIBUTOR TRADEMARKS. DISTRIBUTOR has filed for a service mark in
order to establish ownership to all right, title and interest in and to the
name, trademark and service mark "Generations," and such other tradenames,
trademarks and service marks identified in Schedule D hereto, as the Parties
hereto may amend from time to time (the "DISTRIBUTOR licensed marks" or the
"licensor's licensed marks"). DISTRIBUTOR hereby grants to USL (including its
affiliates) a non-exclusive license to use the DISTRIBUTOR licensed marks in
connection with USL's performance of the services contemplated under this
Agreement, subject to the terms and conditions set forth in this Section 12.
12.2 USL TRADEMARKS. USL owns all right, title and interest in and to
the tradename, trademarks and service mark "The United States Life Insurance
Company in the City of New York," and such other tradenames, trademarks and
service marks identified in Schedule D hereto, as the Parties hereto may amend
from time to time (the "USL licensed marks" or the "licensor's
23
<PAGE>
licensed marks"). USL hereby grants to DISTRIBUTOR (including its affiliates) a
non-exclusive license to use the USL licensed marks in connection with
DISTRIBUTOR's performance of the services contemplated by this Agreement,
subject to the terms and conditions set forth in this Section 12.
12.3 GRANT OF LICENSE. The grant of license by DISTRIBUTOR and USL
(each, a "licensor") to the other and affiliates thereof (the "licensees") shall
terminate automatically when the Contracts (or any particular form of Contract)
cease to be outstanding or by either Party at its election upon termination of
this Agreement. Upon automatic termination, each licensee shall cease to use a
licensor's licensed marks. Upon USL's elective termination of this license,
DISTRIBUTOR (including its affiliates) shall immediately cease to distribute
marketing material relating to any Contract and shall likewise cease any
activity that suggests that it has any right under the USL licensed marks or
that it has any association with USL or any affiliate of USL in connection with
any such Contracts. Similarly, upon DISTRIBUTOR's elective termination of this
license, USL (including its affiliates) shall cease to issue as soon as
reasonably practicable, any new Contracts bearing any of the DISTRIBUTOR
licensed marks and shall likewise cease any activity which suggests that it has
any right under any of the DISTRIBUTOR licensed marks or that it has any
association with DISTRIBUTOR or any affiliate of DISTRIBUTOR, except that USL
shall have the right to continue to administer any outstanding Contracts bearing
any of the DISTRIBUTOR licensed marks and in connection therewith to use the
DISTRIBUTOR licensed marks.
12.4 PRIOR APPROVAL. Notwithstanding any provision in this Agreement to the
contrary, a licensee shall obtain the prior written approval of the licensor for
the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approval shall not be unreasonably withheld.
12.5 SAMPLE MATERIALS. During the term of this grant of license, a
licensor may request that a licensee submit samples of any materials bearing any
of the licensor's licensed marks that were previously approved by the licensor
but, due to changed circumstances, the licensor may wish to reconsider, or that
were not previously approved in the manner set forth above. If, on the
reconsideration or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld. The licensee shall obtain the prior
written approval of the licensor for the use of any new materials developed to
replace the disapproved materials, in the manner set forth above.
12.6 TRADEMARKS VALID AND ENFORCEABLE. Each licensee hereunder: (a)
acknowledges and stipulates that the licensor's licensed marks are valid and
enforceable trademarks and/or service marks and that such licensee does not own
the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (b) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (c) acknowledges and agrees that the
use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
24
<PAGE>
SECTION 13. BONDING AND INSURANCE
Each Party shall maintain sufficient fidelity bond coverage (including
coverage for larceny and embezzlement) and errors and omissions insurance
coverage as may be required by applicable law or as such Party seems necessary
in light of its obligations under this Agreement. DISTRIBUTOR shall maintain
errors and omissions coverage from a reputable insurance company in an amount
and form acceptable to USL at all times during the term of this Agreement.
SECTION 14. NOTICES
14.1 MANNER OF NOTICES. Unless otherwise provided in this Agreement,
any notice required or permitted to be sent under this Agreement shall be given
to the following persons at the following addresses and facsimile numbers, or
such other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, New York 10038
Attn: Jane Rushton, Esq.
Fax: (212) 709-6410
American General Securities Incorporated
2727 Allen Parkway, Suite 290
Houston, Texas 77019
Attn: F. Paul Kovach, Jr.
Telecopier: (713) 831-3366
Van Kampen Funds Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 601801
Attn: Ronald A. Nyberg
Telecopier: (708) 684-6155
14.2 NOTICE OF REGULATORY PROCEEDINGS.
(a) USL and AGSI shall immediately notify DISTRIBUTOR of: (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to any Contract or to any Account's
registration statement under the 1933 Act relating to the Contracts or any
Contract Prospectus or any order having a material effect with respect to USL's
or AGSI's ability to perform their respective obligations hereunder, (ii) any
request by the
25
<PAGE>
SEC or other regulatory body for any amendment to such registration statement or
Contract Prospectus, (iii) the initiation of any proceeding for that purpose or
for any other purpose relating to the offering of any Contract, or the
registration or offering of the Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent or otherwise
materially affect the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and, in all material respects, issued and sold in
accordance with applicable state and federal law. USL and AGSI shall make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time. USL and AGSI shall also
immediately notify DISTRIBUTOR if any of their Sales Persons or Associated
Agencies is or becomes subject to any proceedings or is sanctioned or suspended
(i) by the SEC or NASD, (ii) by any court for securities law violations, or
(iii) by any state regulatory authority.
(b) DISTRIBUTOR shall immediately notify USL of: (i) the issuance by any
court or regulatory body of any order having a material effect with respect to
DISTRIBUTOR's ability to perform its obligations hereunder, (ii) the initiation
of any proceeding for any purpose relating to the sale of the Contracts, and
(iii) any other actions or circumstances that may prevent the lawful offer or
sale of any of the Contracts in any state or jurisdiction. DISTRIBUTOR shall
also immediately notify USL if any of its Sales Persons or any VK Funds
Associated Agency is or becomes subject to any proceedings or is sanctioned or
suspended (i) by the SEC or NASD, (ii) by any court for securities law
violations, or (iii) by any state regulatory authority.
SECTION 15. MISCELLANEOUS
15.1 AMENDMENT. This Agreement may be amended at any time by a writing
executed by the parties.
15.2 GOVERNING LAW. This Agreement shall be interpreted in accordance
with and governed by the laws of the State of New York.
15.3 SURVIVAL OF PROVISIONS. Upon termination of this Agreement, the
following provisions shall survive: Sections 2.11, 2.12, 3.3, 6, 9, 10, 11, 12,
14, and 15.
15.4 SEVERABILITY. Should any provision of this Agreement be held or
made invalid by a court decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby.
15.5 WAIVER. Any failure or delay by any Party to enforce at any time
any of the provisions of this Agreement, or to exercise any right or option
which is herein provided, or to require at any time the performance of any of
the provisions hereof, shall in no way be construed to be a waiver of such
provision of this Agreement. If any Party waives the breach of any provision of
this Agreement by another Party, the waiving Party still has the right to
require
26
<PAGE>
performance of that provision and its conduct shall not be construed to waive
succeeding breaches of that provision or any breaches of any other provision.
15.6 FORCE MAJEURE. No Party shall be liable for damages due to delay or
failure to perform any obligation under this Agreement where such delay or
failure results directly or indirectly from circumstances beyond the control and
without the fault or negligence of such Party.
15.7 PARTIES TO COOPERATE.
(a) USL, AGSI, DISTRIBUTOR, and any necessary Associated Agencies and
Selling Group Members shall cooperate fully in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial proceeding
with respect to USL, AGSI, DISTRIBUTOR, and their respective affiliates, agents
and representatives to the extent that such examination, investigation, or
proceeding arises in connection with Contracts distributed under this Agreement.
DISTRIBUTOR shall furnish applicable federal and state regulatory authorities
with any information or reports in connection with its services under this
Agreement that authorities may request in order to ascertain whether USL's
operations are being conducted in a manner consistent with any applicable law or
regulations.
(b) DISTRIBUTOR shall execute such papers and do such acts and things as
shall from time to time be reasonably requested by USL for the purpose of
qualifying and maintaining qualification of the Contracts for sale under the
applicable laws of any state, and maintaining the registration of the Contracts
under the 1933 Act and any Account under the 1940 Act.
15.8 ENTIRE AGREEMENT. This Agreement shall be the sole and only
agreement among USL, AGSI, and DISTRIBUTOR regarding the marketing and
distribution of Contracts, and it supersedes all prior and contemporaneous
agreements. The Parties recognize that USL and DISTRIBUTOR may be parties to
other agreements, the terms and conditions of which may pertain to their
respective duties and obligations under this Agreement. To the extent anything
in those other agreements contradicts the terms of this Agreement, this
Agreement shall control. This Agreement may not be amended, supplemented, or
modified, except as expressly permitted herein, without the written agreement of
the Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the day and year first written above.
The United States Life Insurance Company in the City of New York
on behalf of itself and each Account
named in Schedule A hereto,
as amended from time to time
27
<PAGE>
- - -------------------------------------
BY:
AMERICAN GENERAL SECURITIES INCORPORATED
- - -------------------------------------
BY:
Van Kampen Funds Inc.
- - -------------------------------------
BY:
28
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SCHEDULE A
NAMES OF SEPARATE ACCOUNTS
The United States Life Insurance Company in the City of New York Separate
Account USL VA-R
AVAILABLE CONTRACTS (IDENTIFIED BY FORM NUMBER)
Generations Variable Annuity
Certificate form number: 98033N
A-1
<PAGE>
SCHEDULE B
USL ADMINISTRATIVE RESPONSIBILITIES
1. Contract Maintenance
(a) File and obtain state approvals for the Contracts being issued, and any
amendments thereof.
(b) Notify DISTRIBUTOR of the effective date for each state in which the
Contracts become available for issue.
(c) Customize and support state specific requirements where administratively
feasible.
2. Contract Servicing
(a) Issue and maintain master records for Contracts applied for and
accepted.
(b) Provide maintenance support for all Contract features:
(i) Purchase Payments (new issues, 1035 Exchanges, EFT, additions);
(ii) Withdrawals (systematic, partial, full, cancellations, and death
claims);
(iii) Exchanges among Divisions, change of allocations;
(iv) Title Changes (beneficiary, ownership, name, assignments);
(v) Rebalancing, Dollar-Cost Averaging;
(vi) Annuitization.
3. Customer Correspondence
(a) Generate and provide various customer correspondence documents:
(i) Contract (with appropriate riders and endorsements);
(ii) Confirmations of financial transactions;
(iii) Quarterly statements of account activity and balances;
(iv) Billing forms, in a manner agreed to between Owner and USL.
B-1
<PAGE>
4. Customer Service Functions
(a) Provide a telephone staff or other medium to respond to customer
inquiries.
(b) Prepare and update service forms necessary to support the Contract.
(c) Respond to written inquiries from Contract Owners.
(d) Coordinate complaint resolution (formal and informal).
5. Compliance
(a) Coordinate the printing and mailing of the following documents:
(i) Separate Account semiannual and annual reports;
(ii) Evergreen prospectus.
(b) Coordinate proxy solicitations as outlined in the Participation
Agreement.
(c) Prepare updates and regulatory filings as warranted.
(d) Generate tax reporting for Contract Owners as warranted by account
activity.
(e) Maintain appropriate books and records.
6. Financial
(a) Calculate unit values on business days of the separate account.
(b) Place trades with corresponding Trust funds and settle such trades as
defined in the Participation Agreement.
(c) Prepare Separate Account semiannual and annual reports.
7. Licensing/Contracting and Compensation
(a) Establish the initial record and perform ongoing maintenance for
representatives appointed to sell the product.
(b) Maintain copies of all approved Selling Group Agreements.
(c) Arrange for payment of appointment fees.
B-2
<PAGE>
(d) Pay compensation based on arrangements of marketing and Selling Group
Agreements.
8. Reporting
(a) Provide sales or other reports as mutually agreed upon by USL and
Distributor or Selling Group Member.
9. Communications
(a) Provide review and feedback/approval for all marketing pieces associated
with the Contract.
DISTRIBUTOR ADMINISTRATIVE RESPONSIBILITIES
1. Distribution
(a) Solicit and obtain Selling Group Agreements.
(b) Assist in appointing Sales Persons.
(c) Assist in arranging for payment of appointment fees as required.
2. Marketing Support
(a) Provide wholesaling support to prospective and current Selling Group
Members.
(b) Draft and distribute approved marketing and product literature as well
as all forms associated with the Contract (applications, service forms,
etc.).
(c) Provide sales reporting data to wholesalers.
(d) Provide training on Contract features and procedures.
(e) Provide hypothetical data and illustrations for Fund performance.
B-3
<PAGE>
SCHEDULE C
This Schedule governs the compensation to be paid by USL in connection with
the Contracts issued in accordance with the Agreement. The defined terms used
herein shall have the same meaning as in the Agreement to which this Schedule C
is attached or as in the Contracts, whichever is applicable.
1. DISTRIBUTION FEE TO DISTRIBUTOR.
USL shall pay or cause to be paid to DISTRIBUTOR, each semi-monthly period,
a Distribution Fee ("Fee") equal to either one percent (1%) of Purchase Payments
paid pursuant to Schedule 1, 2, 4 or 5 below, or .75 percent (.75%) of Purchase
Payments paid pursuant to Schedule 3 below, and received by USL during such
period that are attributable to all Certificates issued by USL. All Purchase
Payments upon which the Fee may be based must be received by USL in accordance
with the Agreement and such other requirements that USL and DISTRIBUTOR may,
from time to time, establish. The Fee shall constitute the sole and exclusive
payment by USL to DISTRIBUTOR with respect to the Certificates issued pursuant
to the Agreement and all services rendered under or in contemplation of this
Agreement.
2. COMPENSATION TO SELLING GROUP MEMBERS.
USL shall remit, or cause to be remitted, sales commissions in the amounts
set out in the schedules below, as compensation to the appropriate Selling Group
Members who have submitted applications for Certificates that USL has approved
for issuance ("Sales Commissions" or "commissions"). The Parties agree that more
than one schedule may be in effect at a time with respect to a Selling Group
Member.
SALES COMMISSION SCHEDULES
--------------------------
Schedule 1: 6% commission, 0% trail commission
Schedule 2: 4.75% commission, plus a 0.25% trail commission
commencing at the end of the 12th month after receipt
of the initial Purchase Payment and continuing through
the end of the seventh year following receipt of the
Purchase Payment, followed by a 0.50% trail commission
commencing at the end of the third month of the eighth
year following receipt of the initial Purchase Payment.
Schedule 3: 5% commission, plus a 0.25% trail commission commencing
at the end of the 12th month after receipt of the
initial Purchase Payment and continuing through the end
of the seventh year following receipt of the Purchase
Payment, followed by a 0.50% trail commission
commencing at the end of the third month of the eighth
year
C-1
<PAGE>
following receipt of the initial Purchase Payment.
Schedule 4: 5.5% commission, plus a 0.50% trail commission
commencing at the end of the third month of the eighth
year after receipt of the initial Purchase Payment.
Schedule 5: 2.25% commission, plus a 0.75% trial commission
commencing at the end of the 12th month after receipt
of the intitial Purchase Payment.
In addition to the preceeding Sales Commission Schedules, the Parties agree
that they may, from time to time, enter into one or more agreements with one or
more Selling Group Members to pay Sales Commissions in excess of 6% but not to
exceed 7%. The amount by which the rate of Sales Commission payable exceeds 6%
shall be commensurate with a reduction in the amount of the 1% Fee otherwise
payable to DISTRIBUTOR. (For example, a 6.4% Sales Commission rate would
require a Fee payable of .6%; such agreements will always result in a sum of
Sales Commissions payable plus Fees payable, of 7%.)
Commissions shall be paid semi-monthly (unless otherwise agreed). As used
in the above schedules, the term "commission" refers to an amount equal to a
fixed percentage of Purchase Payments received by USL during each semi-monthly
period that are attributable to Certificates solicited by Sales Persons. All
Purchase Payments upon which the commission may be based must be received by USL
in accordance with the Agreement and such other requirements that USL and
DISTRIBUTOR may, from time to time, establish.
As used in the above schedules, the term "trail commission" refers to an
amount equal to an annual percentage of the Certificate Account Value. Trail
commissions will be initially calculated as of the date specified in the above
schedules. Once trail commissions have commenced, trail commissions shall be
computed on each quarterly Certificate anniversary by multiplying 0.0625% (in
the case of a 0.25% trail commission) or 0.125% (in the case of a 0.50% trail
commission) by the Certificate Account Value computed on each quarterly
Certificate anniversary. Trail commissions shall be paid at the calendar
quarter end which follows the computation of the trail commission. Trail
commissions shall continue until annuitization, surrender, or death which
requires distribution of the Certificate AccountValue.
3. COMMISSION REDUCTIONS.
Notwithstanding the foregoing, the following commission reductions shall
apply to all DISTRIBUTOR Fees and Sales Commissions, except as otherwise noted,
under the circumstances described below.
C-2
<PAGE>
(a) REDUCTIONS FOR PURCHASE PAYMENTS AT AGE 81 AND LATER. A 50% commission
reduction shall apply with respect to Purchase Payments made on or after the
Annuitant's eighty-first birthday (regardless of whether the Certificate has a
Contingent Annuitant). Such commission reduction is not applicable to trail
commissions.
(b) CHARGEBACKS FOR WITHDRAWALS. The following commission chargebacks shall
apply on full or partial withdrawals (excluding withdrawals made pursuant to the
Systematic Withdrawal Program that are within the 10% Free Withdrawal
Privilege):
. 100% for full or partial withdrawal of a Purchase Payment made during the
first six months following its receipt; and
. 50% for full or partial withdrawal of a Purchase Payment made during the
next six months following its receipt.
The foregoing chargebacks shall not apply in the event of the death of the
Annuitant or Owner during the periods specified above.
4. NO COMPENSATION PAYABLE.
Notwithstanding the foregoing, no compensation shall be payable, and any
compensation already paid by USL hereunder shall either be promptly returned by
check payable to USL on request or will be deducted by USL from future payments
due under this Schedule C, under each of the following conditions:
(a) if USL, in its sole discretion, determines not to issue the Certificate
applied for or rescinds the Certificate;
(b) if the Certificate owner returns the Certificate pursuant to the "Free
Look" provision of the Certificate;
(c) if a Purchase Payment is received within 60 days following a prior
partial withdrawal, and such Purchase Payment is reasonably believed to be a
reinvestment of part or all of the prior partial withdrawal;
(d) if USL refunds all or any portion of the Purchase Payment as a result
of a complaint or grievance;
(e) if the Certificate owner, at the time the Certificate is purchased, is
(i) an employee or registered representative (or the spouse or minor child of an
employee or registered representative) of any broker-dealer authorized to sell
the Certificates, or (ii) is an officer, director, or bona-fide employee of USL,
AGSI, or any of their company affiliates, or DISTRIBUTOR; provided, however,
that the owner shall have completed, at the time the
C-3
<PAGE>
Certificate is purchased, appropriate documents supplied by USL which provide
for a waiver of all surrender charges; or
(f) if USL or AGSI determines that any Sales Person signing an application
or any person or entity receiving compensation for soliciting purchases of the
Certificates is not duly licensed to sell the Certificates in the state or
jurisdiction of such attempted sale and registered or otherwise qualified under
the 1934 Act and rules thereunder and any applicable state laws and rules
governing broker-dealers and their related persons.
In addition, if USL determines that any Certificate applied for is a
replacement of any insurance or annuity product issued by USL or any of its
affiliates, USL reserves the right not to pay any compensation and to require
the return of any compensation already paid.
5. MISCELLANEOUS.
The Parties may also supplementally agree that USL will directly pay Sales
Commissions to the appropriate Selling Group Member. USL, in its discretion,
may offset against compensation payable by it pursuant to this paragraph any due
and unpaid amounts owed to USL by DISTRIBUTOR.
C-4
<PAGE>
SCHEDULE D
(AS OF SEPTEMBER 15, 1998)
DISTRIBUTOR TRADEMARKS
The name "Van Kampen"
The product name "Generations"
The phrase "A wealth of knowledge, a knowledge of wealth," and its logo
design
USL TRADEMARKS
The name "American General Corporation"
The name "The United States Life Insurance Company in the City of New York"
The American General logo
D-1
<PAGE>
EXHIBIT 3(b)(i)
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
AND
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
MARCH 3, 1999
1
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TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I. Fund Shares 2
ARTICLE II Representations and Warranties 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements; Voting 5
ARTICLE IV. Sales Material and Information 8
ARTICLE V Reserved 9
ARTICLE VI. Diversification 9
ARTICLE VII. Potential Conflicts 10
ARTICLE VIII. Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X. Termination 15
ARTICLE XI. Notices 17
ARTICLE XII. Foreign Tax Credits 18
ARTICLE XIII. Miscellaneous 18
SCHEDULE A Separate Accounts and Contracts 21
SCHEDULE B Participating Life Investment Trust Portfolios 22
SCHEDULE C Proxy Voting Procedures 23
1
<PAGE>
PARTICIPATION AGREEMENT
Among
VAN KAMPEN LIFE INVESTMENT TRUST,
VAN KAMPEN FUNDS INC.,
VAN KAMPEN ASSET MANAGEMENT INC.,
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
and
AMERICAN GENERAL SECURITIES INCORPORATED
THIS AGREEMENT, made and entered into as of the 3rd day of March, 1999 by
and among THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(hereinafter the "Company"), a New York corporation, on its own behalf and on
behalf of each separate account of the Company set forth on Schedule A hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account"), AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI") and VAN KAMPEN
LIFE INVESTMENT TRUST (hereinafter the "Fund"), a Delaware business trust, VAN
KAMPEN FUNDS INC. (hereinafter the "Underwriter"), a Delaware corporation, and
VAN KAMPEN ASSET MANAGEMENT INC. (hereinafter the "Adviser"), 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 by insurance companies for individual and group life insurance
policies and annuity contracts with variable accumulation and/or pay-out
provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Products are required to enter into
participation agreements with the Fund and the Underwriter (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule 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; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1990 (File No. 812-7552), granting Participating
Insurance Companies and Variable Insurance Product 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 Product separate accounts
of both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
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WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, the Adviser is the investment adviser of the Portfolios of the
Fund; and
WHEREAS, the Underwriter is registered as a broker/dealer under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a
member in good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Products; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, AGSI, the Underwriter and the Adviser agree as follows:
ARTICLE I. Fund Shares
1.1. The Fund and the Underwriter agree 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 Fund or its designee of such order. For purposes of this Section 1.1, the
Company shall be the designee of the Fund and Underwriter for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 11:00 a.m.
New York time on the next following Business Day. Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Fund with
notice of such orders by 10:15 a.m. 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 Securities and Exchange Commission, as set forth in the
Fund's prospectus and statement of additional information. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies for their Variable Insurance
Products. No shares of any Portfolio will be sold to the general public.
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1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
which afford the Company substantially the same protections currently provided
by Sections 2.1, 2.4, 2.9, 3.4 and Article VII of this Agreement is in effect to
govern such sales.
1.4. The Fund and the Underwriter agree to redeem for cash, on the
Company's request, any full or fractional shares of the Fund held by the
Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the designee
of the Fund for receipt of requests for redemption from each Account and receipt
by such designee shall constitute receipt by the Fund; provided that the
Underwriter receives notice of such request for redemption on the next following
Business Day in accordance with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under
which amounts may be invested in the Fund are listed on Schedule 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 Fund and the Underwriter sixty (60) days written notice of
its intention to make available in the future, as a funding vehicle under the
Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem shares of
each Portfolio. Each order shall describe the net amount of shares and dollar
amount of each Portfolio to be purchased or redeemed. In the event of net
purchases, the Company shall pay for Portfolio shares on the next Business Day
after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the
redemption proceeds in federal funds transmitted by wire on the next Business
Day after an order to redeem Portfolio shares is made in accordance with the
provisions of Section 1.4 hereof. Notwithstanding the foregoing, if the payment
of redemption proceeds on the next Business Day would require the Portfolio to
dispose of 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 4:00 p.m. New
York time on the same Business Day that the Company transmits the redemption
order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry only.
Share certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.8. The Underwriter shall use its best efforts to furnish same day notice
by 7:00 p.m. New York time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio shares
in additional shares of that Portfolio. The Company reserves the right to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Underwriter 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 7:00 p.m. New
York time. In the event that Underwriter is unable to meet the 7:00 p.m. time
stated immediately above, then Underwriter shall provide the Company with
additional time to notify Underwriter of purchase or redemption orders pursuant
to Sections 1.1 and 1.4, respectively, above. Such additional time shall be
equal to the additional time that Underwriter takes to make the net asset values
available to the
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Company; provided, however, that notification must be made by 11:00 a.m. New
York time on the Business Day such order is to be executed, regardless of when
net asset value is made available.
1.10. If Underwriter provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Fund shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level pursuant to the SEC's recommended guidelines. Any material error
in the calculation or reporting of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to the
Company.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the interests of the Accounts
(the "Contracts") are or will be registered and will maintain the registration
under the 1933 Act and the regulations thereunder to the extent required by the
1933 Act; that the Contracts will be issued 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 New York Insurance Law and the regulations thereunder
and has registered or, prior to any issuance or sale of the Contracts, will
register and will maintain the registration of each Account as a unit investment
trust in accordance with and to the extent required by the provisions of the
1940 Act and the regulations thereunder to serve as a segregated investment
account for the Contracts. The Company shall amend its registration statement
for its contracts under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Contracts.
2.2. The Fund and the Underwriter represent and warrant that Fund shares
sold pursuant to this Agreement shall be registered under the 1933 Act and the
regulations thereunder to the extent required by the 1933 Act, duly authorized
for issuance in accordance with the laws of the State of Delaware and sold in
compliance with all applicable federal and state securities laws and regulations
and that the Fund is and shall remain registered under the 1940 Act and the
regulations thereunder to the extent required by the 1940 Act. The Fund shall
amend the registration statement for its shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its shares. The Fund shall register and qualify the shares for sale in
accordance with the laws of the various states only if and to the extent deemed
advisable by the Fund.
2.3. The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") and that each will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that each will notify the Company immediately upon having
a reasonable basis for believing that the Fund has ceased to so qualify or that
the Fund might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to be a
"segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatment and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
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2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Adviser represent that the Fund is duly organized and
validly existing under the laws of the State of Delaware and that the Fund does
and will comply in all material respects with the 1940 Act.
2.8. Each of the Underwriter and AGSI represents and warrants that it is
and shall remain duly registered under all applicable federal and state laws and
regulations and that it will perform its obligations for the Fund and the
Company in compliance with the laws and regulations of its state of domicile and
any applicable state and federal laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and agrees
to notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements; Voting
3.1(a). The Fund shall provide the Company with as many printed copies of
the Fund's current prospectus (the "Fund Prospectus") as the Company may
reasonably request. If requested by the Company in lieu of providing printed
copies of the Fund Prospectus, the Fund shall provide camera-ready film or
computer diskettes containing the Fund Prospectus and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the Fund Prospectus is amended during the year) to have the
prospectus for the Contracts (the "Contract Prospectus") and the Fund Prospectus
printed together in one document or separately. The Company may elect to print
the Fund Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the number
of Fund Prospectus pages in the Combined Prospectus in relation to the total
number of pages of the Combined Prospectus.
3.1(b). The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement of
additional information for the Contracts (the "Contract SAI") and the Fund SAI
printed together or separately. The Company may also elect to print the Fund
SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c). The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company in
lieu of providing printed copies of the Fund Reports, the Fund shall provide
camera-ready film or computer diskettes containing the Fund's Reports, and such
other
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assistance as is reasonably necessary in order for the Company once each year to
have the annual report and semi-annual report for the Contracts (collectively,
the "Contract Reports") and the Fund Reports printed together or separately. The
Company may also elect to print the Fund Reports in combination with other fund
companies' annual reports and semi-annual reports. For purposes hereof, any
combined annual reports and semi-annual reports including the Fund Reports along
with the Contract Reports or annual reports and semi-annual reports of other
fund companies shall be referred to as a "Combined Reports." For purposes
hereof, the term "Fund Portion of the Combined Reports" shall refer to the
percentage of the number of Fund Reports pages in the Combined Reports in
relation to the total number of pages of the Combined Reports.
3.2. Expenses
3.2(a). Expenses Borne by Company. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material, that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively, the
"Participants"), shall be the expense of the Company.
3.2(b). Expenses Borne by Fund.
Fund Prospectuses.
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of printing and distributing the Fund Portion of the
Combined Prospectus made available by the Company to its existing Participants
in order to update disclosure as required by the 1933 Act and/or the 1940 Act.
In such event, the Fund shall bear the cost of typesetting to provide the Fund
Prospectus to the Company in the format in which the Fund is accustomed to
formatting prospectuses. Notwithstanding the foregoing, in no event shall the
Fund pay for any such costs that exceed by more than five (5) percent what the
Fund would have paid to print such documents. The Fund shall not pay any costs
of typesetting, printing and distributing the Fund Prospectus (or Combined
Prospectus, if applicable) to prospective Participants.
Fund SAIs, Fund Reports and Proxy Material.
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined SAI
or Combined Reports, the Fund shall pay the cost of printing the Fund Portion of
the Combined SAI or Combined Reports, respectively, made available by the
Company to its existing Participants. In such event, the Fund shall bear the
cost of typesetting to provide the Fund SAI or Fund Reports to the Company in
the format in which the Fund is accustomed to formatting statements of
additional information and annual and semi-annual reports. Notwithstanding the
foregoing, in no event shall the Fund pay for any such costs that exceed by more
than five (5) percent what the Fund would have paid to print such documents.
The Fund shall pay one half the cost of distributing Fund SAIs, Fund Reports,
and Fund proxy statement and proxy-related material to such existing
Participants. The Fund shall pay the cost of distributing the Fund Portion of
the Combined SAIs and the Fund Portion of the Combined Reports. The Fund shall
not pay any costs of distributing Fund SAIs, Combined SAIs, Fund Reports,
Combined Reports or proxy statement or proxy-related material to prospective
Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Participants.
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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.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares.
3.2(c). Expenses Borne by Underwriter.
Fund Prospectuses.
With respect to prospective Participants, the Underwriter shall pay one
half of the cost of setting in type, printing and distributing Fund Prospectuses
made available by the Company as sales literature to such prospective
Participants. With respect to prospective Participants, in the event the
Company elects to prepare a Combined Prospectus, the Underwriter shall pay one
half of the cost of printing and distributing the Combined Prospectus made
available by the Company to its prospective Participants as sales literature.
In such event, the Underwriter shall bear the cost of typesetting to provide the
Fund Prospectus to the Company in the format in which the Fund is accustomed to
formatting prospectuses. Notwithstanding the foregoing, in no event shall the
Underwriter pay for any such costs that exceed by more than five (5) percent
what the Underwriter and the Fund would have paid to print such documents.
Fund SAIs, Fund Reports and Proxy Material.
With respect to prospective Participants, the Underwriter shall pay one
half of the cost of setting in type and printing Fund SAIs, Fund Reports and
Fund proxy material made available by the Company to its prospective
Participants as sales literature. In the event the Company elects to prepare a
Combined SAI or Combined Reports, the Underwriter shall pay one half of the cost
of printing the Combined SAI or Combined Reports, respectively, made available
by the Company to its prospective Participants as sales literature. In such
event, the Underwriter shall bear the cost of typesetting to provide the Fund
SAI and Fund Reports to the Company in the format in which the Fund is
accustomed to formatting statements of additional information and annual and
semi-annual reports. Notwithstanding the foregoing, in no event shall the
Underwriter pay for any such costs that exceed by more than five (5) percent
what the Underwriter and the Fund would have paid to print such documents. The
Underwriter shall pay one half the cost of distributing Fund SAIs, Combined
SAIs, Fund Reports, Combined Reports, and Fund proxy material to such
prospective Participants as sales literature.
3.2(d). If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund, the Underwriter or their designee will be responsible
for providing the Fund Prospectus, Fund SAI or Fund Reports in the format in
which it is accustomed to formatting such documents), and, notwithstanding
anything in Sections 3.2(b) or 3.2(c), the Company shall bear the expense of
adjusting or changing the format to conform with any of its prospectuses or
reports.
3.3. The Fund'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 Participants to whom voting privileges
are required to be extended and shall:
(i) solicit voting instructions from Participants;
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(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such Portfolio
for which instructions have been received,
so long as and to the extent that the 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.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund, the Underwriter or their designee, each piece of sales literature or other
promotional material prepared by the Company, AGSI or any person contracting
with the Company or AGSI in which the Fund, the Adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund, the Adviser, the Underwriter or their designee reasonably
objects to such use within ten Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the Company
or AGSI shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or Fund Prospectus, as such registration statement or
Fund Prospectus may be amended or supplemented from time to time, or in Reports
or proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee, except with the permission of the
Fund or its designee.
4.3. The Fund shall furnish, or shall cause to be furnished, to the Company
or its designee, each piece of sales literature or other promotional material
prepared by the Fund in which the Company or its Accounts, are named at least
ten Business Days prior to its use. No such material shall be used if the
Company or its designee reasonably objects to such use within ten Business Days
after receipt of such material.
4.4. Neither the Fund nor the Underwriter 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
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domain or approved by the Company for distribution to Participants, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract, contemporaneously with the filing of such document
with the Securities and Exchange Commission or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following:
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. Diversification
6.1. The Fund will use its best efforts to at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event the Fund ceases to so qualify, it will take all
reasonable steps (a) to notify Company of such event and (b) to adequately
diversify the Fund so as to achieve compliance within the grace period afforded
by Regulation 817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
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7.2. The Company will report any potential or existing material
irreconcilable conflict of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance 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.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take
remedial action in the event of a Board determination of an irreconcilable
material conflict and the cost of such remedial action, and these
responsibilities will be carried out with a view only to the interests of
Contract owners.
7.5. For purposes of Sections 7.3 through 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 through 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. 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 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.
7.7 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 reports,
materials and data shall be submitted more frequently if deemed appropriate by
the Board. All reports received by the Board of potential or existing
conflicts, and all Board action with regard to determining the existence of a
conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in
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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 VIII. Indemnification
8.1. Indemnification By The Company and AGSI
8.1(a). The Company and AGSI agree to indemnify and hold harmless the
Fund, the Underwriter and each member of their respective Board and officers and
each person, if any, who controls the Fund within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company or AGSI) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Company or AGSI, or
persons under its or their control and other than statements or
representations authorized by the Fund or the Underwriter) or
unlawful conduct of the Company or AGSI or persons under its or
their control, with respect to the sale or distribution of the
Contracts or Fund 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
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 and in conformity with information furnished to
the Fund by or on behalf of the Company or AGSI; or
(iv) arise as a result of any failure by the Company or AGSI
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 or AGSI in
this Agreement or arise out of or result from any other material
breach of this Agreement by the Company or AGSI.
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8.1(b). Neither the Company nor AGSI shall 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.
8.1(c). Neither the Company nor AGSI shall 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 or AGSI 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 or AGSI
of any such claim shall not relieve the Company or AGSI 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 or AGSI shall be
entitled to participate, at its own expense, in the defense of such action. The
Company or AGSI also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company or AGSI to such party of the Company's or AGSI's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses under
this Agreement for any legal or other expenses subsequently incurred by such
Party independently in connection with the defense thereof other than reasonable
costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
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 Underwriter
8.2(a). The Underwriter agrees, with respect to each Portfolio that it
distributes, to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Underwriter) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of shares of the Portfolio that it distributes or the Contracts
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Fund or the
Underwriter 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 Portfolio shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by the Fund, the
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Underwriter or persons under their respective control and other
than statements or representations authorized by the Company) or
unlawful conduct of the Fund or Underwriter or persons under
their control, with respect to the sale or distribution of the
Contracts or Portfolio 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 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 the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter 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 Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter; as limited by and in
accordance with the provisions of Section 8.2(b) and 8.2(c)
hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
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.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company and AGSI agree promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. Indemnification by the Adviser
8.3(a). The Adviser agrees to indemnify and hold harmless the Company,
AGSI, and each of their directors and officers and each person, if any, who
controls the Company or AGSI within the meaning of Section 15 of the 1933 Act
(hereinafter collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.3) against any and all
losses, claims, damages,
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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 operations of the
Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Adviser, the
Fund or the Underwriter 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 Portfolio shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by the Fund, the
Adviser or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of
the Fund, the Adviser or persons under their control, with
respect to the sale or distribution of the Contracts or Portfolio
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 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 the Adviser; or
(iv) 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
(v) arise out of or result from any material breach of any
representation and/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, including
without limitation any failure by the Fund to comply with the
conditions of Article VI hereof.
8.3(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.
8.3(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
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<PAGE>
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 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.
8.3(d). The Company and AGSI agree 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 Adviser.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months advance
written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts.
Reasonable advance notice of election to terminate shall be furnished
by the Company, said termination to be effective ten (10) days after
receipt of notice unless the Fund makes available a sufficient number
of shares to reasonably meet the requirements of the Account within
said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered, issued or sold
in accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment medium
of the Contracts issued or to be issued by the Company. The
terminating party shall give prompt notice to the other parties of its
decision to terminate; or
(d) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor or
similar provision; or
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(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by either the Fund, the Adviser or the Underwriter by
written notice to the Company, if either one or more of the Fund, the
Adviser or the Underwriter, shall determine, in its or their sole
judgment exercised in good faith, that the Company, AGSI and/or their
affiliated companies has suffered a material adverse change in its
business, operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse publicity,
provided that the Fund, the Adviser or the Underwriter will give the
Company sixty (60) days' advance written notice of such determination
of its intent to terminate this Agreement, and provided further that
after consideration of the actions taken by the Company or AGSI and
any other changes in circumstances since the giving of such notice,
the determination of the Fund, the Adviser or the Underwriter shall
continue to apply on the 60th day since giving of such notice, then
such 60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the Fund,
the Adviser and the Underwriter, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith, that either
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, provided that the Company or AGSI will
give the Fund, the Adviser and the Underwriter 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 Fund, the Adviser or the
Underwriter and any other changes in circumstances since the giving of
such notice, the determination of the Company or AGSI shall continue
to apply on the 60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(h) termination by the Fund, the Adviser or the Underwriter by written
notice to the Company, if the Company gives the Fund, the Adviser and
the Underwriter the written notice specified in Section 1.6 hereof and
at the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided,
however any termination under this Section 10.1(h) shall be effective
sixty (60) days after the notice specified in Section 1.6 was given;
or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of the
terminating party within ten (10) days after written notice of such
breach is delivered to the Fund or the Company, as the case may be; or
(j) termination by the Fund, Adviser or Underwriter by written notice
to the Company in the event an Account or Contract is not registered
or sold in accordance with applicable federal or state law or
regulation, or the Company fails to provide pass-through voting
privileges as specified in Section 3.4.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts") unless such
further sale of Fund shares is proscribed by law, regulation or applicable
regulatory body, or unless the Fund determines that liquidation of the Fund
following termination of this Agreement is in the best interests of the Fund and
its shareholders. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to direct reallocation of investments in the Fund,
redemption of investments in the Fund and/or investment in the Fund upon the
making of additional purchase payments under the Existing Contracts. The
parties
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agree that this Section 10.2 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Adviser 90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Van Kampen Life Investment Trust
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Attention: General Counsel
If to Underwriter:
Van Kampen Funds Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Attention: General Counsel
If to Adviser:
Van Kampen Asset Management Inc.
1 Parkview Plaza, P.O. Box 5555
Oakbrook Terrace, Illinois 60181-5555
Attention: General Counsel
If to the Company:
The United States Life Insurance Company in the City of New York
125 Maiden Lane
New York, New York 10038
Attention: Jane K. Rushton, Esq.
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
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ARTICLE XII. Foreign Tax Credits
12.1. The Fund and Adviser agree to consult in advance with the Company
concerning whether any series of the Fund qualifies to provide a foreign tax
credit pursuant to Section 853 of the Code.
ARTICLE XIII. Miscellaneous
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund. Each of the Company, AGSI,
Adviser and Underwriter acknowledges and agrees that, as provided by Article 8,
Section 8.1, of the Fund's Agreement and Declaration of Trust, the shareholders,
trustees, officers, employees and other agents of the Fund and its 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. A Certificate of Trust referring to the Fund's
Agreement and Declaration of Trust is on file with the Secretary of State of
Delaware.
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
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 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.
13.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
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(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, notice or
report of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other 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.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
as of the date specified above.
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
on behalf of itself and each of its Accounts named in
Schedule A hereto, as amended from time to time
By: /s/ LARRY M. ROBINSON
--------------------------------------------
Larry M. Robinson
Vice President, Marketing-Product Development
AMERICAN GENERAL SECURITIES INCORPORATED
By: /s/ F. PAUL KOVACH
------------------------------------------
F. Paul Kovach, Jr.
President
VAN KAMPEN LIFE INVESTMENT TRUST
By: /s/ DENNIS J. MCDONNELL
------------------------------------------
Dennis J. McDonnell
Executive Vice President
VAN KAMPEN FUNDS INC.
By: /s/ PATRICK J. WOELFEL
------------------------------------------
Patrick J. Woelfel
Senior Vice President
VAN KAMPEN ASSET MANAGEMENT INC.
By: /s/ DENNIS J. MCDONNELL
------------------------------------------
Dennis J. McDonnell
President
20
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Certificates
Date Established by Board of Directors Funded by Separate Account
- - -------------------------------------- --------------------------------------
The United States Life Insurance Certificate Form No.:
Company in the City of New York Separate 98033N
Account USL VA-R
Established: August 8, 1998
Name of Contract:
Generations Combination Fixed and
Variable Annuity Certificate
21
<PAGE>
SCHEDULE B
PARTICIPATING LIFE INVESTMENT TRUST PORTFOLIOS
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
22
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, address and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to the Fund, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which this
Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units (or equivalent shares)
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce, and the Fund will pay for
the Notice of Proxy and the Proxy Statement (one document). Printed and
folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
1
<PAGE>
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory letter
and a new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g., mutilated,
illegible) of the procedure are "hand verified," (i.e., examined as to why
they did not complete the system). Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units (or equivalent shares)
which is then converted to shares. (It is very important that the fund
receives the tabulations stated in terms of a percentage and the number of
shares.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 11:00 A.M. New York time. The
Fund may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
2
<PAGE>
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
3
<PAGE>
EXHIBIT 3(b)(ii)
<PAGE>
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
VAN KAMPEN FUNDS, INC.
and
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
DECEMBER 1, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares 2
ARTICLE II. Representations and Warranties 5
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 7
ARTICLE IV. Sales Material and Information 12
ARTICLE V. [Reserved] 13
ARTICLE VI. Diversification 13
ARTICLE VII. Potential Conflicts 13
ARTICLE VIII. Indemnification 15
ARTICLE IX. Applicable Law 20
ARTICLE X. Termination 20
ARTICLE XI. Notices 23
ARTICLE XII. Foreign Tax Credits 23
ARTICLE XIII. Miscellaneous 24
SCHEDULE A Portfolios of Morgan Stanley Universal Funds 28
Available for Purchase by United States
Life Insurance Company In The City of New York
SCHEDULE B Separate Accounts and Contracts 29
SCHEDULE C Proxy Voting Procedures 30
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the 1st day of December, 1998
by and among UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
(hereinafter the "Company"), a New York Corporation, on its own behalf and on
behalf of each separate account of the Company set forth on Schedule B hereto as
may be amended from time to time (each such account hereinafter referred to as
the "Account") AMERICAN GENERAL SECURITIES INCORPORATED (("AGSI"),a Texas
corporation, and MORGAN STANLEY UNIVERSAL FUNDS, INC. (hereinafter the "Fund"),
a Maryland corporation, and MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT
INC. and MILLER ANDERSON & SHERRERD, LLP (hereinafter collectively the
"Advisers" and individually the "Adviser"), a Delaware corporation and a
Pennsylvania limited liability partnership, respectively.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or pay-
out provisions (hereinafter referred to individually and/or collectively as
"Variable Insurance Products") and (ii) the investment vehicle for certain
qualified pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Insurance Products are required to enter into
participation agreements with the Fund and the Advisers (the "Participating
Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto; under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated September 19, 1996 (File No. 812-10118), granting
Participating Insurance Companies and Variable Insurance Product 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 Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, each Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
WHEREAS, each Adviser manages certain Portfolios of the Fund; and
WHEREAS, Morgan Stanley & Co. Incorporated (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and serves
as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Variable Insurance Products and
the Underwriter is authorized to sell such shares to each such Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
AGSI, the Fund and each Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company shares
of the Portfolios set forth on Schedule A and shall execute orders placed for
each Account on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of such order. For purposes of this Section 1.1,
the Company shall be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:15 a.m. Eastern time
on the next following Business Day. Notwithstanding the foregoing, the Company
shall use its best efforts to provide the Fund with notice of such orders by
10:00 a.m. Eastern time on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which the Fund calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission, as set forth in the Fund's Prospectus and
Statement of Additional Information. Notwithstanding the foregoing, the Board
of Directors of the Fund (hereinafter the "Board") may refuse to permit the Fund
to sell shares of any Portfolio to any
<PAGE>
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the general
public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing provisions
substantially the same as Sections 1.5, 2.4, 2.9, 3.4 and Article VII of this
Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with the
timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus. The Accounts of the Company, under
which amounts may be invested in the Fund, are listed on Schedule B attached
hereto and incorporated herein by reference, as such Schedule B may be amended
from time to time by mutual written agreement of all of the parties hereto. The
Company will give the Fund and the Adviser sixty (60) days written notice of its
intention to make available in the future, as a funding vehicle under the
Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem shares
of each Portfolio. Each order shall describe the net amount of shares and
dollar amount of each Portfolio to be purchased or redeemed. In the event of
net purchases, the Company shall pay for Portfolio shares on the next Business
Day after an order to purchase Portfolio shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. In the event of net redemptions, the Portfolio shall pay the redemption
proceeds in federal funds transmitted by wire on the next Business Day after an
order to redeem a Portfolio's shares is made in accordance with the provision of
Section 1.4 hereof. Notwithstanding the foregoing, if the payment of redemption
proceeds on the next Business Day would require the Portfolio to dispose of
securities or otherwise incur substantial additional costs, and if the Portfolio
has determined to settle redemption transactions for all shareholders on a
delayed basis, proceeds shall be wired to the Company within seven (7) days and
the Portfolio shall notify in writing the person designated by the Company as
the recipient for such notice of such delay by 3:00 p.m. Eastern time on the
same Business Day that the Company transmits the redemption order to the
Portfolio.
<PAGE>
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall use its best efforts to furnish same day notice by
7:00 p.m. Eastern time (by wire or telephone, followed by written confirmation)
to the Company of any dividends or capital gain distributions payable on the
Fund's shares. The Company hereby elects to receive all such dividends and
capital gain distributions as are payable on the Portfolio shares in additional
shares of that Portfolio. The Company reserves the right to revoke this
election and to receive all such dividends and capital gain distributions in
cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time. In the event that the Fund is unable to meet the
7:00 p.m. time stated immediately above, then the Fund shall provide the Company
with additional time to notify the Fund of purchase or redemption orders
pursuant to Sections 1.1 and 1.4, respectively, above. Such additional time
shall be equal to the additional time that the Fund takes to make the net asset
values available to the Company; provided, however, that notification must be
made by 10:15 a.m. Eastern time on the Business Day such order is to be executed
regardless of when the net asset value is made available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to an
adjustment with respect to the Fund shares purchased or redeemed to reflect the
correct net asset value per share. The determination of the materiality of any
net asset value pricing error shall be based on the SEC's recommended guidelines
regarding such errors. The correction of any such errors shall be made at the
Company level and shall be made pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per share,
dividend or capital gain information shall be reported promptly upon discovery
to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in all
material respects with all applicable federal and state laws and regulations.
The Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally and
validly established each Account prior to any issuance or sale thereof as a
segregated asset account under the New York Insurance Code and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account
<PAGE>
as a unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for issuance
in accordance with the laws of the State of Maryland and sold in compliance with
all applicable federal and state securities laws and regulations and that the
Fund is and shall remain registered under the 1940 Act and the regulations
thereunder to the extent required by the 1940 Act. The Fund shall amend the
registration statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund.
2.3 The Fund and the Advisers represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and each
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that the Fund or the
appropriate Adviser will notify the Company immediately upon having a reasonable
basis for believing that a Portfolio has ceased to so qualify or that a
Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to be a
"segregated account" under applicable provisions of the Code and that each
Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Account or Contract has ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.7. The Fund and the Advisers represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and that
the Fund does and will comply in all material respects with the 1940 Act.
<PAGE>
2.8. Each Adviser and AGSI represents and warrants that it is and shall
remain duly registered in all material respects under all applicable federal and
state securities laws and that it will perform its obligations for the Fund and
the Company in compliance in all material respects with the laws and regulations
of its state of domicile and any applicable state and federal securities laws
and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount equal to the greater of $5 million or any
amount required by applicable federal or state law or regulation. The aforesaid
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and agrees
to notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1.(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus (the "Fund Prospectus") as the
Company may reasonably request. If requested by the Company, in lieu of
providing printed copies of the Fund Prospectus, the Fund shall provide camera-
ready film or computer diskettes containing the Fund Prospectus and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the Fund Prospectus is amended during the year) to have
the prospectus for the Contracts (the "Contract Prospectus") and the Fund
Prospectus printed together in one document or separately. The Company may
elect to print the Fund Prospectus in combination with other fund companies'
prospectuses. For purposes hereof, any combined prospectus including the Fund
Prospectus along with the Contract Prospectus or prospectus of other fund
companies shall be referred to as a "Combined Prospectus." For purposes hereof,
the term "Fund Portion of the Combined Prospectus" shall refer to the percentage
of the number of Fund Prospectus pages in the Combined Prospectus in relation to
the total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement of
additional information for the Contracts (the "Contract SAI") and the Fund SAI
printed together or separately. The Company may also elect to print the Fund
SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of
<PAGE>
the number of Fund SAI pages in the Combined SAI in relation to the total number
of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company in
lieu of providing printed copies of the Fund Reports, the Fund shall provide
camera-ready film or computer diskettes containing the Fund's Reports, and such
other assistance as is reasonably necessary in order for the Company once each
year to have the annual report and semi-annual report for the Contracts
(collectively, the "Contract Reports") and the Fund Reports printed together or
separately. The Company may also elect to print the Fund Reports in combination
with other fund companies' annual reports and semi-annual reports. For purposes
hereof, any combined annual reports and semi-annual reports including the Fund
Reports along with the Contract Reports or annual reports and semi-annual
reports of other fund companies shall be referred to as "Combined Reports."
For purposes hereof, the term "Fund Portion of the Combined Reports" shall refer
to the percentage of the number of Fund Reports pages in the Combined Reports in
relation to the total number or pages of the Combined Reports.
3.2 Expenses
3.2(a) Expenses Borne by Company. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively, the
"Participants"), shall be the expense of the Company.
3.2(b) Expenses Borne by Fund
Fund Prospectuses
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined Prospectus,
the Fund shall pay the cost of setting in type, printing and distributing the
Fund Portion of the Combined Prospectus made available by the Company to its
existing Participants in order to update disclosure as required by the 1933 Act
and/or the 1940 Act. In such event, the Fund shall bear the cost of typesetting
to provide the Fund Prospectus to the Company in the format in which the Fund is
accustomed to formatting prospectus. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5) percent
what the Fund would have paid to print such documents. The Fund shall not pay
any costs of typesetting, printing and distributing the Fund Prospectus (or
Combined Prospectus, if applicable) to prospective Participants.
<PAGE>
Fund SAIs, Fund Reports and Proxy Material
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined SAI
or Combined Reports, the Fund shall pay the cost of setting in type and printing
the Fund Portion of the Combined SAI or Combined Reports, respectively, made
available by the Company to its existing Participants. In such event, the Fund
shall bear the cost of typesetting to provide the Fund SAI or Fund Reports to
the Company in the format in which the Fund is accustomed to formatting
statements of additional information and annual and semi-annual reports.
Notwithstanding the foregoing, in no event shall the Fund pay for any such costs
that exceed by more than five (5) percent what the Fund would have paid to print
such documents. The Fund shall pay one half the cost of distributing Fund SAIs,
Fund Reports and Fund proxy statements and proxy-related material to such
existing Participants. The Fund shall pay the cost of distributing the Fund
Portion of the Combined SAIs and the Fund Portion of the Combined Reports to
existing Participants. The Fund shall not pay any costs of distributing Fund
SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy statements or
proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of typesetting, printing or distributing any of
the foregoing documents other than those actually distributed to existing
Participants.
The Fund shall pay no fee or other compensation to the Company under this
Agreement, except that if the Fund or any Portfolio adopts and implements a plan
pursuant to Rule 12b-1 to finance distribution expenses, then the Underwriter
may make payments to the Company or to the underwriter for the Contracts if and
in amounts agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares.
3.2(c) Expenses Borne by Van Kampen Funds, Inc.
Fund Prospectuses
<PAGE>
With respect to prospective Participants, Van Kampen Funds, Inc. ("VK
Funds"), shall pay one half of the cost of setting in type, printing and
distributing Fund Prospectuses made available by the Company as sales literature
to such prospective Participants. With respect to prospective Participants, in
the event the Company elects to prepare a Combined Prospectus, VK Funds shall
pay one half of the cost of printing and distributing the Combined Prospectus
made available by the Company to its prospective Participants as sales
literature. In such event, VK Funds shall bear the cost of typesetting to
provide the Fund Prospectus to the Company in the format in which the Fund is
accustomed to formatting prospectuses. Notwithstanding the foregoing, in no
event shall VK Funds pay for any such costs that exceed by more than five (5)
percent what VK Funds and the Fund would have paid to print such documents.
Fund SAIs, Fund Reports and Proxy Material.
With respect to prospective Participants, VK Funds. shall pay one half of
the cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as sales
literature. In the event the Company elects to prepare a Combined SAI or
Combined ReportsVK Funds shall pay one half of the cost of printing the
Combined SAI or Combined Reports, respectively, made available by the Company to
its prospective Participants as sales literature. In such event, VK Funds shall
bear the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event shall VK Funds pay for any such costs that exceed by
more than five (5) percent what VK Funds and the Fund would have paid to print
such documents. VK Funds shall pay one half the cost of distributing Fund SAIs,
Combined SAIs, Fund Reports, Combined Reports, and Fund proxy material to such
prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund, or its designee will be responsible for providing the
Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or such
other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute all
proxy material furnished by the Fund to Participants to whom voting privileges
are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
<PAGE>
(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.
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser(s) is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund, an
Adviser, or their designee reasonably objects to such use within ten Business
Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the Company
or AGSI shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund in connection with the sale of the
Contracts other than the information or representations contained in the
registration statement or the Fund Prospectus, as such registration statement or
Fund Prospectus may be amended or supplemented from time to time, or in reports
or proxy statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee, except with the permission of the
Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Advisers shall give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no action
letters, and all amendments to any of the above, that relate to the investment
in an Account or Contract contemporaneously with the filing of such document
with the Securities and Exchange Commission or other regulatory authorities.
<PAGE>
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and registration
statements, prospectuses, statements of additional information, shareholder
reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. Each Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event a Portfolio ceases to so qualify, the appropriate
Adviser will take all reasonable steps (a) to notify the Company of such breach
and (b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. 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
<PAGE>
is not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested directors, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. No charge
or penalty will be imposed as a result of such withdrawal. The Company agrees
that it bears the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict and the cost of such
remedial action, and these responsibilities will be carried out with a view only
to the interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. No charge or penalty will be imposed as a result of such
withdrawal. The Company agrees that it bears the responsibility to take
remedial action in the event of a Board determination of an irreconcilable
material conflict and the cost of such remedial action, and these
responsibilities will be carried out with a view only to the interests of
Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority of
the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 or 7.4 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as
<PAGE>
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.
7.7 The Company and the Advisers, shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon them
by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies of a conflict, and determining whether any proposed action
adequately remedies a conflict, shall be properly recorded in the minutes of the
Board or other appropriate records, and such minutes or other records shall be
made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification By The Company and AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the Fund
and each member of the Board and officers, and each Adviser and each director
and officer of each Adviser, and each person, if any, who controls the Fund or
an Adviser within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," 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
AGSI) or litigation (including legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement or prospectus for the Contracts or contained in
the Contracts or sales literature for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Company or AGSI, or persons under its control and
other than statements or
<PAGE>
representations authorized by the Fund or an Adviser) or unlawful
conduct of the Company or AGSI or persons under its control, with
respect to the sale or distribution of the Contracts or Fund 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 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 and in
conformity with information furnished to the Fund by or on behalf of
the Company or AGSI; or
(iv) arise as a result of any failure by the Company or
AGSI 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 or AGSI in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company or AGSI, as limited by and in accordance
with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall 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.
8.1(c). Neither the Company nor AGSI shall 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 or AGSI 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 or
AGSI of any such claim shall not relieve the Company or AGSI 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 or AGSI shall be entitled to participate, at its
own expense, in the defense of such action. The Company or AGSI also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company or AGSI to such party of the Company's or AGSI's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and expenses under
<PAGE>
this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company
or AGSI 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 Advisers
8.2(a). Each Adviser agrees, with respect to each Portfolio that
it manages, 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" and individually,
"Indemnified Party," 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, result from the gross
negligence, bad faith, willful misconduct of the Adviser or any
director, officer, employee or agent thereof, are related to the
operation of the Adviser or the Fund and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or
sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to an Adviser or
the Fund or the Underwriter 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 Portfolio shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by the Adviser(s)
or persons under its control and other than statements or
representations authorized by
<PAGE>
the Company) or unlawful conduct of the Adviser(s) or
persons under its control, with respect to the sale or
distribution of the Contracts or Portfolio 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 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 Adviser(s); or
(iv) arise as a result of any failure by the
Adviser(s) 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 Adviser(s) in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Fund or the
Adviser(s); including without limitation any failure by the
Fund or the Adviser(s) to comply with the conditions of
Article VI hereof.
8.2(b). An 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.
8.2(c). An 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 party named in the action. After notice
from the Adviser to such party of the Adviser's election to assume the
defense
<PAGE>
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 and AGSI agree promptly to notify the
Advisers of the commencement of any litigation or proceedings against
it or any of its officers, trustees 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 Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Texas.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the Securities and Exchange Commission may grant
(including, but not limited to, the Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts.
Reasonable advance notice of election to terminate shall be furnished
by the Company, said termination to be effective ten (10) days after
receipt of notice unless the Fund makes available a sufficient number
of shares to reasonably meet the requirements of the Account within
said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable
<PAGE>
state and/or federal law or such law precludes the use of such shares
as the underlying investment medium of the Contracts issued or to be
issued by the Company. The terminating party shall give prompt notice
to the other parties of its decision to terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company or AGSI reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or an Adviser by written
notice to the Company if either one of the Advisers or the Fund shall
determine, in its sole judgment exercised in good faith, that the
Company, AGSI and/or their affiliated companies has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity, provided that the Fund or an
Adviser will give the Company sixty (60) days' advance written notice
of such determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions taken by the
Company or AGSI and any other changes in circumstances since the
giving of such notice, the determination of the Fund or the Adviser
shall continue to apply on the 60th day since giving of such notice,
then such 60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall determine, in its
sole judgment exercised in good faith, that either the Fund or the
Adviser (with respect to the appropriate Portfolio) has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; provided that the Fund or an
Adviser will give the Company sixty (60) days' advance written notice
of such determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions taken by the
Company and any other changes in circumstances since the giving of
such notice, the determination of the Company or AGSI shall continue
to apply on the 60th day since giving of such notice, then such 60th
day shall be the effective date of termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser the written
notice specified in Section 1.6 hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement;
<PAGE>
provided, however any termination under this Section 10.1(h) shall be
effective sixty (60) days after the notice specified in Section 1.6
was given; or
(i) termination by any party upon the other party's breach of any
representation in Section 2 or any material provision of this
Agreement, which breach has not been cured to the satisfaction of the
terminating party within ten (10) days after written notice of such
breach is delivered to the Fund or the Company, as the case may be; or
(j) termination by the Fund or an Adviser by written notice to
the Company in the event an Account or Contract is not registered or
sold in accordance with applicable federal or state law or regulation,
or the Company fails to provide pass-through voting privileges as
specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of
this Agreement, the Fund shall at the option of the Company, continue
to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred
to as "Existing Contracts") unless such further sale of Fund shares is
proscribed by law, regulation or applicable regulatory body, or unless
the Fund determines that liquidation of the Fund following termination
of this Agreement is in the best interests of the Fund and its
shareholders. Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to direct reallocation of
investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments
under the Existing Contracts. The parties agree that this Section
10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as distinct from Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to
implement Contract Owner initiated or approved transactions, or (ii)
as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to
as a "Legally Required Redemption") or (iii) as permitted by an order
of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request,
the Company will promptly furnish to the Fund the opinion of counsel
for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Advisers) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the
Company shall not prevent Contract Owners from allocating payments to
a Portfolio that was otherwise available under the Contracts without
first giving the Fund or the appropriate Adviser 90 days prior written
notice of its intention to do so.
<PAGE>
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund:
Morgan Stanley Universal Funds, Inc.
c/o Morgan Stanley Dean Witter
Investment Management Inc
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr.
<PAGE>
If to Adviser:
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr.
If to Adviser:
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, Pennsylvania 19428
Attention: Lorraine Truten
If to the Company:
United States Life Insurance Company
in the City of New York
125 Maiden Lane
New York, New York 10038
Attention: Jane K. Rushmore, Esq.
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Advisers agree to consult with the Company
concerning whether any Portfolio of the Fund qualifies to provide a
foreign tax credit pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the
Fund as neither the Board, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund.
<PAGE>
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 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 an Adviser may
assign this Agreement or any rights or obligations hereunder to any
affiliate of or company under common control with the Adviser, if such
assignee is duly licensed and registered to perform the obligations of
the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90 days after the end
of each fiscal year;
<PAGE>
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event within
45 days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or policyholders,
as soon as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the Securities and
Exchange Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other public report submitted to the Company by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company, as soon
as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative hereto as of the date specified above.
<PAGE>
UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
on behalf of itself and each of its Accounts named in Schedule B
hereto, as amended from time to time.
By: /s/ DON M. WARD
--------------------------------
Name: Don M. Ward
Title: Vice President
AMERICAN GENERAL SECURITIES INCORPORATED
By: /s/ F/ PAUL KOVACH, JR.
--------------------------------
Name: F. Paul Kovach, Jr.
Title: President
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: /s/ MICHAEL KLEIN
--------------------------------
Name: Michael Klein
Title: President
MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
By: /s/ JEFFREY MARGOLIS
--------------------------------
Name: Jeffrey Margolis
Title: Principal
MILLER ANDERSON & SHERRERD, LLP
By: /s/ MARNA WHITTINGTON
--------------------------------
Name: Marna Whittington
Title: Authorized Signatory
VAN KAMPEN FUNDS, INC.
(only as to Section 3.2(c) of the Agreement)
By: /s/ PATRICK J. WOELFEL
--------------------------------
Name: Patrick J. Woelfel
Title: Sr. Vice President
<PAGE>
SCHEDULE A
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS AVAILABLE FOR
PURCHASE BY UNITED STATES LIFE
INSURANCE COMPANY IN THE CITY OF NEW YORK
UNDER THIS AGREEMENT
Fixed Income
High Yield
Equity Growth
Mid Cap Value
Value
International Magnum
Emerging Markets Equity
Global Equity
<PAGE>
SCHEDULE B
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
- - -------------------------------------- -----------------------------------
The United States Life Insurance
Company of the City of New York Contract Form No.
98033
Separate Account: USL VA-R
Established: August 8, 1998
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund , as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement
or other voting instructions and solicitation material. The Fund will
provide at least one copy of the last Annual Report to the Company pursuant
to the terms of Section 3.3 of the Agreement to which this Schedule
relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including,) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) The Fund must review
and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The
Fund may request an earlier deadline if reasonable and if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
Exhibit 3(c)
<PAGE>
SELLING GROUP AGREEMENT
VAN KAMPEN FUNDS, INC. AND
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
This Selling Group Agreement ("Agreement") is made among Van Kampen Funds, Inc.,
a registered broker - dealer and the distributor for the variable life insurance
policies and/or annuity contracts or certificates set forth in Schedule A
("Distributor"),
- - --------------------------------------------------------------------------------
("Selling Group Member")
- - --------------------------------------------------------------------------------
("Associated Agency")
and, as the fourth party, The United States Life Insurance Company in the City
of New York ("USL"). Selling Group Member is registered with the Securities and
Exchange Commission ("SEC") as a broker-dealer under the Securities Exchange Act
of 1934 ("1934 Act") and under any appropriate regulatory requirements of state
law, and is a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"), unless Selling Group Member is exempt from the broker-
dealer registration requirements of the 1934 Act. Unless exempt, Selling Group
Member maintains a level of qualification with the NASD appropriate to enable it
to offer and sell the products set forth in Schedule A. Selling Group Member is
affiliated with Associated Agency, which is properly licensed under the
insurance laws of the state(s) in which Selling Group Member will act under this
Agreement.
This Agreement is for the purpose of providing for the distribution of certain
variable life insurance policies and/or annuity contracts or certificates set
forth in Schedule A and any successor or additional SEC registered insurance
products (as discussed in Part (1) "NEW PRODUCTS" of this Agreement) to be
issued by USL and distributed through Distributor through representatives who
are state insurance licensed and appointed agents of USL and associated with
Associated Agency and are also NASD registered representatives of Selling Group
Member ("Sales Persons"). The policies and/or annuity contracts or certificates
set forth in Schedule A, along with any successor or additional SEC registered
insurance products, are referred to collectively herein as the "Contracts".
In consideration of the mutual promises and covenants contained in this
Agreement, USL and Distributor appoint Selling Group Member and those persons
associated with Associated Agency who are NASD registered representatives of
Selling Group Member and state insurance licensed agents of USL to solicit and
procure applications for the Contracts. This appointment is not deemed
<PAGE>
to be exclusive in any manner and only extends to those jurisdictions where the
Contracts have been approved for sale. Selling Group Member is authorized to
collect the first purchase payment or premium (collectively "Premiums") on the
Contracts and, unless Selling Group Member and USL have otherwise agreed, must
remit such premiums in full dollar amount to USL. Unless Selling Group Member
and USL have otherwise agreed, applications shall be taken only on preprinted
application forms supplied by USL. All completed applications and supporting
documents are the sole property of USL and must be promptly delivered to USL.
All applications are subject to acceptance by USL at its sole discretion.
(1) NEW PRODUCTS
USL and Distributor may propose, and USL may issue additional or successor
products, in which event Selling Group Member will be informed of the product
and its related concession schedule. If Selling Group Member does not agree to
distribute such product(s), it must notify Distributor in writing within 30 days
of receipt of the Concession Schedule for such product(s). If Selling Group
Member does not indicate disapproval of the new product(s) or the terms
contained in the related Concession Schedule, Selling Group Member will be
deemed to have thereby agreed to distribute such product(s) and agreed to the
related Concession Schedule which shall be attached to and made a part of this
Agreement.
(2) SALES PERSONS
Associated Agency is authorized to recommend Sales Persons for appointment by
USL to solicit sales of the Contracts. Associated Agency warrants that all such
Sales Persons shall not commence solicitation nor aid, directly or indirectly,
in the solicitation of any application for any Contract until that Sales Person
is appropriately licensed for such product under applicable insurance laws and
is a currently NASD registered representative of Selling Group Member.
Associated Agency shall be responsible for all fees required to obtain and/or
maintain any licenses or registrations required by state or federal law, for
Associated Agency and its Sales Persons. From time to time, USL will provide
Associated Agency and Selling Group Member with information regarding the
jurisdictions in which USL is authorized to solicit applications for the
Contracts and any limitations on the availability of such Contracts in any
jurisdiction.
(3) SALES MATERIAL
Associated Agency and Selling Group Member shall not utilize in their efforts to
market the Contracts, any written brochure, prospectus, descriptive literature,
printed and published material, audio-visual material or standard letters unless
such material has been provided preprinted by USL or Distributor or unless USL
and Distributor have provided written approval for the use of such literature.
In accordance with the requirements of the laws of the several states,
Associated Agency and Selling Group Member shall maintain complete records
indicating the manner and extent of distribution of any such solicitation
material, shall make such records and files available to staff of USL and/or
Distributor in field inspections and shall make such material available to
personnel of state insurance departments, the NASD or other regulatory agencies,
including the SEC, which have regulatory authority over USL or Distributor.
Associated Agency and Selling Group Member jointly and severally hold USL,
Distributor and their affiliates harmless from any liability arising from
2
<PAGE>
the use of any material which either (a) has not been specifically approved in
writing by USL, or (b) although previously approved, has been disapproved by USL
or Distributor, in writing for further use.
(4) PROSPECTUSES
Selling Group Member and Associated Agency warrant that solicitation for the
sale of SEC registered insurance products will be made by use of a currently
effective prospectus, that a prospectus will be delivered concurrently with each
sales presentation and that no statements shall be made to a client superseding
or controverting any statement made in the prospectus. USL and Distributor
shall furnish Selling Group Member and Associated Agency, at no cost to Selling
Group Member or Associated Agency, reasonable quantities of prospectuses to aid
in the solicitation of Contracts.
(5) SELLING GROUP MEMBER COMPLIANCE
Selling Group Member shall be solely responsible for the approval of suitability
determinations for the purchase of any Contract or the selection of any
investment option thereunder, in compliance with federal and state securities
laws and shall supervise Associated Agency and Sales Persons in determining
client suitability. Selling Group Member shall hold USL and Distributor
harmless from any financial claim resulting from improper suitability decisions.
Selling Group Member will fully comply with the requirements of the NASD and of
the 1934 Act and such other applicable federal and state laws and will establish
rules, procedures, and supervisory and inspection techniques necessary to
diligently supervise the activities of its NASD registered representatives who
are state insurance licensed agents or solicitors of USL, in connection with
offers and sales of the Contracts. Such supervision shall include providing, or
arranging for, initial and periodic training in knowledge of the Contracts.
Upon request by Distributor or USL, Selling Group Member will furnish
appropriate records as are necessary to establish diligent supervision and
client suitability.
Selling Group Member shall fully cooperate in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial proceeding
with respect to USL, Distributor, Selling Group Member, and Associated Agency
and their respective affiliates, agents and representatives to the extent that
such examination, investigation, or proceeding arises in connection with the
Contracts. Selling Group Member shall immediately notify Distributor if its
broker-dealer registration or the registration of any of its Sales Persons is
revoked, suspended, or terminated.
(6) ASSOCIATED AGENCY AND SALES PERSON COMPLIANCE
Associated Agency will fully comply with the requirements of state insurance
laws and applicable federal laws and will establish rules and procedures
necessary to diligently supervise the activities of the Sales Persons. Upon
request by Distributor or USL, Selling Group Member will furnish appropriate
records as are necessary to establish such supervision. Associated Agency and
Sales Persons shall be responsible for making suitability determinations for
the purchase of any Contract
3
<PAGE>
or the selection of any investment option thereunder, in compliance with federal
and state securities laws.
Associated Agency shall fully cooperate in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial proceeding
with respect to USL, Distributor, Selling Group Member, and Associated Agency
and their respective affiliates, agents and representatives to the extent that
such examination, investigation, or proceeding arises in connection with the
Contracts. Associated Agency shall immediately notify Distributor if its
insurance license or the license of any of its Sales Persons is revoked,
suspended, or terminated.
(7) USL COMPLIANCE
USL represents that the prospectus(es) and registration statement(s) relating to
the Contracts contain no untrue statements of material fact or omission to state
a material fact, the omission of which makes any statement contained in the
prospectus and registration statement misleading. USL agrees to indemnify
Associated Agency and Selling Group Member from and against any claims,
liabilities and expenses which may be incurred by any of those parties under the
Securities Act of 1933, the 1934 Act, the Investment Company Act of 1940, common
law, or otherwise, and that arises out of a breach of this paragraph.
(8) COMPENSATION
USL will remit to Associated Agency compensation as set forth in Schedule B
hereto.
(9) CUSTOMER SERVICE, COMPLAINTS, AND INDEMNIFICATION
The parties agree that USL may contact by mail or otherwise, any client, agent,
account executive, or employee of Associated Agency or other individual acting
in a similar capacity if deemed appropriate by USL, in the course of normal
customer service for existing Contracts, in the investigation of complaints, or
as required by law. The parties agree to cooperate fully in the investigation
of any complaint.
Selling Group Member, Associated Agency, and Sales Persons agree to hold
harmless and indemnify Distributor and USL against any and all claims,
liabilities and expenses incurred by either Distributor or USL, and arising out
of or based upon any alleged or untrue statement of Selling Group Member,
Associated Agency or Sales Person other than statements contained in the
approved sales material for any Contract, or in the registration statement or
prospectus for any Contract.
4
<PAGE>
(10) FIDELITY BOND
Associated Agency represents that all directors, officers, employees and Sales
Persons of Associated Agency licensed pursuant to this Agreement or who have
access to funds of USL are and will continue to be covered by a blanket fidelity
bond including coverage for larceny, embezzlement and other defalcation, issued
by a reputable bonding company. This bond shall be maintained at Associated
Agency's expense. Such bond shall be at least equivalent to the minimal
coverage required under the NASD Rules of Fair Practice, and endorsed to extend
coverage to life insurance and annuity transactions. Associated Agency
acknowledges that USL may require evidence that such coverage is in force and
Associated Agency shall promptly give notice to USL of any notice of
cancellation or change of coverage.
Associated Agency assigns any proceeds received from the fidelity bond company
to USL to the extent of USL's loss due to activities covered by the bond. If
there is any deficiency, Associated Agency will promptly pay USL that amount on
demand. Associated Agency indemnifies and holds harmless USL from any
deficiency and from the cost of collection.
(11) LIMITATIONS OF AUTHORITY
The Contract forms are the sole property of USL. No person other than USL has
the authority to make, alter or discharge any policy, Contract, certificate,
supplemental contract or form issued by USL. No party has the right to waive
any provision with respect to any Contract or policy; give or offer to give, on
behalf of USL, any tax or legal advice related to the purchase of a Contract or
policy; or make any settlement of any claim or bind USL or any of its affiliates
in any way. No person has the authority to enter into any proceeding in a court
of law or before a regulatory agency in the name of or on behalf of USL.
(12) ARBITRATION
The parties agree that any controversy between or among them arising out of
their business or pursuant to this Agreement that cannot be settled by agreement
shall be taken to arbitration as set forth herein. Such arbitration will be
conducted according to the securities arbitration rules then in effect, of the
American Arbitration Association, NASD, or any registered national securities
exchange. Arbitration may be initiated by serving or mailing a written notice.
The notice must specify which rules will apply to the arbitration. This
specification will be binding on all parties.
The arbitrators shall render a written opinion, specifying the factual and legal
bases for the award, with a view to effecting the intent of this Agreement. The
written opinion shall be signed by a majority of the arbitrators. In rendering
the written opinion, the arbitrators shall determine the rights and obligations
of the parties according the substantive and procedural laws of the State of
Illinois. Accordingly, the written opinion of the arbitrators will be
determined by the rule of law and not by equity. The decision of the majority
of the arbitrators shall be final and binding on the parties and shall be
enforced by the courts in Illinois.
5
<PAGE>
(13) GENERAL PROVISIONS
(A) Waiver
Failure of any of the parties to promptly insist upon strict
compliance with any of the obligations of any other party under this
Agreement will not be deemed to constitute a waiver of the right to
enforce strict compliance.
(B) Independent Contractors
Distributor, Selling Group Member and Associated Agency are
independent contractors and not employees or subsidiaries of USL;
Selling Group Member and Associated Agency are not employees or
subsidiaries of Distributor.
(C) Independent Assignment
No assignment of this Agreement or of commissions or other payments
under this Agreement shall be valid without prior written consent of
USL and Distributor.
(D) Notice
Any notice pursuant to this Agreement may be given electronically
(other than vocally by telephone) or by mail, postage paid,
transmitted to the last address communicated by the receiving party to
the other parties to this Agreement.
(E) Severability
To the extent this Agreement may be in conflict with any applicable
law or regulation, this Agreement shall be construed in a manner
consistent with such law or regulation. The invalidity or illegality
of any provisions of this Agreement shall not be deemed to affect the
validity or legality of any other provision of this Agreement.
(F) Amendment
This Agreement may be amended only in writing and signed by all
parties. No amendment will impair the right to receive commissions as
accrued with respect to Contracts issued and applications procured
prior to the amendment.
(G) Termination
This Agreement may be terminated by any party upon 30 days' prior
written notice. It may be terminated, for cause, by any party
immediately. Termination of this Agreement shall not impair the right
to receive commissions accrued with respect to applications procured
prior to the termination except as otherwise specifically provided in
Schedule B.
6
<PAGE>
(H) ILLINOIS LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.
(I) This Agreement replaces and supersedes any other agreement or
understanding related to the Contracts, between or among the parties
to this Agreement.
By signing below, the undersigned agree to have read and be bound by the terms
and conditions of this Agreement.
Date: __________________________
Selling Group Member: _________________________________________________________
(BROKER-DEALER)
Address: _________________________________________________________
Signature: _________________________________________________________
Name & Title: _________________________________________________________
Associated Agency: _________________________________________________________
(PRIMARY INSURANCE AGENCY AFFILIATION)
Address: _________________________________________________________
_________________________________________________________
Signature: _________________________________________________________
Name & Title: _________________________________________________________
VAN KAMPEN FUNDS, INC.
Signed By: _________________________________________________________
Fred Shepherd, Senior Vice President
7
<PAGE>
The United States Life Insurance Company in the City of New York
Administrative Center
2727-A Allen Parkway
Houston Texas 77019
Signed By: _____________________________________________________
Name and Title
8
<PAGE>
Schedule A
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
REGISTRATION FORMS SEPARATE
CONTRACT NAME AND NUMBERS ACCOUNT
- - ------------- --------------------- -------
Generations Variable Annuity Form N-4 USL VA-R
Nos. 811-09007
333-63673
<PAGE>
EXHIBIT 4(b)(ii)
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
At the request of the Applicant, the Company hereby amends the provisions of
this contract by the addition of the following section:
RESTRICTION ON TRANSFERABILITY. Any provision contained herein to the
contrary notwithstanding, this contract may not be sold, assigned,
discounted, or pledged as collateral or as security for the performance of
an obligation or for any other purpose, to any person other than the
Company. Nothing contained in this endorsement, however, shall operate to
prevent the Owner from exercising the right to name and change
beneficiaries or the right to elect any method of settlement provided under
the settlement provisions of this contract.
David Dietz
President
<PAGE>
EXHIBIT 4(b)(v)
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ENDORSEMENT
This endorsement has been added to and made a part of the Contract or
Certificate to which it is attached.
DIRECT ROLLOVERS. This endorsement applies to any amount that is payable
as an "eligible rollover distribution" as defined under Section 402 of the
Internal Revenue Code (the "Code"). The Payee under this Contract has the
right to elect to have an eligible rollover distribution paid directly to
an eligible retirement plan. Such distribution is called a "direct
rollover" under the Code. Before any eligible rollover distribution is
made to the Payee, we will provide a written explanation of: (1) the
Payee's right to make a direct rollover; and (2) the tax consequence of
making or not making a direct rollover. No eligible rollover distribution
will be made unless the Code's requirements have been satisfied.
The effective date of this endorsement is the later of: (1) January 1,
1993; or (2) The Date of issue of the Contract or Certificate to which this
endorsement is attached.
David Dietz
President
<PAGE>
Exhibit 4(b)(vi)
<PAGE>
THE UNITED STATES LIFE Insurance Company In the City of New York
INDIVIDUAL RETIREMENT ANNUITY (IRA) ENDORSEMENT
This endorsement has been added to and made a part of the Contract or
Certificate to which it is attached.
The Owner of this contract represents that it is being acquired as an IRA,
either regular or Spousal, qualified for special tax treatment under Sections
408(b) and 219 of the Internal Revenue Code of 1986 (the 'Code'). The following
provisions are herewith made a part of the contract. In the event of conflict
between this endorsement and the contract, the provisions of the endorsement
will control. The contract may be modified as necessary for compliance with the
Code and Treasury Regulations.
1. EXCLUSIVE BENEFIT
This contract is for the exclusive benefit of the Owner or his or her
beneficiaries. The Owner shall be annuitant.
2. ROLLOVERS.
Rollover amounts may be received by this contract in accordance with the
provisions of Section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3) of the Code. A
contract which receives regular IRA contributions may not receive a rollover
contribution.
3. DISTRIBUTION OF OWNER'S INTEREST.
A. Distribution of the entire interest of the Owner will be made, or will
commence, no later than the required beginning date. The required beginning date
will be the first day of April following the calendar year in which such
individual attains age 70 1/2. Distribution may be made either in a lump sum, or
in equal, or substantially equal, amounts over:
(1) The life of the Owner; or
(2) The lives of the Owner and his or her named beneficiary; or
(3) A period certain not extending beyond the life expectancy of the
Owner; or
(4) A period certain not extending beyond the joint and last survivor
expectancy of the Owner and his or her named beneficiary.
L4807 USL Page 1 of 6
<PAGE>
B. Periodic payments must be made in intervals of no longer than one year.
Such payments may be either nonincreasing or they may increase only as provided
in Proposed Income Tax Regulation 1.40 1 (a)(9yl, O&A F-3.
C. For the purposes of 3.A.(1) through 3.A.(4), the amount to be
distributed each year, beginning with the first calendar year for which
distributions are required and then for each succeeding calendar year, shall be
made in accordance with the requirements of Code Section 401(a)(9) including the
incidental death benefit requirements of Code Section 401(a)(9)(G) and the
regulations thereunder, including the minimum distribution incidental benefit
requirement of Proposed Income Tax Regulation 1.40 1 (a)(9y2).
D. The life expectancies described in 3.A.(1) through 3.A.(4) cannot exceed
the period computed by the use of the expected return multiples in Table V and
VI of Section 1.72-9 of the Income Tax Regulations.
E. Unless otherwise elected by the Owner by the time distributions are
required to begin, life expectancies shall be recalculated annually. This
election shall be irrevocable as to the Owner and shall apply in all subsequent
years.
F. If the beneficiary designated in paragraph 3.A.(2) and A.(4) is not the
Owner's spouse, then such beneficiary's life expectancy may not be recalculated.
Instead, such beneficiary's life expectancy will be calculated using the
attained age of such beneficiary during the calendar year in which the
individual attains age 70 1/2. Payments for subsequent years shall be calculated
based on such life expectancy reduced by one for each calendar year which was
elapsed since the calendar year life expectancy was first calculated.
4. DISTRIBUTION UPON DEATH.
If the Owner dies, his or her interest will be paid as follows:
A. If the Owner dies after payment has commenced, the remaining portion
of his or her interest will continue to be paid at least as rapidly as under the
method of distribution being used prior to the Owner's death.
B. If the Owner dies before payment has commenced, distribution of the
Owner's entire interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the owner's death, except to the extent that
an election is made to receive distributions in accordance with (1) or (2)
below:
(1) If the Owner's interest is payable to a beneficiary named by
the Owner, then the Owner's entire interest will be paid over the life or over a
period certain not greater than the life expectancy of the named beneficiary
L4807 USL Page 2 of 6
<PAGE>
commencing no later than December 31 of the calendar year immediately following
the calendar year in which the Owner died. The named beneficiary may elect at
any time to receive greater payments.
(2) If the Owner's named beneficiary is the Owner's surviving
spouse, the date distributions are required to begin in accordance with (1)
above shall not be earlier than the later of:
(a) December 31 of the calendar year immediately following the
calendar year in which the Owner died; and,
(b) December 31 of the calendar year in which the Owner would
have attained age 70 1/2.
(3) If the named beneficiary is the Owner's surviving spouse, the
spouse may treat the contract as his or her own IRA. This election will be
deemed to have been made if such surviving spouse:
(a) Makes a regular IRA contribution to the contract; or
(b) Makes a rollover to or from such contract; or
(c) Fails to elect any of the above provisions.
C. Life expectancy is computed by use of the expected return multiples
in Tables V and VI of Income Tax Regulations Section 1.72-9. For purposes of
distributions beginning after the Owner's death, unless otherwise elected by the
surviving spouse by the time distribution are required to begin, life
expectancies shall be recalculated annually. Such election shall be irrevocable
by the surviving spouse and shall apply to all subsequent years. In the case of
any other named beneficiary:
(1) Life expectancies shall be calculated using the attained age of
the beneficiary during the calendar year in which payments are required to
begin; and
(2) Payments for any subsequent calendar year will be based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
D. Distributions under this paragraph are considered to have begun if:
(1) Distributions are made on account of the Owner reaching his or
her required beginning date (as defined in subparagraph 3.A.); or
L4807 USL Page 3 of 6
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(2) If the Owner irrevocably begins to receive distributions prior
to the required beginning date in an annuity form acceptable under Income Tax
Regulations Section 1.40 1 (a)(9).
5. OWNER'S INTEREST NONFORFEITABLE.
The entire interest of the Owner in this contract is nonforfeitable.
6. CONTRACTS NON-TRANSFERABLE.
This contract is not transferable by the Owner with one exception. The
contract may be transferred to a former spouse of the Owner under a divorce
decree or written instrument incident to such divorce. Nothing contained in this
endorsement shall operate to prevent the Owner from exercising his or her right
to name or to change beneficiaries.
7. MAXIMUM CONTRIBUTIONS.
Except in the case of a rollover contribution (as described in paragraph
2), no premiums will be accepted unless they are in cash and the total of such
premiums paid shall not exceed $2,000 for any taxable year.
Contributions can be made to a Spousal IRA even if the spouse has earned
some compensation during the year. Provided the spouse does not make a
contribution to an IRA, a Spousal IRA which separately accounts for the Owner's
interest and the spouse's interest can be established. The maximum deductible
amount for such an IRA is the lesser of $2,250 or 100% of compensation. No more
than $2,000 of the annual contribution may, however, be allocated to the
interest of a single spouse.
The above premium limitations are different if the employer of the Owner
has established a Simplified Employee Pension program (SEP) (pursuant of Section
408(k)) under which this contract is an investment. A SEP permits an employer to
contribute to the contract. The Owner and his or her employer are responsible
for seeing that contributions in excess of regular IRA limits are made under a
valid SEP.
No contribution will be accepted under a SIMPLE plan established by any
employer (pursuant to Section 408 (p)). No transfer or rollover of funds
attributable to contributions made by a particular employer under its SIMPLE
plan will be accepted from a SIMPLE IRA, that is, an IRA used in conjunction
with a SIMPLE plan, prior to the expiration of the 2-year period beginning on
the date the individual first participated in that employer's SIMPLE plan.
L4807 USL Page 4 of 6
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8. DIVIDENDS.
Any refund of premiums (other than those attributable to excess
contributions) will be applied before the close of the calendar year of refund.
Such refunds will be applied toward the payment of future premiums or the
purchase of additional benefits. "Refund of premiums" will include any dividends
payable under this contract.
9. NO FIXED PREMIUMS.
If premium payments are interrupted, the entire contract will be reinstated
at any date prior to maturity upon payment of a premium to the Company. The
minimum premium amount for reinstatement shall be $50.00. However, if no
premiums have been received for two full consecutive policy years and the paid
up annuity benefit at maturity would be less than $20 per month, the Company
may, at its option:
A. Accept additional future payments; or
B. Terminate the contract by payment in cash of the then present value of
the paid up benefit.
10. ANNUAL REPORTS.
The issuer of an IRA shall furnish annual calendar year reports concerning
the status of the annuity.
11. INCLUDIBLE COMPENSATION.
Compensation means wages, salaries, professional fees, or other amounts
derived from or received for personal services actually rendered. Such amounts
include, but are not limited to:
A. Commissions paid to salespersons;
B. Payment for services on the basis of a percentage of profits;
C. Commissions on insurance premiums; or
D. Tips, and bonuses.
Compensation includes earned income, as defined in Code Section 401(c)(2)
(reduced by the deduction the self employed person takes for contributions made
to a self-employed retirement (Keogh) plan). For purposes of this definition,
Section 401(c)(2) shall be applied as if the term "trade" or "business" for
purposes of Section 1402 included service described in Subsection (c)(6).
L4807 USL Page 5 of 6
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Compensation does not include amounts derived from or received as earnings
or profits from property or amounts not includible in gross income. (Earnings or
profits from property includes, but is not limited to, interest and dividends).
Compensation also does not include any amount received as a pension or annuity
or as deferred compensation. The term "compensation" shall include any amount
which an individual would include in gross income under Code Section 71 with
respect to a divorce or separation instrument described in Subparagraph (A) of
Code Section 71 (b)(2).
12. AMENDMENT.
All amendments of the endorsement, as required by law, shall be made
effective by mailing by United States Postal Service a copy of such amendment to
the Owner at his or her address of record as shown by the records of the
Company. All amendments shall be effective on the earlier of:
A. The date of such mailing; or
B. In the case of a retroactive amendment, the effective date of the
amendment.
13. EFFECTIVE DATE.
Except as described in paragraph 12, the effective date of this endorsement
is the date of issue of the Contract or Certificate.
President
L 4807 USL Page 6 of 6
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EXHIBIT 4(b)(vii)
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
ROTH INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
(Under section 408A of the Internal Revenue Code)
____________________________________________________________________________
Check if this endorsement supersedes a prior Roth IRA endorsement [ ]
Check if Roth Conversion IRA [ ]
____________________________________________________________________________
This endorsement is made a part of the annuity contract to which it is attached,
and the following provisions apply in lieu of any provisions in the contract to
the contrary.
The annuitant is establishing a Roth individual retirement annuity (Roth IRA)
under section 408A to provide for his or her retirement and for the support of
his or her beneficiaries after death.
_____________________________________________________________________________
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then, except
in the case of a rollover contribution described in section 408A(e), the
Company will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the annuitant.
2. If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will
be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single annuitant, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married annuitant who files jointly, between AGI of $150,000 and $160,000;
and for a married annuitant who files separately, between $0 and $10,000. In
the case of a conversion, the Company will not accept IRA Conversion
Contributions in a tax year if the annuitant's AGI for that tax year exceeds
$100,000 or if the annuitant is married and files a separate return. Adjusted
gross income is defined in section 408A(c)(3) and does not include IRA
Conversion Contributions.
ARTICLE III
The Annuitant's interest in the contract is nonforfeitable and nontransferable.
ARTICLE IV
1. The contract does not require fixed contributions.
2. Any dividends (refund of contributions other than those attributable to
excess contributions) arising under the contract will be applied before the
close of the calendar year following the year of the dividend as
contributions toward the contract.
L9195N Page 1 of 3
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ARTICLE V
1. If the annuitant dies before his or her entire interest in the contract is
distributed to him or her and the annuitant's surviving spouse is not the
sole beneficiary, the entire remaining interest will, at the election of
the annuitant or, if the annuitant has not so elected, at the election of
the beneficiary, either:
(a) Be distributed by December 31 of the calendar year containing the
fifth anniversary of the annuitant's death; or
(b) Be distributed over the life, or a period not longer than the life
expectancy, of the designated beneficiary starting no later than
December 31 of the calendar year following the calendar year of the
annuitant's death. Life expectancy will be computed using the
expected return multiples in Table V of section 1.72-9 of the Income
Tax Regulations.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. If the annuitant's spouse is the sole beneficiary on the annuitant's date
of death, such spouse will then be treated as the annuitant.
ARTICLE VI
1. The Owner agrees to provide the Company with information necessary for the
Company to prepare any reports required under sections 408(i) and
408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, and under
guidance published by the Internal Revenue Service.
2. The Company agrees to submit reports to the Internal Revenue Service and
the annuitant as prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VIII
This endorsement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
to this endorsement may be made with the consent of the persons whose signatures
appear on the contract.
L9195N Page 2 of 3
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ARTICLE IX
1. DEFINITIONS.
Annuitant/Owner. References to "Annuitant" also mean "Owner". The
Annuitant is the Owner of the Contract to which this endorsement is
attached.
ROTH CONVERSION IRA. A Roth Conversion IRA is a Roth IRA that accepts only
IRA Conversion Contributions made during the same tax year.
IRA CONVERSION CONTRIBUTIONS. IRA Conversion Contributions are amounts
rolled over, transferred, or considered transferred from a non-Roth IRA to
a Roth IRA. A non-Roth IRA is an individual retirement account or annuity
described section 408(a) or 408(b), other than a Roth IRA.
2. Notwithstanding the provisions of Article V, a surviving spouse who is a
beneficiary may elect any form of payment available under the contract with
respect to the death benefit payable upon the annuitant's death
3. For purposes of Article VIII,
(a) the annuitant's signature on the application for this contract
operates as a signature on this endorsement; and
(b) all amendments of the endorsement, as required by law, shall be made
effective by mailing by United States Postal Service a copy of such
amendment to the Owner at his or her address of record as shown by the
records of the Company. All amendments shall be effective on the
earlier of:
(i) the date of such mailing; or
(ii) in the case of a retroactive amendment, the effective date of the
amendment.
4. This contract is for the exclusive benefit of the Owner or his or her
beneficiaries. No amount of the annuity may be used as collateral for a
loan.
5. Except as described in Article IX, paragraph 3, the effective date of this
endorsement is the Date of Issue of the Contract.
____________________________________
President
L9195N Page 3 of 3
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Exhibit 5(a)(ii)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Complete and Return to: THE UNITED STATES LIFE Insurance Company GENERATIONS(TM)
Administrative Center In the City of New York ("USL") ===============
P.O. Box Administrative Center: Houston, TX VARIABLE ANNUITY
Houston, TX
(800) 346-4944 VARIABLE ANNUITY CERTIFICATE APPLICATION
Fax: (713) 831-3701
Hearing Impaired: (888) 436-5257
INSTRUCTIONS: PLEASE TYPE OR PRINT IN PERMANENT BLACK INK.
- - ------------------------------------------------------------------------------------------------------------------------------
1. ANNUITANT | 2. CONTINGENT ANNUITANT (optional)
Name: __________________________________________________ | Name: __________________________________________________
Address: _______________________________________________ | Address: _______________________________________________
________________________________________________________ | ________________________________________________________
Phone: ________________ DOB: ______________ (Max Age 85) | Phone: ________________ DOB: ______________ (Max Age 85)
Sex: [_]M [_]F SS #: _______________________________ | Sex: [_]M [_]F SS #: _______________________________
- - --------------------------------------------------------------------------------------------------------------------------------
3. OWNER (Complete only if different than Annuitant) JOINT OWNER (optional)
Name: __________________________________________________ Name: _________________________________________________
Address: _______________________________________________ Address: ______________________________________________
________________________________________________________ _______________________________________________________
Phone: ________________ DOB: ______________ (Max Age 85) Phone: ________________ DOB: ______________ (Max Age 85)
Sex: [_]M [_]F Tax ID or SS #: ______________________ Sex: [_]M [_]F Tax ID or SS #: ______________________
- - --------------------------------------------------------------------------------------------------------------------------------
4. BENEFICIARY DESIGNATION (if more space is needed, use Section 10):
_______________
PRIMARY (if more than one, indicate percentages) | CONTINGENT (if more than one, indicate percentages)
Name/Relationship | Name/Relationship
|
|
- - --------------------------------------------------------------------------------------------------------------------------------
5. PAYMENT INFORMATION
Initial Purchase Payment $ _______________ If [_]1035X OR [_] Transfer, estimated amount $ ______________
[_] Non-Qualified (minimum $5,000) [_] Qualified: (minimum $2,000) (check appropriate boxes in sections A and B)
A. [_] Rollover [_] Transfer
B. Type of Plan: [_] IRA [_] ROTH IRA [_] SEP-IRA [_] 401(k) [_] 401(a) [_] Other _____________
If any portion of the initial purchase payment is allocated to a Fixed Account, refer to this section in the prospectus and to
your annuity certificate regarding eligibility for an interest rate lock on 1035 Exchanges or other rollovers and transfers that
qualify for special tax treatment under the Internal Revenue Code.
- - ---------------------------------------------------------------------------------------------------------------------------------
6. INVESTMENT OPTIONS Total allocation must equal 100%. Use whole percentages only.
Asian Equity (95) ______% Global Equity (85) ______% Morgan Stanley
Domestic Income (80) ______% Government (86) ______% Real Estate Securities (93) ______%
Emerging Growth (81) ______% Growth and Income (88) ______% Strategic Stock (96) ______%
Emerging Markets Equity (82) ______% High Yield (89) ______% Value (94) ______%
Enterprise (83) ______% International Magnum (90) ______% 1-Year Guarantee Period ______%
Equity Growth (87) ______% Mid Cap Value (91) ______% Other _____________________ ______%
Fixed Income (84) ______% Money Market (92) ______%
- - --------------------------------------------------------------------------------------------------------------------------------
7. AUTOMATIC REBALANCING ($25,000 minimum) Total allocation must equal 100%. Use whole percentages only.
[_] Check here for Automatic Rebalancing of investments, based on certificate anniversary, to the VARIABLE ALLOCATIONS ONLY
indicated below or then in effect.
FREQUENCY: [_] Quarterly [_] Semiannually [_] Annually
Asian Equity (95) ______% Global Equity (85) ______% Morgan Stanley ______%
Domestic Income (80) ______% Government (86) ______% Real Estate Securities (93) ______%
Emerging Growth (81) ______% Growth and Income (88) ______% Strategic Stock (96) ______%
Emerging Markets Equity (82) ______% High Yield (89) ______% Value (94) ______%
Enterprise (83) ______% International Magnum (90) ______% Other _____________________ ______%
Equity Growth (87) ______% Mid Cap Value (91) ______%
Fixed Income (84) ______% Money Market (92) ______%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
8. DOLLAR COST AVERAGING
Dollar cost average [_] $________ OR [_] _______% taken from the [_] Money Market OR [_] 1-Year Guarantee Period
Frequency: [_] Monthly [_] Quarterly [_] Semiannually [_] Annually
Duration: [_] 12 months [_] 24 months [_] 36 months [_] 48 months [_] 60 months to be allocated to the following Variable
Division(s) as indicated: (When furnishing the allocations below, you must only use EITHER dollars OR percentages throughout
the request.)
Asian Equity (95) ______% Global Equity (85) ______% Morgan Stanley
Domestic Income (80) ______% Government (86) ______% Real Estate Securities (93) ______%
Emerging Growth (81) ______% Growth and Income (88) ______% Strategic Stock (96) ______%
Emerging Markets Equity (82) ______% High Yield (89) ______% Value (94) ______%
Enterprise (83) ______% International Magnum (90) ______% Other _____________________ ______%
Equity Growth (87) ______% Mid Cap Value (91) ______%
Fixed Income (84) ______% Money Market (92) ______%
- - ------------------------------------------------------------------------------------------------------------------------------------
9. REPLACEMENT Will the proposed contract replace any existing annuity or insurance contract? [_] No [_] Yes
(If yes, list company name, plan, year of issue and complete appropriate replacement documents.)
- - ------------------------------------------------------------------------------------------------------------------------------------
10. SPECIAL INSTRUCTIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
11. SIGNATURES
All statements made in this application are true to the best of our knowledge and belief, and we agree to all terms and
conditions as shown.
We further agree that this application, if attached, shall be a part of the annuity contract, and verify our understanding
that ALL PAYMENTS AND VALUES PROVIDED BY THE CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE,
MAY INCREASE OR DECREASE, AND ARE NOT GUARANTEED AS TO THE DOLLAR AMOUNT.
We acknowledge receipt of the current prospectuses for the American General Life Insurance Company Separate Account D,
Van Kampen Life Investment Trust and Morgan Stanley Dean Witter Universal Funds, Inc. If this application is for an IRA,
ROTH IRA, or a Simplified Employee Pension, we acknowledge receipt of the applicable Individual Retirement Annuity
Disclosure Statement provided to us in conjunction with the current prospectuses.
----------------------------------------------------------------------------------------------------------------------------
UNDER PENALTIES OF PERJURY, I CERTIFY (1) THAT THE SOCIAL SECURITY (OR TAXPAYER IDENTIFICATION) NUMBER IS CORRECT AS IT
APPEARS IN THIS APPLICATION 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 CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING.
----------------------------------------------------------------------------------------------------------------------------
Signed at _______________________________________________________________________ Date: ______________________________
CITY STATE
_________________________________________________________ ________________________________________________________
SIGNATURE OF ANNUITANT SIGNATURE OF OWNER (if different that Annuitant)
_________________________________________________________ ________________________________________________________
SIGNATURE OF CONTINGENT ANNUITANT (if applicable) SIGNATURE OF JOINT OWNER (if applicable)
- - ------------------------------------------------------------------------------------------------------------------------------------
12. DEALER/LICENSED AGENT INFORMATION AND SIGNATURES
Licensed Agent: _________________________________________ _________________________________________________________
PRINT NAME AGENT NUMBER/LOCATION
_________________________________________ _________________________________________________________
PHONE STATE LICENSE NUMBER
Will the proposed contract replace any existing annuity or insurance contract? [_] NO [_] YES
The agent hereby certified he/she witnessed the signature(s) contained in this application and that all information
contained in this application is true to the best of his/her knowledge and belief.
Signature of Licensed Agent: _________________________________________________________________
Broker Dealer: _______________________________________________________________________________
PRINT NAME
Branch Office: __________________________________________________________________________________________________________
STREET ADDRESS CITY STATE ZIP
Signature of Licensed Principal of Broker Dealer: _______________________________________________________________________
- - ------------------------------------------------------------------------------------------------------------------------------------
For Agent Use Only - Contact your Home Office for details. [_] Profile A [_] Profile B [_] Profile C Once selected, Profile cannot
be changed on this certificate.
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 5(b)
<PAGE>
<TABLE>
<CAPTION>
THE UNITED STATES LIFE INSURANCE COMPANY G E N E R A T I O N S(TM)
Complete and return to: --------------------------------------------- =====================
Administrative Center IN THE CITY OF NEW YORK ("USL") Variable Annuity
P.O. Box 1401 ---------------------------------------------
Houston, TX 77251-1401 Administrative Center: Houston, TX
(800) 346-4944
Fax: (713) 831-3701 -- SERVICE REQUEST --
Hearing Impaired: (888) 436-5257
<S> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------------------------
[X] CERTIFICATE 1.| CERTIFICATE #:______________________________________________ ANNUITANT:_______________________________
IDENTIFICATION |
| CERTIFICATE OWNER(S):__________________________________________________________________________________
(COMPLETE SECTIONS | ADDRESS:_______________________________________________________________________________________________
1 AND 13 FOR ALL |
REQUESTS.) | [ ] CHECK HERE IF
| CHANGE OF ADDRESS _____________________________________________________________________________________
INDICATE CHANGE OR |
REQUEST DESIRED BELOW. | S.S. No. or Tax I.D. No._________/_____/_____________ Phone Number: ( )_______________________________
- - ------------------------------------------------------------------------------------------------------------------------------------
[ ] NAME 2.| [ ] Annuitant* [ ] Beneficiary* [ ] Owner(s)* (*DOES NOT CHANGE ANNUITANT, BENEFICIARY OR
CHANGE | OWNERSHIP DESIGNATION.)
| -------------------------------------------------------------------------------------------------------
| From: (First, Middle, Last) | To: (First, Middle, Last)
| |
| _______________________________________________________________________________________________________
| Reason: [ ] Marriage [ ] Divorce [ ] Correction [ ] Other (Attach copy of a certified court order)
- - ------------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC ADDITIONAL 3.| _____ By initialing here, I authorize USL to collect $_________ (min. $100) starting on ______________
PURCHASE PAYMENT | by initialing electronic debit entries against my bank account with the MONTH/DAY
OPTION | following frequency:
| [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually (Attach voided check to Service Request)
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] DOLLAR COST 4.| Dollar cost average [ ] $_______ OR [ ] ______% (whole % only) Begin Date: ____ /____ /____
AVERAGING | Taken from the: [ ] Money Market OR [ ] 1-Year Guarantee Period MM DD YY
| Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
| Duration: [ ] 12 Months [ ] 24 Months [ ] 36 Months [ ] 48 Months [ ] 60 Months
| to be allocated to the following division(s) as indicated. (Use only dollars OR percentages.)
|
| Asian Equity (95) ______ Growth and Income (88) ______
| Domestic Income (80) ______ High Yield (89) ______
| Emerging Growth (81) ______ International Magnum (90) ______
| Emerging Markets Equity (82) ______ Mid Cap Value (91) ______
| Enterprise (83) ______ Money Market (92) ______
| Equity Growth (87) ______ Morgan Stanley
| Fixed Income (84) ______ Real Estate Securities (93) ______
| Global Equity (85) ______ Strategic Stock (96) ______
| Government (86) ______ Value (94) ______
| Other _____________________ ______
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] AUTOMATIC 5.| [ ] ADD [ ] STOP Automatic Rebalancing
REBALANCING | [ ] CHANGE Automatic Rebalancing of variable investments to the percentage allocations indicated below:
| [ ] Quarterly [ ] Semiannually [ ] Annually (based on certificate anniversary)
($25,000 MINIMUM) |
USE WHOLE PERCENTAGES. | Asian Equity (95) ______% High Yield (89) ______%
TOTAL MUST EQUAL 100%. | Domestic Income (80) ______% International Magnum (90) ______%
| Emerging Growth (81) ______% Mid Cap Value (91) ______%
| Emerging Markets Equity (82) ______% Money Market (92) ______%
| Enterprise (83) ______% Morgan Stanley
| Equity Growth (87) ______% Real Estate Securities (93) ______%
| Fixed Income (84) ______% Strategic Stock (96) ______%
| Global Equity (85) ______% Value (94) ______%
| Government (86) ______% Other _____________________ ______%
| Growth and Income (88) ______%
|
| NOTE: Automatic Rebalancing is only available for variable divisions. Automatic Rebalancing will not
| change allocation of future purchase payments.
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] CHANGE 6.| Asian Equity (95) ______% Growth and Income (88) ______%
ALLOCATION OF | Domestic Income (80) ______% High Yield (89) ______%
FUTURE PURCHASE | Emerging Growth (81) ______% International Magnum (90) ______%
PAYMENTS | Emerging Markets Equity (82) ______% Mid Cap Value (91) ______%
| Enterprise (83) ______% Money Market (92) ______%
USE WHOLE PERCENTAGES. | Equity Growth (87) ______% Morgan Stanley
TOTAL MUST EQUAL 100%. | Fixed Income (84) ______% Real Estate Securities (93) ______%
| Global Equity (85) ______% Strategic Stock (96) ______%
| Government (86) ______% Value (94) ______%
| Other _____________________ ______%
|
| NOTE: A change to the allocation of future purchase payments will not alter Automatic Rebalancing
| allocations.
- - -----------------------------------------------------------------------------------------------------------------------------------
PAGE 1 OF 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[ ] TRANSFER OF 7.| Indicate division number along with gross dollar or percentage amount. (Maintain $ or % consistency)
ACCUMULATED VALUES |
| % or $________ from Div._______ to Div._______ % or $________ from Div._______ to Div._______
| % or $________ from Div._______ to Div._______ % or $________ from Div._______ to Div._______
| % or $________ from Div._______ to Div._______ % or $________ from Div._______ to Div._______
| % or $________ from Div._______ to Div._______ % or $________ from Div._______ to Div._______
|
| NOTE: If a transfer is elected and Automatic Rebalancing is active for your certificate, you may want
| to consider changing the Automatic Rebalancing allocations (Section 5). Otherwise, the Automatic
| Rebalancing will transfer funds in accordance with instructions on file.
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] SYSTEMATIC 8.| Specified Dollar Amount $______________
WITHDRAWAL |
(ALSO COMPLETE | Frequency: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
SECS. 11, 12, & 13.) |
| To begin on / / (Date must be between the 5th and 24th of the month and at least
($100 MINIMUM | 30 days after issue date.)
WITHDRAWAL) | Unless specified below, withdrawals will be taken from the divisions as they are currently allocated in
| your certificate.
PERCENTAGES (WHOLE % |
ONLY) MUST EQUAL 100%, | $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
OR DOLLARS MUST EQUAL | $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
TOTAL AMOUNT. | $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
|
| NOTE: The systematic withdrawal option terminates on the certificate's annuity date. You may cancel the
| systematic withdrawal process at any time by notifying USL in writing.
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 9.| Amount requested is to be ( ) net OR ( ) gross of applicable charges. Total Amount=$___________
PARTIAL |
WITHDRAWAL | $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
| $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
(ALSO COMPLETE SECS. | $ or %_____ Div. No._____ $ or %_____ Div. No._____ $ or %_____ Div. No. ____
11, 12 & 13.) |
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] REQUEST FOR 10.| [ ] Certificate attached
FULL SURRENDER | [ ] I hereby declare that the certificate specified has been lost, destroyed, or mislaid and request
| that the value of the certificate be paid. I agree to indemnify and hold harmless USL against any
(ALSO COMPLETE SECS. | claims which may be asserted on my behalf and on the behalf of my heirs, assignees, legal
11, 12 & 13.) | representatives, or any other person claiming rights derived through me against USL on the basis of
| the certificate.
- - -----------------------------------------------------------------------------------------------------------------------------------
[ ] METHOD OF 11.| NOTE: If no method is indicated, check(s) will be mailed to the owner at the address of record.
DISTRIBUTION | Check one: [ ] Mail check to owner. [ ] Mail check to alternate address. [ ] Deposit funds directly
| to bank/firm.*
| (available only for
| systematic withdrawal)
|
| ______________________________________________________________________________________________________
| NAME OF INDIVIDUAL OR FINANCIAL INSTITUTION
| _________________________________________________ __________________________________________________
| ADDRESS CITY/STATE/ZIP
| _________________________________________________ Type of account: [ ] Checking [ ] Savings
| IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT
| *Enclose a voided check from account where funds are to be deposited. PLEASE DO NOT ENCLOSE A
| DEPOSIT SLIP.
- - ------------------------------------------------------------------------------------------------------------------------------------
[ ] NOTICE OF 12.| The taxable portion of the distribution you receive from your annuity certificate is subject to federal
WITHHOLDING | 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 have withholding apply by
| checking the appropriate box below. If you elect not to have withholding apply to your distribution or
| if you do not have enough income tax withheld, you may be responsible for payment of estimated tax.
| You may incur penalties under the estimated tax rules if your withholding and estimated tax are not
| sufficient. If no election is made we are REQUIRED to withhold Federal Income Tax.
| Check one: [ ] I do NOT want income tax withheld from this distribution.
| [ ] I do want 10% or _______ % income tax withheld from this distribution.
- - ------------------------------------------------------------------------------------------------------------------------------------
[X] 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
(COMPLETE THIS SECTION | Section 3406(a)(1)(C) of the Internal Revenue Code.
FOR ALL REQUESTS.) |
| The Internal Revenue Service does not require your consent to any provision of this document other than
| the certification required to avoid backup withholding.
|
| __________________________________________ ________________________________________________________
| DATE SIGNATURE(S) OF CERTIFICATE OWNER(S)
- - ------------------------------------------------------------------------------------------------------------------------------------
USL 8794-1 REV 0499 PAGE 2 OF 2
</TABLE>
<PAGE>
Exhibit 5(c)
<PAGE>
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK ("USL")
Administrative Center: Houston, TX
GENERATIONS(TM)
================
Variable Annuity
- SPECIAL REQUEST FOR SURRENDER CHARGE WAIVER -
FOR USL EMPLOYEES WHO PURCHASE A GENERATIONS(TM) CERTIFICATE ("CERTIFICATE")
- - --------------------------------------------------------------------------------
INSTRUCTIONS:
1. Complete both sections of this form.
2. Make check payable to THE UNITED STATES LIFE Insurance Company In the
City of New York.
3. Mail GENERATIONS(TM) application, Special Request for Surrender Charge
Waiver form, and check to USL.
NOTE: An application submitted for special surrender charge waiver privilege
must be accompanied by this form. Certificates purchased under this privilege
are not eligible for commissions. Annuity applications not accompanied by
this form will be subject to all applicable certificate provisions, including
surrender charges and commissions.
- - --------------------------------------------------------------------------------
SECTION 1--Certificate Identification
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Certificate Owner: Joint Owner (if applicable):
--------------------------------------- ---------------------------------------
Address: Address:
------------------------------------------------- ----------------------------------------------------------
- - --------------------------------------------------------- ----------------------------------------------------------
Phone: ( ) Phone: ( )
---------------------------------------------------- -------------------------------------------------------------
Sex: [ ] F [ ] M Date of Birth / / Sex: [ ] F [ ] M Date of Birth / /
------------------------- ---------------------------------
Tax I.D. or S.S. # - - Tax I.D. or S.S. # - -
---------------------------------------- ------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION 2--Certificate Owner's Certification
I hereby certify to USL that:
1. I have submitted a completed and signed GENERATIONS(TM) Certificate
application along with this form.
2. I am currently a full-time employee of USL.
3. This purchase is for personal investment purposes and the Certificate
acquired hereunder shall not be resold.
I agree to make notification in writing of any change in my employment status. I
agree not to make any additional purchase payments without surrender
charges/commissions unless I am entitled to do so under the Certificate's
Prospectus. I further agree that USL shall have the right at any time to verify
my eligibility in this program. I understand that the privilege to purchase the
Certificate without surrender charges/commissions may be modified or terminated
at any time.
Signature of Employee/Certificate Owner(s):___________________________________
Date__________________________________________
<PAGE>
Exhibit 5(d)
<PAGE>
1035 EXCHANGE INSTRUCTIONS
- - --------------------------------------------------------------------------------
1. Processing Rules
A 1035 exchange is one that qualifies under IRC Section 1035 guidelines.
A 1035 exchange is for non-qualified funds only.
The Home Office does not offer tax advice. Applicants and certificate
owners should contact their own tax advisors.
To qualify as a 1035 exchange, the following certificate types are
required:
* An annuity or life insurance contract in exchange for an annuity
certificate.
In addition, the following certificate type exchanges are required:
* Individual certificate to individual certificate;
* Joint certificate to joint certificate; and
* Two individual certificates on same annuitant(s) with the same owner(s)
to individual or joint certificate.
The annuitant and owner on the exchanged contract must be the same on the
new certificate.
To qualify as a full 1035 exchange, all existing cash value must be
transferred to the new certificate and none of the cash value can be
refunded.
Money from a 1035 exchange cannot be added to an existing annuity
certificate--it must fund a new certificate.
- - --------------------------------------------------------------------------------
2. Forms Requirements
Annuity Application (form number which is approved in the state of
application).
Replacement form as required by state, if applicable.
Assignment and Transfer Request Form (USL 8875) for IRC Section 1035(a)
Exchange.
External company's contract/policy or lost contract/policy statement.
- - --------------------------------------------------------------------------------
3. Signature Requirements
The annuitant of the new application (age 15 or older) must sign the
Annuity Application.
The proposed owner of the new certificate must sign the Annuity Application
and the Assignment and Transfer Request Form (USL 8875).
If the owner is a trust, the trustee must sign the application and the
Assignment and Transfer Request Form (USL 8875) along with the trustee's
title.
<PAGE>
QUALIFIED AND NON-QUALIFIED FUNDS
TRANSFER INSTRUCTIONS
- - --------------------------------------------------------------------------------
1. Processing Rules
A transfer occurs when an existing policy/contract or account is liquidated
and proceeds are forwarded to another company or to the client.
There are three types of transfers:
* Trustee-to-Trustee (or Custodian) transfer: Proceeds are sent from one
company directly to another company to fund a like plan (Example: TSA to
TSA, IRA to IRA, Non-qualified to Non-qualified).
* Direct Rollover: Proceeds are sent from one company directly to another
company to fund a different type of plan (Example: TSA to IRA, 401(k) to
IRA, etc.).
* Rollover: Proceeds are sent from the original company to the owner. The
owner then forwards the check to the new company within 60 days.
Partial transfers are allowed.
Please consult a tax advisor for any tax consequences.
These types of transfers are not 1035 exchanges and do not qualify under
IRC Section 1035 guidelines.
A transfer may be qualified or non-qualified.
NOTE: The Home Office is responsible for qualified administration of
IRAs/SEPs only. Other than IRAs, qualified plans' administration is
the responsibility of the customer or plan administrator. The Home
Office does not provide a plan prototype.
- - --------------------------------------------------------------------------------
2. Form Requirements
Annuity Application (form number which is approved in the state of
application).
Replacement form as required by state, if applicable, and only when another
ANNUITY CONTRACT is being replaced.
External company/institution's contract or lost contract statement.
Assignment and Transfer Request Form (USL 8875) if the funds are qualified
and the Administrative Center is to request the funds. This same form is
used if the funds are non-qualified and coming from a non-insurance/annuity
contract and the Administrative Center is to request the funds.
If the plan type is IRA, refer the customer to the IRA disclosure attached
to the prospectus.
If the plan type is SEP, submit IRS Form 5305 with the application.
- - --------------------------------------------------------------------------------
3. Signature Requirements
The annuitant/proposed owner of the new certificate (age 15 or older) must
sign the Annuity Application (if different individuals, both must sign).
The owner must sign the Assignment and Transfer Request Form (USL 8875).
If the owner is a trust, then the trustee's signature and title is required
on all appropriate forms.
<PAGE>
Exhibit 5(e)
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
COMPLETE AND RETURN THIS REQUEST TO: THE UNITED STATES LIFE INSURANCE COMPANY
Administrative Center IN THE CITY OF NEW YORK ("USL")
P. O. Box 1401 Administrative Center: Houston, TX
Houston, TX 77251-1401
(800) 246-1924 * (713) 831-3701 CHANGE OF BENEFICIARY
Hearing Impaired (888) 436-5257
(Before completing this form please read instructions below and on reverse side.)
- - ------------------------------------------------------------------------------------------------------------------------------------
Contract/Certificate No. Contract/Certificate Owner Annuitant
- - ------------------------------------------------------------------------------------------------------------------------------------
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to the designated beneficiaries as may be living, unless
otherwise provided below. In the event no beneficiary survives the Annuitant or Owner, and if this form or the Contract/Certificate
does not provide otherwise, the proceeds will be paid to the executors or administrators of the deceased's Estate.
====================================================================================================================================
PRIMARY BENEFICIARY:
FULL NAME RELATIONSHIP TO ANNUITANT PERCENTAGES (IF APPLICABLE)
- - --------- ------------------------- ---------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a primary beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
CONTINGENT BENEFICIARY (proceeds payable under this designation only if none of the designated primary beneficiaries survives the
deceased Annuitant or Owner):
FULL NAME RELATIONSHIP TO ANNUITANT PERCENTAGES (IF APPLICABLE)
- - --------- ------------------------- ---------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
If a living or non-testamentary trust is designated as a contingent beneficiary, complete the following:
____________________________________________________________________________________________ Dated: _________________________
Name of Trust
====================================================================================================================================
The undersigned Contract/Certificate Owner hereby revokes any previous beneficiary designation and any optional mode of settlement
with respect to any death benefit proceeds payable at the death of the Annuitant or Owner.
I represent and certify that no insolvency or bankruptcy proceedings are now pending against me.
Dated at _______________________________________________________ this ______________ day of __________________________, 19_______.
____________________________________________________________ _________________________________________________________
WITNESS CONTRACT/CERTIFICATE OWNER
____________________________________________________________ _________________________________________________________
WITNESS ADDITIONAL SIGNATURE (IF REQUIRED)
====================================================================================================================================
This change of beneficiary and/or method of settlement has been approved by the Company at its Administrative Center, and
presentation of the Contract/Certificate for endorsement has been waived.
THE UNITED STATES LIFE Insurance Company In the City of New York
DATE OF APPROVAL:___________________________________________ BY:______________________________________________________
</TABLE>
USL 8876-1
<PAGE>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
1. All signatures must be in INK and should appear exactly as the name is
given in the Contract/Certificate. A separate election for change of
beneficiary must be completed for each Contract/Certificate.
2. The full name of the new Beneficiary, relationship to the Annuitant,
current mailing address and taxpayer identification number (S.S. No.)
should be given for all Beneficiaries. If Beneficiary is to receive
payment under life income option, give date of birth.
3. If a Beneficiary is a married woman, her full given name should be used.
For example, Mary E. Jones, not Mrs. J.F. Jones.If a Trustee is
designated, notification as to the type of trust created should be
furnished to the Company.
4. If two Beneficiaries are to share jointly, the last name entered should
be followed by the words "equally, or to the survivor." If three or more
Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivors or survivor." If the
interest of one Beneficiary is to be contingent to the interest of
another, after the name of the first Beneficiary the following words
should be placed: "if living; otherwise to."
For your assistance, examples of the wording to be used in some of the more
common designations are set out below. In difficult cases where there is
doubt as to the proper wording, the Company will prepare a special form for
your signature on request.
1. One Beneficiary Jane Doe, wife of the Annuitant
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant, and John
Doe, son, equally, or to the survivor
3. One Primary and Two Contingent
Beneficiaries Jane Doe, wife of the Annuitant, if
living; otherwise to John Doe and Mary
Doe, children of the Annuitant, equally,
or to the survivor
4. One Primary and One Contingent
Beneficiary Jane Doe, wife of the Annuitant, if
living; otherwise to John Doe, son
5. Two Primary and One Contingent
Beneficiary John Doe and Mary Doe, parents of the
Annuitant, equally, or to the survivor;
otherwise, to Jane Doe, sister of the
Annuitant
6. Wife, Primary; Named and
Unnamed Children, Contingent
Beneficiaries Jane Doe, wife of the Annuitant, if
living; otherwise to Henry Doe, Barbara
Doe, and Paul Doe, children of the
Annuitant, and any other then living
children born of the marriage of the
Annuitant and said wife, equally, or to
the survivors
7. Wife, Primary; Children and
Step-Children Mary Doe, wife of the Annuitant, if
living; otherwise, Henry Doe, son
of Contingents the Annuitant, Mary Doe,
step-daughter of the Annuitant, and any
then living children born of the
marriage of the Annuitant and said wife,
equally, or to the survivor
8. Wife, Primary; Unnamed Children
with Second Contingents Jane Doe, wife of the Annuitant, if
living; otherwise any then living
children born of the marriage of the
Annuitant and said wife, equally, or to
the survivor; otherwise to Harry Doe and
Mabel Doe, parents of the Annuitant,
equally, or to the survivor
9. Business Designations A. The Beacon Oil Company, Incorporated,
a Texas Corporation Houston, Texas,
employer (or creditor), or its
successors or assigns
B. John Doe, Business Partner
C. Harry Doe, Employer (or employee)
10. Trustee - Written Trust The American General Bank, Houston,
Texas, as Trustee, or its successors in
Trust, under Trust Instrument dated
May 31, 1995
Trustee - Testamentary Trust Trustee as provided in the Last Will and
Testament of the Annuitant, or
successors thereunder
11. Estate The Executors, Administrators, or
Assigns of the Annuitant
<PAGE>
Exhibit 5(f)
<PAGE>
<TABLE>
<S> <C>
THE UNITED STATES LIFE Insurance Company in the City of New York ("USL")
Assignment and Transfer Request
____________________________________________________________________________________________________________________________________
Current Trustee/Custodian: Telephone Number:
____________________________________________________________________________________________________________________________________
Company's Address: City: State: Zip
____________________________________________________________________________________________________________________________________
Owner(s): Owner's SSN:
____________________________________________________________________________________________________________________________________
Annuitant's Name (If different from Owner) Contract/Account No:
____________________________________________________________________________________________________________________________________
Type of Transfer: (Choose only one) [ ] Non-Qualified Transfer [ ] Qualified Rollover [ ] Qualified Direct Transfer
[ ] 1035 Non-Taxable Exchange (Transfer of funds from a (Irrevocable Direct (Direct Transfer from
[ ] Other:__________________________ non-qualified mutual funds, Rollover of Tax current IRA trustee or
CDs, savings account, etc. Sheltered Annuities custodian company to new
to a non-qualified Annuity and Qualified IRA trustee or custodian)
Contract/Certificate) Retirement Plans to
an IRA) (Forward
proceeds to USL within
60 days to maintain
tax status)
____________________________________________________________________________________________________________________________________
REQUEST FOR 1035 EXCHANGE
____________________________________________________________________________________________________________________________________
I hereby absolutely assign and transfer to USL all of my rights, title, and interest of every nature in and to the above referenced
contract/certificate including, but not limited to surrender, assign, transfer, or change beneficiary.
. Section 1035 of the Internal Revenue Code permits certain nontaxable exchanges of insurance policies and annuity
contracts/certificates. It is my intention that this transfer qualify as a Section 1035 exchange and that no portion of this
exchange be actually or constructively received by me. USL makes no representation concerning my tax treatment for this
transaction and has neither responsibility nor liability for my tax treatment.
. I understand the exact amount of the proceeds may vary depending upon the date of transfer and I agree to execute any
additional documents required to complete the transfer.
. I understand that the exchange is not complete if the company issuing the contract/certificate is unable or unwilling
to pay the value of the above referenced contract(s)/certificate(s) to USL.
. I understand that as of the date of surrender of the contract/certificate by the company, the surrendered contract/certificate
no longer provides any coverage and the new contract/certificate is not in effect until USL approves the new contract/certificate
and receives the funds.
. I represent and warrant that no person, firm, or corporation has a legal or equitable interest in the contract/certificate except
the undersigned, and that no proceedings of either legal or equitable nature have been instituted or are pending against the
undersigned.
The contract/certificate is:
[ ] Enclosed Contract/Certificate is attached
[ ] Lost or destroyed (I certify that the contract/certificate is lost or destroyed. In addition, I certify that
the contract/certificate has not been assigned or pledged as collateral.)
_________________________________________________________________ _____________________________________________________________
Owner's Signature(s) Date
USL, owner of the above referenced contract/certificate, does hereby request immediate surrender of the above referenced
contract/certificate.
____________________________________________________________________________________________________________________________________
REQUEST FOR NON-QUALIFIED TRANSFER, QUALIFIED ROLLOVER OR QUALIFIED DIRECT TRANSFER
____________________________________________________________________________________________________________________________________
This serves as authorization to liquidate and forward:
[ ] All [ ] Partial $________________________________ or__________________________________________ %
of my account balance as listed above to the annuity I have established through USL.
_______________________________________________________________________________________________________________________________
FOR CD TRANSFERS: I am aware that if I request a liquidation of a CD prior to the maturity date, I may be subject to surrender or
withdrawal penalties. I direct and authorize the above liquidation and transfer of the net liquidation proceeds:
[ ] Upon receipt of this request [ ] On the maturity date of ______________________________________________
__________________________________________________________________ _____________________________________________________________
Owner's Signature(s) Date
____________________________________________________________________________________________________________________________________
LETTER OF ACCEPTANCE
____________________________________________________________________________________________________________________________________
The above named individual has established a Qualified or Non-Qualified Annuity with USL. We will accept the transfer of cash
assets currently held in your plan for placement into the Qualified or Non-Qualified Annuity established with USL.
For a Section 1035(a) exchange, please provide us with the pre and post TEFRA cost basis.
By:________________________________________________________________ ____________________________________________________________
Authorized Representative of USL Date
Checks should be made payable to: THE UNITED STATES LIFE Insurance Company In the City of New York
FBO (For the benefit of)_______________________________________________
Print Name of Contract/Certificate Owner(s)
Mail to: Administrative Center Administrative Center 3-50
P.O. Box or
Houston, TX overnight
(800) 247-6584 * (713) 831-3701 Fax
Hearing Impaired (888) 436-5257
____________________________________________________________________________________________________________________________________
USL 8875 0599
</TABLE>
<PAGE>
Exhibit 5(g)
<PAGE>
<TABLE>
<S> <C> <C>
Complete and return to: THE UNITED STATES LIFE Insurance Company
Administrative Center In the City of New York ("USL")
P.O. Box 1401 ELECTION OF ANNUITY PAYMENT OPTION/CHANGE FORM
Houston, TX 77251-1401 FOR VARIABLE ANNUITIES
800-247-6584 * (713) 831-3701 Fax
Hearing Impaired (888) 436-5256
Please refer to "Definitions" on Page 2 before completing this form.
__________________________________________________________________________________________________________________________________
1. Annuitant:___________________________________________________________ Annuitant's Date of Birth:_______________________
Contract/Certificate Owner(s):_______________________________________ Contract/Certificate #:__________________________
Address:_____________________________________________________________ Annuitant's Sex: [ ] Male [ ] Female
Contract/Certificate Owner(s) Social Security
(or Taxpayer I.D.) No.: ___________________________________________ Phone Number: ( )____________________________
____________________________________________________________________________________________________________________________________
2. Extended Maturity Date This option stipulates that a maturity option
Extend the maturity date to_____________________. may be requested anytime prior to the extended
maturity date if desired.
____________________________________________________________________________________________________________________________________
3. [ ] NOTICE AND Section 401(a)(9) of the Internal Revenue Code and IRS regulations impose
DISCLAIMER OF certain minimum distribution requirements upon IRAs, tax sheltered annuities,
REQUIRED DISTRIBUTIONS and (S)401(k) plans. (See Proposed Regulations (S)1.401(a)(9)-1, (S)1.401(a)(9)-2,
FROM INDIVIDUAL (S)1.403(b)-2, (S)1.408-8, and IRS Notice 88-38.) Generally, these rules require that
RETIREMENT ANNUITIES and distributions must commence after age 70 1\2.
TAX SHELTERED ANNUITIES
((S)403(b) AND 401(k) PLANS) Since USL is not in a position to determine whether or not you are in compliance with
these distribution requirements, please consult your tax advisor or trustee of your plan,
if applicable, to ensure your compliance with these rules.
I have read the above notice and disclaimer and agree that USL is not liable for any
penalty or any other liability I might incur due to my failure to satisfy the minimum
distribution requirements referred to above.
Initials of contract/certificate owner(s) ______________
____________________________________________________________________________________________________________________________________
4. Marital Status: [ ] Single [ ] Married [ ] Widowed [ ] Divorced | 5. I certify that the contract/certificate has been:
| [ ] Enclosed [ ] Lost [ ] Destroyed
- - ------------------------------------------------------------------------------------------------------------------------------------
6. Settlement Options
a. TSA, CORPORATE, AND HR-10 PENSION OR PROFIT SHARING PLAN PARTICIPANTS: If you are married at the time you are eligible to
receive payments, the Employee Retirement Income Security Act of 1974 stipulates you will automatically receive a Joint
and Survivor Annuity unless you and your spouse elect NOT to receive this annuity form. No other settlement option will
be valid unless the election statement below is completed:
[ ] We hereby elect not to receive benefits under a Joint and Survivor Annuity Form.
_______________________________________________________________________ _______________________________________________
ANNUITANT SIGNATURE DATE SPOUSE SIGNATURE DATE
b. Elect one of the following settlement options: (Furnish proof of birth with election of Options 1-3. For election
of Options 2-5, complete Section 10 for "Beneficiary/ Joint Annuitant.") Surrender charges may be applicable per
the contract or certificate provisions. (All Settlement options may not be available. Please refer to your contract
or certificate.)
[ ] (1) Life Annuity
[ ] (2) Life Annuity with: [ ] 120 [ ] 180 [ ] 240 guaranteed monthly payments
[ ] (3) Joint and Survivor Annuity with: [ ] Full [ ] 2\3 [ ] 1\2 benefits to survivor
[ ] (4) Payments for a designated period. Length of period __________ years (from 5-40 years)
[ ] (5)* Installments of a specified dollar amount. Dollar amount of each payment $_________________
Frequency of payment: [ ] Monthly [ ] Quarterly [ ] Semiannually [ ] Annually
*Option 5 is only available on a fixed basis.
c. Begin payments: (Mo./Day/Yr.) _____/_____/_____
d. Apply contract or certificate value toward payment as follows: ___________% Fixed Account
_____% in Division _______ _____% in Division ______ _____% in Division ______ _______% in Division ________
_____% in Division _______ _____% in Division ______ _____% in Division ______ _______% in Division ________
____________________________________________________________________________________________________________________________________
7. Bank Agreement Authorization (for use when selecting Settlement Options 1-5 listed above) *Available on fixed payment
options only.
USL is hereby authorized and directed to transfer funds in settlement of the annuity payments as they become due to me, to the
order of the bank or institution named below. I hereby authorize and direct the Bank to correct erroneous credits to my
account received for due dates after my death or due to erroneous duplicate transfers by refunding the amount(s) to USL as
being payments made under mistake of fact. I agree that USL shall not be liable for loss of funds during the process of
transfer to the bank (or for delay in any such transfer) except where due to the negligence of USL. I reserve the right to
revoke or cancel this bank authorization which must be made in writing to USL.
_____________________________________________ |__|__|__|__|__|__|__|__|__| Type of bank account (check one):
Name of Bank ABA Routing Number [ ] Savings [ ] Checking*
(Obtain from Bank.) * Attach a blank "voided" check from your account.
_____________________________________________ ____________________________________________________________________________
Name on Bank Account Bank Account Number
___________________________________________________________________________ ( )_________________________________________
Address City State Zip Phone Number
____________________________________________________________________________________________________________________________________
Page 1 of 2
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- - -----------------------------------------------------------------------------------------------------------------------------------
8. Notice of Withholding
Complete the following applicable lines when selecting a Settlement Option:
1. I elect not to have income tax withheld from my pension or annuity. (Do not complete lines 2 or 3.)........... [ ]
2. I want my withholding from each periodic pension or annuity payment to be figured using the number of
allowances and marital status shown.
(You may also designate a dollar amount on line 3.) Marital status: [ ] Single [ ] Married [ ] Married,
but withhold at higher Single rate........................................................ _______________
(Enter number
of allowances.)
3. I want the following additional amount withheld from each pension or annuity payment. NOTE: For periodic
payments, you cannot enter an amount here without entering the number (including zero) of allowances on
line 2........................................................................................................ $_____________
____________________________________________________________________________________________________________________________________
Under penalties of perjury, I certify: (1) that the Social Security (or taxpayer identification) number is correct as it appears
in this application 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 consent to any provision of this document other than the certifications required
to avoid backup withholding.
____________________________________________________________________________________________________________________________________
PLEASE SIGN HERE.___________________________________________________________________ Date________________________________
____________________________________________________________________________________________________________________________________
9. Change Allocation of Future Annuity Payments Instructions: Indicate the transfer of underlying investments and future
payments. You are limited to the number of transfers. Refer to your contract or certificate for specific details. Please note
that there is no option to transfer payments from the Fixed Account to the Separate Account. Total must equal 100%; no
fractional percentages.
______% from Division _________ to Division ____________ _________ % from Division ____________ to Division _________
______% from Division _________ to Division ____________ _________ % from Division ____________ to Division _________
____________________________________________________________________________________________________________________________________
10. Joint Annuitant or Primary Beneficiary:
_____________________________________________________ [ ] M [ ] F Social Security (Taxpayer I.D.) No. ______/________/_____
Last First M. I.
___________________________________________________________________________________ Date of Birth_______/________/________
Address City State Zip MM DD YY
____________________________________________________________________________________________________________________________________
11. In accordance with the terms of the contract/certificate designated herein, I hereby elect the above option and agree
that this election supercedes and revokes any prior election.
_________________________________________________________________________________________
SIGNATURE OF ANNUITANT (AND JOINT ANNUITANT, IF APPLICABLE) DATE
_________________________________________________________________________________________
SIGNATURE OF CONTRACT/CERTIFICATE OWNER (IF OTHER THAN ANNUITANT) DATE
_________________________________________________________________________________________
SIGNATURE OF ASSIGNEE DATE
_________________________________________________________________________________________
SIGNATURE OF JOINT OWNER DATE
____________________________________________________________________________________________________________________________________
DEFINITIONS
CONTRACT/CERTIFICATE OWNER: The person, corporation, or trustee named in the contract or certificate application as
the contract or certificate owner
ANNUITANT: The person named in the contract or certificate application as the annuitant
PARTICIPANT: An employee eligible to participate in a retirement plan adopted by the contract or
certificate owner
JOINT ANNUITANT: The person selected to receive payment after death of the annuitant when Option 2,
Joint and Survivor Annuity, is elected
BENEFICIARY: The person entitled to receive payment in the event benefits continue after death of
annuitant
____________________________________________________________________________________________________________________________________
Page 2 of 2
</TABLE>
<PAGE>
Exhibit 5(h)
<PAGE>
<TABLE>
<S> <C>
THE UNITED STATES LIFE INSURANCE COMPANY
Complete and Return to: IN THE CITY OF NEW YORK ("USL")
Administrative Center Administrative Center: Houston, TX G E N E R A T I O N S(TM)
P.O. Box 1401 =========================
Houston, TX 77251-1401 Variable Annuity
(800) 346-4944
Fax: (713) 831-3701
Hearing Impaired:
(888) 436-5257
- DOLLAR COST AVERAGING ENROLLMENT FORM -
____________________________________________________________________________________________________________________________________
TO INITIATE DOLLAR COST AVERAGING (AUTOMATIC TRANSFER PLAN):
For new certificates:
. Select your initial investment allocations in Section 6 of the Generations(TM) Variable Annuity Application (USL
8771-33), allocating the desired percentage to the 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA) Period.
(The minimum allocation to the 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA) Period is $5,000.)
. In lieu of Section 8 of the Application, complete this form to begin dollar cost averaging from the 6-Month
Guarantee (DCA) or 1-Year Guarantee (DCA) Period.
. Submit this form with your Application.
For existing certificates--certificate # VA_____________________:
. Complete this form and submit it with additional payment.
. The entire additional payment will be applied toward the 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA)
Period, as specified below.
. Additional payments may not be invested into the special 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA)
Period while an existing dollar cost averaging plan is active.
____________________________________________________________________________________________________________________________________
SECTION I: Investment Allocations
Please allocate entire amount from EITHER the [ ] 6-Month Guarantee (DCA) or [ ] 1-Year Guarantee (DCA) Period in equal monthly
amounts over a period of 6 months or 12 months to the following Division(s) as indicated. (Use only whole percentages. Total
allocation must equal 100%.)
. Balances in the 1-Year Guarantee (DCA) Period that are subject to dollar cost averaging, pursuant to this form, will
earn interest at the rate of _____%, which represents an increase of ______% over the 1-Year Guaranteed Interest Rate
currently offered, OR
. Balances in the 6-Month Guarantee (DCA) Period that are subject to dollar cost averaging, pursuant to this form, will
earn interest at the rate of _____%.
Asian Equity (95) ____ % Global Equity (85) ____ % Morgan Stanley
Domestic Income (80) ____ % Government (86) ____ % Real Estate Securities (93) ____ %
Emerging Growth (81) ____ % Growth and Income (88) ____ % Strategic Stock (96) ____ %
Emerging Markets Equity (82) ____ % High Yield (89) ____ % Value (94) ____ %
Enterprise (83) ____ % International Magnum (90) ____ % Other __________________ ____ %
Equity Growth (87) ____ % Mid Cap Value (91) ____ %
Fixed Income (84) ____ % Money Market (92) ____ %
NOTE: All money allocated to the 6-Month Guarantee (DCA) or 1-Year Guarantee (DCA) Period will be transferred in equal monthly
amounts over a 6-month or 12-month period, beginning 30 days after the request date. The final amount transferred from the 6-Month
Guarantee (DCA) or 1-Year Guarantee (DCA) Period will include all of the remaining balance.
____________________________________________________________________________________________________________________________________
SECTION II: Signatures
Your signature below indicates you have received a GENERATIONS(TM) prospectus and authorizes your request to begin dollar cost
averaging ("DCA"). All transactions will be confirmed. Please review the information in these statements carefully. All errors or
corrections must be reported to The United States Life Insurance Company In the City of New York ("USL") immediately to assure
proper crediting. USL will assume all transactions are accurate unless notified within 30 days.
You may elect to terminate your DCA by writing USL, and termination will become effective prior to the next transfer following this
notification. Upon termination, you will no longer receive the increased interest rate. If USL receives another transfer or
liquidation request on the date of a DCA transfer, USL may delay processing the transfer. In addition, USL reserves the right to
discontinue, modify, or amend its DCA offer at any time. Any changes made to the DCA offer will not affect Certificate Owners
currently participating in DCA.
_________________________________________________________________ ____________________________________________________
SIGNATURE OF PARTICIPANT SOCIAL SECURITY NUMBER OF PARTICIPANT
_________________________________________________________________ ____________________________________________________
PRINT PARTICIPANT NAME SIGNATURE OF JOINT PARTICIPANT (IF APPLICABLE)
_________________________________________________________________ ____________________________________________________
PHONE DATE PRINT LICENSED AGENT NAME
____________________________________________________________________________________________________________________________________
USL 8966-1 REV 0499 VAGFRMDCAN
</TABLE>
<PAGE>
Exhibit 5(i)
<PAGE>
GENERATIONS VARIABLE ANNUITY
Enclosed is confirmation of the initial
purchase payment applied to your
GENERATIONS variable annuity contract
issued by THE UNITED STATES LIFE
Insurance Company In the City of New
York. The contract itself will be
delivered to you in the very near future.
We appreciate the confidence you have
placed in THE UNITED STATES LIFE
Insurance Company In the City of New
York and the GENERATIONS product.
Should you have any questions, please
contact your Investment Representative
or the Administrative Center at (800)
346-4944.
GENERATIONS VARIABLE ANNUITY
Enclosed is confirmation of the initial
purchase payment applied to your
GENERATIONS variable annuity contract
issued by THE UNITED STATES LIFE
Insurance Company In the City of New
York. The contract itself will be
delivered to you in the very near future.
We appreciate the confidence you have
placed in THE UNITED STATES LIFE
Insurance Company In the City of New
York and the GENERATIONS product.
Should you have any questions, please
contact your Investment Representative
or the Administrative Center at (800)
346-4944.
GENERATIONS VARIABLE ANNUITY
Enclosed is confirmation of the initial
purchase payment applied to your
GENERATIONS variable annuity contract
issued by THE UNITED STATES LIFE
Insurance Company In the City of New
York. The contract itself will be
delivered to you in the very near future.
We appreciate the confidence you have
placed in THE UNITED STATES LIFE
Insurance Company In the City of New
York and the GENERATIONS product.
Should you have any questions, please
contact your Investment Representative
or the Administrative Center at (800)
346-4944.
<PAGE>
EXHIBIT 8(a)
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BY AND BETWEEN
THE UNITED STATES LIFE INSURANCE COMPANY
IN THE CITY OF NEW YORK
AND
AMERICAN GENERAL LIFE COMPANIES
THIS ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") made ____________,
1999 to be effective as of January 1, 1998 (the "Effective Date") is by and
between THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
("USL"), a New York domiciled life insurance company, and AMERICAN GENERAL LIFE
COMPANIES ("AGLC"), a corporation organized pursuant to the laws of Delaware
with its principal place of business in Houston, Texas and formerly known as
American General Independent Producer Division.
.......
1. SERVICES TO BE PROVIDED BY AGLC TO USL. Subject to the terms, conditions,
and limitations of this Agreement, AGLC shall, at USL's request and
direction, provide to USL the following services:
.......
(b) MARKETING SUPPORT/PRODUCT DEVELOPMENT AND ADMINISTRATION. AGLC shall
provide administrative services relating to marketing support and
product development and administration with respect to insurance and
annuity products, both fixed and variable, individual and group, and
registered and non-registered, including: (i) conducting formal
insurance market research; (ii) developing and designing new products
and obtaining regulatory approvals for such products; (iii) developing
illustration and sales materials; (iv) provided case design
underwriting services; (v) evaluating product performance based on
production, expense, persistency, investment and mortality levels; and
(vi) maintaining sales illustration, advertising materials and re-
projection software which are compliant with New York Insurance Law
(S) 3209 and New York Insurance Regulation 74 and maintained in
accordance with New York Insurance Regulation 152.
.......
1
<PAGE>
(k) REGISTERED AND NON-REGISTERED PRODUCT SERVICES. With respect to: (i)
the development, sale and servicing of products of USL that are
registered with the Securities and Exchange Commission (the "SEC") as
well as to "private placement" products which are not registered with
the SEC; and (ii) the administration of the SEC-registered and
unregistered separate accounts of USL, AGLC shall provide in addition
to all any and services described above, all related legal,
accounting, including daily pricing of the underlying divisions of the
Separate Account and preparation of the statutory and GAAP financial
statements, computer support and transfer agent services.
.......
2
<PAGE>
EXHIBIT 8(b)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of December 1, 1998, is by and between VAN
KAMPEN ASSET MANAGEMENT INC., a Delaware corporation ("Adviser") and UNITED
STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK, a New York corporation
("USL").
W I T N E S S E T H:
WHEREAS, 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 the investment vehicle for certain
separate accounts of USL, established for variable life insurance policies
and/or variable annuity contracts offered by USL (the "Separate Account,"
whether one or more); and
WHEREAS, USL has entered into a participation agreement dated December 1, 1998
among USL, 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 USL to provide the administrative services specified in
the attached Exhibit A ("Administrative Services"), in connection with the
ownership of interests of the Separate Account, which is the owner of shares of
the Funds 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 USL is willing and able to provide such Administrative Services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of the Shareholders.
2. USL represents and agrees that it will maintain and preserve all records as
required by law to be maintained and preserved in connection with providing
the Administrative Services, and will otherwise comply with all laws, rules
and regulations applicable to the Administrative Services.
<PAGE>
3. USL 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 USL, 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, USL 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. USL 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 USL required by this Agreement, or the
Participation Agreement, provided that USL shall be fully responsible for the
acts and omissions of such other parties.
5. USL 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. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained in USL variable annuity or variable life insurance accounts. USL
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 USL 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 USL
with respect to Generations Contracts, beginning on the date hereof and
during the term of the Participation Agreement, Adviser agrees to pay USL an
annual fee which shall equal .14% of the value of each Fund's assets
maintained in the Master Account for the Shareholders (excluding all assets
invested during the guarantee periods available under the Generations
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 Generations Contracts) of each month falling
within the applicable calendar year. The foregoing fee will be paid by
Adviser to USL on a calendar year basis, and in this regard, payment of such
fee will be made by Adviser to USL within thirty (30) days following the end
of each calendar year.
<PAGE>
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by Adviser to USL relate solely to
the performance by USL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by USL to
USL policy or contract owners, or to any separate account organized by USL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
9. USL 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 USL of the Administrative
Services under this Agreement.
10. This Agreement may be terminated without penalty at any time by USL 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 USL to preserve any records (in any medium
or format) relating to this Agreement beyond the time periods otherwise
required by the laws to which USL or the Funds are subject provided that
such records shall be offered to the Funds in the event USL 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 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 USL 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 as of the date of
such termination, for so long as such amounts are held in the Master Account
and USL continues to provide the Administrative Services with respect to
such amounts in conformity with this Agreement. This Agreement, or any
provision hereof, shall survive termination to the extent necessary for each
party to perform its obligations with respect to amounts for which a fee
continues to be due subsequent to such termination.
12. USL 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 USL, acting in its capacity described herein, shall at no time be
acting as an agent for Adviser, Underwriter or any of the Funds. USL
agrees, and agrees to cause its agents, not to make 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 USL;
3
<PAGE>
in the then current prospectus for a variable annuity contract or variable
life insurance policy issued by USL or then current sales literature with
respect to such variable annuity contract or variable life insurance policy,
approved by 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 Schedule One, constitutes the entire
agreement between the parties with respect to the matters dealt with herein
and supersedes any previous agreements and documents with respect to such
matters. The parties agree that Schedule One may be replaced from time to
time with a new Schedule One to accurately reflect any changes in the Funds
available as investment vehicles under the Participation Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By: /s/ LARRY M. ROBINSON
----------------------------------
Authorized Signatory
Larry M. Robinson
---------------------------------------
Vice President - Variable Products - Marketing
VAN KAMPEN ASSET MANAGEMENT INC.
By: /s/ DENNIS J. MCDONNELL
-------------------------------
Dennis J. McDonnell
President
4
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S):
- - ----------------------- ------------
Van Kampen Life Investment Trust 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
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, USL 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. USL 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 USL 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 USL 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.
6
<PAGE>
EXHIBIT 8(c)
<PAGE>
AGREEMENT
THIS AGREEMENT ("Agreement") made as of December 1, 1998, is by and among MORGAN
STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC., a Delaware corporation ("MSAM"),
MILLER ANDERSON & SHERRERD, LLP, a Pennsylvania limited partnership ("MAS")
(each of MSDWIM and MAS are referred to herein as an "Adviser" and collectively
as, the "Advisers") and UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW
YORK, a New York corporation ("USL").
W I T N E S S E T H:
WHEREAS, the investment company identified on Schedule One hereto ("Schedule
One," as the same may be amended from time to time), is registered as an open-
end management investment company under the Investment Company Act of 1940, as
amended (the "Act") (the "Investment Company" - the portfolios of the Investment
Company identified in Schedule One are referred to herein individually as a
"Fund" and collectively as the "Funds"); and
WHEREAS, each of the Funds is available as the investment vehicle for certain
separate accounts of USL, established for variable life insurance policies
and/or variable annuity contracts offered by USL (individually or collectively,
the "Separate Account"); and
WHEREAS, USL has entered into a participation agreement dated January 24, 1997
among USL, the Investment Company and the Advisers (the "Participation
Agreement," as the same may be amended from time to time); and
WHEREAS, the Advisers provide, among other things, investment advisory and/or
administrative services to the Investment Company; and
WHEREAS, the Advisers desire USL to provide the administrative services
specified in the attached Exhibit A ("Administrative Services"), in connection
with the ownership of interests of the Separate Account, which holds shares of
the Funds, and USL is willing and able to provide such Administrative Services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. USL agrees to perform the Administrative Services specified in Exhibit A
hereto for the benefit of variable annuity and variable life insurance
contracts that participate in the Separate Account.
2. USL may, with the consent of an Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of USL required by this Agreement, provided that
USL shall be fully responsible for the acts and omissions of such other
parties.
1
<PAGE>
3. USL hereby agrees to notify the Advisers promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
4. USL hereby represents and covenants that it does not, and will not, own or
hold or control with power to vote any shares of the Funds which are
registered in the name of USL or the name of its nominee and which are
maintained under USL variable annuity or variable life insurance accounts.
5. The provisions of the Agreement shall in no way limit the authority of the
Advisers or the Investment Company to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of the Funds and/or sale of shares of the Funds.
6. In consideration of the Administrative Services provided by USL with respect
to the variable life insurance and variable annuity contracts identified on
Schedule Two attached hereto, each Adviser agrees to pay USL with respect to
the Funds for which it serves as adviser (as indicated on Schedule One), a
monthly fee at an annual rate which shall equal .15% of the net asset value
of the shares of each such Fund held in the Separate Account. The foregoing
fee will be paid by the applicable Adviser to USL on a calendar quarter
basis; payment of such fee will be made by the appropriate Adviser to USL
within thirty (30) days following the end of each calendar quarter. The
determination of applicable assets shall be made by averaging the assets of
the applicable portfolios of the Fund maintained in the Master Account for
the Shareholders as of the last Business Day (as defined in the Participation
Agreement) of each month falling within the applicable calendar quarter.
Notwithstanding anything in this Agreement or the Participation Agreement
appearing to the contrary, the payments by an Adviser to USL relate solely to
the performance by USL of the Administrative Services described herein only,
and do not constitute payment in any manner for services provided by USL to
USL policy or contract owners, or to any separate account organized by USL,
or for any investment advisory services, or for costs associated with the
distribution of any variable annuity or variable life insurance contracts.
7. USL shall indemnify and hold harmless the Investment Company, the Funds, and
the Advisers and each of their respective officers, Directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including, without
limitation, reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance by USL of the Administrative
Services under this Agreement.
8. This Agreement may be terminated without penalty at any time by USL or by an
Adviser as to one or more of the Funds, upon one hundred and eighty days
(180) written notice to the other party. Notwithstanding the foregoing, the
provisions of paragraphs 7 and 9 of this Agreement, shall continue in full
force and effect after termination of this Agreement.
9. After the date of any termination of this Agreement in accordance with
paragraph 8 of this Agreement, no fee will be due with respect to any shares
of the Funds first placed in the Separate
2
<PAGE>
Account after the date of such termination. However, notwithstanding any
such termination, the Advisers will remain obligated to pay USL the fee
specified in paragraph 6 of this Agreement, with respect to the net asset
value of shares of the Funds maintained in the Separate Account as of the
date of such termination, for so long as such amounts are held in the
Separate Account and USL continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
10. USL understands and agrees that the obligations of the Advisers under this
Agreement are not binding upon the Investment Company, upon any of its Board
members or upon any shareholder of any of the Funds.
11. It is understood and agreed that in performing the services under this
Agreement USL, acting in its capacity described herein, shall at no time be
acting as an agent for an Adviser or the Investment Company. USL agrees, and
agrees to cause its agents, not to make any representations concerning the
Investment Company or the Funds except those contained in the Investment
Company's then-current prospectus; in current sales literature furnished by
the Investment Company or an Adviser to USL; in the then current prospectus
for a variable annuity contract or variable life insurance policy issued by
USL or then current sales literature with respect to such variable annuity
contract or variable life insurance policy, approved by an Adviser.
12. This Agreement, including the provisions set forth herein in paragraph 6,
may only be amended pursuant to a written instrument signed by the party to
be charged. This Agreement may not be assigned by a party hereto, by
operation of law or otherwise, without the prior written consent of the
other party.
13. This Agreement shall be governed by the laws of the State of Texas, without
giving effect to the principles of conflicts of law of such jurisdiction.
14. This Agreement, including Exhibit A and Schedules One and Two, constitutes
the entire agreement between the parties with respect to the matters dealt
with herein and supersedes any previous agreements and documents with
respect to such matters. The parties agree that Schedule One may be
replaced from time to time with a new Schedule One to accurately reflect any
changes in the Investment Company or Funds available as investment vehicles
under the Participation Agreement.
3
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement
as of the date first above written.
UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By: /s/ DON M. WARD
---------------------------------
Authorized Signatory
Don M. Ward
---------------------------------
Print or Type Name
MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
By: /s/ MICHAEL F. KLEIN
----------------------------------
Authorized Signatory
Michael F. Klein
----------------------------------
Print or Type Name
MILLER ANDERSON & SHERRERD, LLP
By: /s/ MARNA C. WHITTINGTON
----------------------------------
Authorized Signatory
Marna C. Whittington
----------------------------------
Print or Type Name
4
<PAGE>
SCHEDULE ONE
INVESTMENT COMPANY NAME: FUND NAME(S) AND ADVISER TO FUND:
- - ------------------------------------- --------------------------------------
Morgan Stanley Universal Funds, Inc. Adviser: Morgan Stanley Dean Witter
Investment Management Inc.
Funds:
Equity Growth
International Magnum
Emerging Markets Equity
Global Equity
Adviser:
Miller Anderson & Sherrerd, LLP
Funds:
Fixed Income
High Yield
Mid Cap Value
Value
5
<PAGE>
SCHEDULE TWO
VARIABLE LIFE INSURANCE AND
ANNUITY CONTRACTS COVERED UNDER
AGREEMENT (as of January 1, 1999)
The United States Life Insurance
Company In the City of New York Contract Form No.
-----------------
98033
Separate Account: USL VA-R
Established: August 8, 1998
6
<PAGE>
EXHIBIT A
(As of January 1, 1999)
Pursuant to the Agreement by and among the parties hereto, USL shall perform the
following Administrative Services:
1. Assist the Investment Company in communicating with variable life insurance
policy owners and variable annuity contract owners and provide them with
information regarding the Funds, including (a) information on investment
objectives, policies and procedures, (b) information on Fund performance and
(c) answers to questions regarding Fund investments.
2. Create and utilize computer programs and other information systems that
assist the Investment Company in communicating Fund information to variable
life insurance policy owners and variable annuity contract owners.
3. Assist the Investment Company in educating USL's home office and field
personnel on the management and operation of the Funds.
4. Transmit to variable life insurance policy owners and variable annuity
contract owners proxy materials and reports and other information received by
USL from the Investment Company and required to be sent to policy and
contract owners under the federal securities laws and, upon request of the
Investment Company and transmit communications deemed by the Investment
Company, through its Board of Directors, to be necessary and proper for
receipt by all policy and contract owners participating in the Separate
Account.
5. Provide to the Investment Company such periodic reports as shall reasonably
be necessary to enable Investment Company and its Advisers to comply with
applicable securities and insurance laws.
7
<PAGE>
EXHIBIT 9
<PAGE>
American
General
LIFE COMPANIES
2727 Allen Parkway (WT3-02), Houston, Texas 77019
Pauletta P. Cohn
ASSOCIATE GENERAL COUNSEL
Direct Line (713) 831-8471
FAX (713) 831-5492
E-mail: [email protected]
May 26, 1999
The United States Life Insurance Company
in the City of New York
125 Maiden Lane
New York, NY 10038
Dear Ladies and Gentlemen:
As Associate General Counsel of American General Life Companies, I have acted as
counsel to The United States Life Insurance Company in the City of New York (the
"Company") in connection with the filing of Pre-effective Amendment No. 1 to
Registration Statement on Form N-4, File Nos. 333-63673 and 811-09007
("Registration Statement") of Separate Account USL VA-R ("Separate Account USL
VA-R") of the Company with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended. The Registration Statement relates to a
proposed issuance of an indefinite number of units of interest in Separate
Account USL VA-R ("Units") funding Generations (certificate form No. 98033N)
flexible payment variable and fixed individual deferred annuity certificates
issued by the Company ("Certificates"). Net premiums received under the
Certificates are allocated by the Company to Separate Account USL VA-R to the
extent directed by owners of the Certificates. Net premiums under other
variable annuity contracts or certificates that may be issued by the Company may
also be allocated to Separate Account USL VA-R. The Certificates 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 Certificates 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 Certificates the
Registration Statement, as finally amended, will be effective.
<PAGE>
May 26, 1999
Page Two
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 New York.
2. Separate Account USL VA-R was duly established and is maintained by the
Company pursuant to the laws of the State of New York, under which income,
gains and losses, whether or not realized, from assets allocated to Separate
Account USL VA-R, are, in accordance with the Certificate, credited to or
charged against Separate Account USL VA-R without regard to other income,
gains or losses of the Company.
3. Assets allocated to Separate Account USL VA-R will be owned by the Company.
The Company is not a trustee with respect thereto. The Certificates provide
that the portion of the assets of Separate Account USL VA-R equal to the
reserves and other Certificate liabilities with respect to Separate Account
USL VA-R will not be chargeable with liabilities arising out of any other
business the Company may conduct. The Company reserves the right to transfer
assets of Separate Account USL VA-R in excess of such reserves and other
Certificate liabilities to the general account of the Company.
3. When issued and sold as described above, the Certificates (including any
Units duly credited thereunder) will be duly authorized and will constitute
validly issued and binding obligations of the Company in accordance with
their terms.
I am admitted to the bar in the State of Texas, and I do not express any opinion
as to the laws of any other jurisprudence.
This opinion is being furnished in accordance with the requirements of Item
601(b)(5), Regulation S-K of the 1933 Act and I hereby consent to the use of
this opinion as an exhibit to the Registration Statement.
Sincerely,
\s\ PAULETTA P. COHN
--------------------
<PAGE>
EXHIBIT 10
<PAGE>
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 April 23, 1999, as to The United
States Life Insurance Company in the City of New York, in Pre-Effective
Amendment No. 1 to the Registration Statement (Form N-4, Nos. 333-63673 and
811-09007) to The United States Life Insurance Company in the City of New York.
/s/ ERNST & YOUNG LLP
------------------------------
ERNST & YOUNG LLP
New York, New York
May 21, 1999
<PAGE>
EXHIBIT 13(a)
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
12/31/97 12/31/93 12/31/88
LIT DOMESTIC INCOME #125 12/31/98 12/31/98 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 9.780063 7.462719 5.752083
# OF UNITS PURCHASED 102.248830 133.999418 173.850064
END OF PERIOD UV 10.314029 10.314029 10.314029
END OF PERIOD VALUE 1,054.60 1,382.07 1,793.09
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.84 $4.76 $10.37
REDEEMABLE VALUE (after fees & CDSC) 993.75 1,341.31 1,782.73
PERCENT RETURN (HHAATR) -0.62% 6.05% 5.95%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 5.46% 6.69% 6.01%
- - -------------------------------------------------------------------------------------------------------------------------
07/03/95
LIT EMERGING GROWTH #126 12/31/98
365 1826 1277
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 7.942066 N/A 5.000000
# OF UNITS PURCHASED 125.911822 N/A 200.000000
END OF PERIOD UV 10.773237 N/A 10.773237
END OF PERIOD VALUE 1,356.48 0.00 2,154.65
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $1.09 $0.00 $4.53
REDEEMABLE VALUE (after fees & CDSC) 1,295.39 N/A 2,105.12
PERCENT RETURN (HHAATR) 29.54% N/A 23.73%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 35.65% N/A 24.55%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT ENTERPRISE #128 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 17.116676 8.449091 4.536221
# OF UNITS PURCHASED 58.422558 118.355927 220.447813
END OF PERIOD UV 21.09783 21.09783 21.09783
END OF PERIOD VALUE 1,232.59 2,497.05 4,650.97
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.99 $6.68 $18.65
REDEEMABLE VALUE (after fees & CDSC) 1,171.60 2,454.38 4,632.32
PERCENT RETURN (HHAATR) 17.16% 19.67% 16.57%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 23.26% 20.09% 16.62%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT GOVERNMENT #131 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 9.489946 8.028234 5.246769
# OF UNITS PURCHASED 105.374678 124.560395 190.593487
END OF PERIOD UV 10.162078 10.162078 10.162078
END OF PERIOD VALUE 1,070.83 1,265.79 1,936.83
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.86 $4.46 $12.16
REDEEMABLE VALUE (after fees & CDSC) 1,009.97 1,225.34 1,924.67
PERCENT RETURN (HHAATR) 1.00% 4.15% 6.77%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 7.08% 4.83% 6.83%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
12/23/96
LIT GROWTH AND INCOME #133 12/31/98
365 1826 738
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.090841 N/A 5.000000
# OF UNITS PURCHASED 164.180940 N/A 200.000000
END OF PERIOD UV 7.184112 N/A 7.184112
END OF PERIOD VALUE 1,179.49 N/A 1,436.82
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.94 $0.00 $2.14
REDEEMABLE VALUE (after fees & CDSC) 1,118.55 N/A 1,389.68
PERCENT RETURN (HHAATR) 11.86% N/A 17.69%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 17.95% N/A 19.65%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT MONEY MARKET #137 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.049846 7.058691 5.735668
# OF UNITS PURCHASED 124.225979 141.669327 174.347609
END OF PERIOD UV 8.337193 8.337193 8.337193
END OF PERIOD VALUE 1,035.70 1,181.12 1,453.57
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.83 $4.41 $10.11
REDEEMABLE VALUE (after fees & CDSC) 974.87 1,140.72 1,443.46
PERCENT RETURN (HHAATR) -2.51% 2.67% 3.74%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 3.57% 3.39% 3.81%
- - -------------------------------------------------------------------------------------------------------------------------
07/03/95
LIT MORGAN STANLEY REAL ESTATE SECURITIES #138 12/31/98
365 1826 1277
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.929881 N/A 5.000000
# OF UNITS PURCHASED 111.983575 N/A 200.000000
END OF PERIOD UV 7.782348 N/A 7.782348
END OF PERIOD VALUE 871.50 0.00 1,556.47
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.70 $0.00 $4.29
REDEEMABLE VALUE (after fees & CDSC) 810.80 N/A 1,507.18
PERCENT RETURN (HHAATR) -18.92% N/A 12.45%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -12.85% N/A 13.49%
- - -------------------------------------------------------------------------------------------------------------------------
11/03/97
LIT STRATEGIC STOCK #141 12/31/98
365 1826 423
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.113642 N/A 5.000000
# OF UNITS PURCHASED 195.555340 N/A 200.000000
END OF PERIOD UV 5.875314 N/A 5.875314
END OF PERIOD VALUE 1,148.95 0.00 1,175.06
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 0.00 54.00
LESS ANNUAL FEE ($) $0.92 $0.00 $1.07
REDEEMABLE VALUE (after fees & CDSC) 1,088.03 N/A 1,119.99
PERCENT RETURN (HHAATR) 8.80% N/A 10.28%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 14.89% N/A 14.95%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
10/01/96
MS EMERGING MARKETS EQUITY #127 12/31/98
365 1826 821
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 4.812679 N/A 5.000000
# OF UNITS PURCHASED 207.784479 N/A 200.000000
END OF PERIOD UV 3.596580 N/A 3.596580
END OF PERIOD VALUE 747.31 0.00 719.32
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.60 $0.00 $1.54
REDEEMABLE VALUE (after fees & CDSC) 686.72 N/A 672.78
PERCENT RETURN (HHAATR) -31.33% N/A -16.17%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -25.27% N/A -13.63%
- - -------------------------------------------------------------------------------------------------------------------------
03/03/97
MS ASIAN EQUITY PORTFOLIO #140 12/31/98
365 1826 668
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 2.789056 N/A 5.000000
# OF UNITS PURCHASED 358.544253 N/A 200.000000
END OF PERIOD UV 2.572850 N/A 2.572850
END OF PERIOD VALUE 922.48 0.00 514.57
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.74 $0.00 $0.78
REDEEMABLE VALUE (after fees & CDSC) 861.74 N/A 459.79
PERCENT RETURN (HHAATR) -13.83% N/A -34.61%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -7.75% N/A -30.46%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS EQUITY GROWTH PORTFOLIO #132 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.554457 N/A 5.000000
# OF UNITS PURCHASED 152.567940 N/A 200.000000
END OF PERIOD UV 7.713238 N/A 7.713238
END OF PERIOD VALUE 1,176.79 0.00 1,542.65
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.94 $0.00 $2.28
REDEEMABLE VALUE (after fees & CDSC) 1,115.85 N/A 1,486.37
PERCENT RETURN (HHAATR) 11.59% N/A 22.00%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 17.68% N/A 24.30%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS GLOBAL EQUITY PORTFOLIO #130 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.917550 N/A 5.000000
# OF UNITS PURCHASED 168.988855 N/A 200.000000
END OF PERIOD UV 6.621460 N/A 6.621460
END OF PERIOD VALUE 1,118.95 0.00 1,324.29
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.90 $0.00 $2.00
REDEEMABLE VALUE (after fees & CDSC) 1,058.06 N/A 1,268.29
PERCENT RETURN (HHAATR) 5.81% N/A 12.66%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 11.90% N/A 15.13%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
01/02/97
MS INTERNATIONAL MAGNUM PORTFOLIO #135 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.288281 N/A 5.000000
# OF UNITS PURCHASED 189.097365 N/A 200.000000
END OF PERIOD UV 5.682435 N/A 5.682435
END OF PERIOD VALUE 1,074.53 0.00 1,136.49
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.86 $0.00 $1.75
REDEEMABLE VALUE (after fees & CDSC) 1,013.67 N/A 1,080.74
PERCENT RETURN (HHAATR) 1.37% N/A 3.97%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 7.45% N/A 6.63%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS FIXED INCOME PORTFOLIO #129 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.420517 N/A 5.000000
# OF UNITS PURCHASED 184.484248 N/A 200.000000
END OF PERIOD UV 5.767140 N/A 5.767140
END OF PERIOD VALUE 1,063.95 0.00 1,153.43
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.85 $0.00 $1.79
REDEEMABLE VALUE (after fees & CDSC) 1,003.10 N/A 1,097.64
PERCENT RETURN (HHAATR) 0.31% N/A 4.79%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 6.39% N/A 7.42%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS HIGH YIELD PORTFOLIO #134 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.597850 N/A 5.000000
# OF UNITS PURCHASED 178.640014 N/A 200.000000
END OF PERIOD UV 5.785041 N/A 5.785041
END OF PERIOD VALUE 1,033.44 0.00 1,157.01
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.83 $0.00 $1.82
REDEEMABLE VALUE (after fees & CDSC) 972.61 N/A 1,101.19
PERCENT RETURN (HHAATR) -2.74% N/A 4.96%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 3.34% N/A 7.59%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS MID CAP VALUE PORTFOLIO #136 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.949165 N/A 5.000000
# OF UNITS PURCHASED 143.902181 N/A 200.000000
END OF PERIOD UV 7.942056 N/A 7.942056
END OF PERIOD VALUE 1,142.88 0.00 1,588.41
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.91 $0.00 $2.38
REDEEMABLE VALUE (after fees & CDSC) 1,081.96 N/A 1,532.03
PERCENT RETURN (HHAATR) 8.20% N/A 23.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 14.29% N/A 26.13%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
01/02/97
MS VALUE PORTFOLIO #139 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.965428 N/A 5.000000
# OF UNITS PURCHASED 167.632566 N/A 200.000000
END OF PERIOD UV 5.756937 N/A 5.756937
END OF PERIOD VALUE 965.05 0.00 1,151.39
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.77 $0.00 $1.87
REDEEMABLE VALUE (after fees & CDSC) 904.28 N/A 1,095.52
PERCENT RETURN (HHAATR) -9.57% N/A 4.68%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -3.49% N/A 7.33%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
EXHIBIT 13(b)
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
12/31/97 12/31/93 12/31/88
LIT DOMESTIC INCOME #125 12/31/98 12/31/98 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 9.780063 7.462719 5.752083
# OF UNITS PURCHASED 102.248830 133.999418 173.850064
END OF PERIOD UV 10.314029 10.314029 10.314029
END OF PERIOD VALUE 1,054.60 1,382.07 1,793.09
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.84 $4.76 $10.37
REDEEMABLE VALUE (after fees & CDSC) 993.75 1,341.31 1,782.73
PERCENT RETURN (HHAATR) -0.62% 6.05% 5.95%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 5.46% 6.69% 6.01%
- - -------------------------------------------------------------------------------------------------------------------------
07/03/95
LIT EMERGING GROWTH #126 12/31/98
365 1826 1277
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 7.942066 N/A 5.000000
# OF UNITS PURCHASED 125.911822 N/A 200.000000
END OF PERIOD UV 10.773237 N/A 10.773237
END OF PERIOD VALUE 1,356.48 0.00 2,154.65
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $1.09 $0.00 $4.53
REDEEMABLE VALUE (after fees & CDSC) 1,295.39 N/A 2,105.12
PERCENT RETURN (HHAATR) 29.54% N/A 23.73%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 35.65% N/A 24.55%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT ENTERPRISE #128 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 17.116676 8.449091 4.536221
# OF UNITS PURCHASED 58.422558 118.355927 220.447813
END OF PERIOD UV 21.09783 21.09783 21.09783
END OF PERIOD VALUE 1,232.59 2,497.05 4,650.97
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.99 $6.68 $18.65
REDEEMABLE VALUE (after fees & CDSC) 1,171.60 2,454.38 4,632.32
PERCENT RETURN (HHAATR) 17.16% 19.67% 16.57%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 23.26% 20.09% 16.62%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT GOVERNMENT #131 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 9.489946 8.028234 5.246769
# OF UNITS PURCHASED 105.374678 124.560395 190.593487
END OF PERIOD UV 10.162078 10.162078 10.162078
END OF PERIOD VALUE 1,070.83 1,265.79 1,936.83
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.86 $4.46 $12.16
REDEEMABLE VALUE (after fees & CDSC) 1,009.97 1,225.34 1,924.67
PERCENT RETURN (HHAATR) 1.00% 4.15% 6.77%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 7.08% 4.83% 6.83%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
12/23/96
LIT GROWTH AND INCOME #133 12/31/98
365 1826 738
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.090841 N/A 5.000000
# OF UNITS PURCHASED 164.180940 N/A 200.000000
END OF PERIOD UV 7.184112 N/A 7.184112
END OF PERIOD VALUE 1,179.49 N/A 1,436.82
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.94 $0.00 $2.14
REDEEMABLE VALUE (after fees & CDSC) 1,118.55 N/A 1,389.68
PERCENT RETURN (HHAATR) 11.86% N/A 17.69%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 17.95% N/A 19.65%
- - -------------------------------------------------------------------------------------------------------------------------
12/31/88
LIT MONEY MARKET #137 12/31/98
365 1826 3652
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.049846 7.058691 5.735668
# OF UNITS PURCHASED 124.225979 141.669327 174.347609
END OF PERIOD UV 8.337193 8.337193 8.337193
END OF PERIOD VALUE 1,035.70 1,181.12 1,453.57
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 0.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 0.00
LESS ANNUAL FEE ($) $0.83 $4.41 $10.11
REDEEMABLE VALUE (after fees & CDSC) 974.87 1,140.72 1,443.46
PERCENT RETURN (HHAATR) -2.51% 2.67% 3.74%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 3.57% 3.39% 3.81%
- - -------------------------------------------------------------------------------------------------------------------------
07/03/95
LIT MORGAN STANLEY REAL ESTATE SECURITIES #138 12/31/98
365 1826 1277
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 8.929881 N/A 5.000000
# OF UNITS PURCHASED 111.983575 N/A 200.000000
END OF PERIOD UV 7.782348 N/A 7.782348
END OF PERIOD VALUE 871.50 0.00 1,556.47
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.70 $0.00 $4.29
REDEEMABLE VALUE (after fees & CDSC) 810.80 N/A 1,507.18
PERCENT RETURN (HHAATR) -18.92% N/A 12.45%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -12.85% N/A 13.49%
- - -------------------------------------------------------------------------------------------------------------------------
11/03/97
LIT STRATEGIC STOCK #141 12/31/98
365 1826 423
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.113642 N/A 5.000000
# OF UNITS PURCHASED 195.555340 N/A 200.000000
END OF PERIOD UV 5.875314 N/A 5.875314
END OF PERIOD VALUE 1,148.95 0.00 1,175.06
SURRENDER CHARGE PERCENTAGE 6.0% N/A 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 0.00 54.00
LESS ANNUAL FEE ($) $0.92 $0.00 $1.07
REDEEMABLE VALUE (after fees & CDSC) 1,088.03 N/A 1,119.99
PERCENT RETURN (HHAATR) 8.80% N/A 10.28%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 14.89% N/A 14.95%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
10/01/96
MS EMERGING MARKETS EQUITY #127 12/31/98
365 1826 821
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 4.812679 N/A 5.000000
# OF UNITS PURCHASED 207.784479 N/A 200.000000
END OF PERIOD UV 3.596580 N/A 3.596580
END OF PERIOD VALUE 747.31 0.00 719.32
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 5.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 45.00
LESS ANNUAL FEE ($) $0.60 $0.00 $1.54
REDEEMABLE VALUE (after fees & CDSC) 686.72 N/A 672.78
PERCENT RETURN (HHAATR) -31.33% N/A -16.17%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -25.27% N/A -13.63%
- - -------------------------------------------------------------------------------------------------------------------------
03/03/97
MS ASIAN EQUITY PORTFOLIO #140 12/31/98
365 1826 668
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 2.789056 N/A 5.000000
# OF UNITS PURCHASED 358.544253 N/A 200.000000
END OF PERIOD UV 2.572850 N/A 2.572850
END OF PERIOD VALUE 922.48 0.00 514.57
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.74 $0.00 $0.78
REDEEMABLE VALUE (after fees & CDSC) 861.74 N/A 459.79
PERCENT RETURN (HHAATR) -13.83% N/A -34.61%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -7.75% N/A -30.46%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS EQUITY GROWTH PORTFOLIO #132 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.554457 N/A 5.000000
# OF UNITS PURCHASED 152.567940 N/A 200.000000
END OF PERIOD UV 7.713238 N/A 7.713238
END OF PERIOD VALUE 1,176.79 0.00 1,542.65
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.94 $0.00 $2.28
REDEEMABLE VALUE (after fees & CDSC) 1,115.85 N/A 1,486.37
PERCENT RETURN (HHAATR) 11.59% N/A 22.00%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 17.68% N/A 24.30%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS GLOBAL EQUITY PORTFOLIO #130 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.917550 N/A 5.000000
# OF UNITS PURCHASED 168.988855 N/A 200.000000
END OF PERIOD UV 6.621460 N/A 6.621460
END OF PERIOD VALUE 1,118.95 0.00 1,324.29
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.90 $0.00 $2.00
REDEEMABLE VALUE (after fees & CDSC) 1,058.06 N/A 1,268.29
PERCENT RETURN (HHAATR) 5.81% N/A 12.66%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 11.90% N/A 15.13%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
01/02/97
MS INTERNATIONAL MAGNUM PORTFOLIO #135 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.288281 N/A 5.000000
# OF UNITS PURCHASED 189.097365 N/A 200.000000
END OF PERIOD UV 5.682435 N/A 5.682435
END OF PERIOD VALUE 1,074.53 0.00 1,136.49
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.86 $0.00 $1.75
REDEEMABLE VALUE (after fees & CDSC) 1,013.67 N/A 1,080.74
PERCENT RETURN (HHAATR) 1.37% N/A 3.97%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 7.45% N/A 6.63%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS FIXED INCOME PORTFOLIO #129 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.420517 N/A 5.000000
# OF UNITS PURCHASED 184.484248 N/A 200.000000
END OF PERIOD UV 5.767140 N/A 5.767140
END OF PERIOD VALUE 1,063.95 0.00 1,153.43
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.85 $0.00 $1.79
REDEEMABLE VALUE (after fees & CDSC) 1,003.10 N/A 1,097.64
PERCENT RETURN (HHAATR) 0.31% N/A 4.79%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 6.39% N/A 7.42%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS HIGH YIELD PORTFOLIO #134 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.597850 N/A 5.000000
# OF UNITS PURCHASED 178.640014 N/A 200.000000
END OF PERIOD UV 5.785041 N/A 5.785041
END OF PERIOD VALUE 1,033.44 0.00 1,157.01
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.83 $0.00 $1.82
REDEEMABLE VALUE (after fees & CDSC) 972.61 N/A 1,101.19
PERCENT RETURN (HHAATR) -2.74% N/A 4.96%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 3.34% N/A 7.59%
- - -------------------------------------------------------------------------------------------------------------------------
01/02/97
MS MID CAP VALUE PORTFOLIO #136 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 6.949165 N/A 5.000000
# OF UNITS PURCHASED 143.902181 N/A 200.000000
END OF PERIOD UV 7.942056 N/A 7.942056
END OF PERIOD VALUE 1,142.88 0.00 1,588.41
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.91 $0.00 $2.38
REDEEMABLE VALUE (after fees & CDSC) 1,081.96 N/A 1,532.03
PERCENT RETURN (HHAATR) 8.20% N/A 23.87%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) 14.29% N/A 26.13%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(a)&13(b)
USL GENERATIONS
HYPOTHETICAL HISTORICAL AVERAGE ANNUAL TOTAL RETURNS AAT RETURN
AND HYPOTHETICAL HISTORICAL TOTAL RETURNS 10 YEAR
Fees based on avg $40,000 account 1 YEAR 5 YEAR OR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR INCEPTION
=========================================================================================================================
<S> <C> <C> <C>
01/02/97
MS VALUE PORTFOLIO #139 12/31/98
365 1826 728
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 5.965428 N/A 5.000000
# OF UNITS PURCHASED 167.632566 N/A 200.000000
END OF PERIOD UV 5.756937 N/A 5.756937
END OF PERIOD VALUE 965.05 0.00 1,151.39
SURRENDER CHARGE PERCENTAGE 6.0% 4.0% 6.0%
FREE 10% WITHDRAWAL 0.00 100.00 100.00
LESS SURRENDER CHARGES 60.00 36.00 54.00
LESS ANNUAL FEE ($) $0.77 $0.00 $1.87
REDEEMABLE VALUE (after fees & CDSC) 904.28 N/A 1,095.52
PERCENT RETURN (HHAATR) -9.57% N/A 4.68%
PERCENT RETURN - NO FEES & NOT SURRENDERED (HHTR) -3.49% N/A 7.33%
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
EXHIBIT 13(c)
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(c)
USL GENERATIONS TOTAL
HYPOTHETICAL HISTORICAL RETURN
CUMULATIVE TOTAL RETURNS 1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================================
<S> <C> <C> <C>
LIT DOMESTIC INCOME #125 12/97 12/93 12/88
12/98 12/98 12/98
BEG OF PERIOD UV 9.780063 7.462719 5.752083
# OF UNITS PURCHASED 102.248830 133.999418 173.850064
END OF PERIOD UV 10.314029 10.314029 10.314029
END OF PERIOD VALUE 1,054.60 1,382.07 1,793.09
DIFFERENCE 54.60 382.07 793.09
PERCENT CHANGE (HHCTR) 5.46% 38.21% 79.31%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT EMERGING GROWTH #126 07/95
BEG OF PERIOD UV 7.942066 N/A 5.000000
# OF UNITS PURCHASED 125.911822 N/A 200.000000
END OF PERIOD UV 10.773237 N/A 10.773237
END OF PERIOD VALUE 1,356.48 N/A 2,154.65
DIFFERENCE 356.48 N/A 1,154.65
PERCENT CHANGE (HHCTR) 35.65% N/A 115.46%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT ENTERPRISE #128 12/88
BEG OF PERIOD UV 17.116676 8.449091 4.536221
# OF UNITS PURCHASED 58.422558 118.355927 220.447813
END OF PERIOD UV 21.09783 21.09783 21.09783
END OF PERIOD VALUE 1,232.59 2,497.05 4,650.97
DIFFERENCE 232.59 1,497.05 3,650.97
PERCENT CHANGE (HHCTR) 23.26% 149.71% 365.10%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT GOVERNMENT #131 12/88
BEG OF PERIOD UV 9.489946 8.028234 5.246769
# OF UNITS PURCHASED 105.374678 124.560395 190.593487
END OF PERIOD UV 10.162078 10.162078 10.162078
END OF PERIOD VALUE 1,070.83 1,265.79 1,936.83
DIFFERENCE 70.83 265.79 936.83
PERCENT CHANGE (HHCTR) 7.08% 26.58% 93.68%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT GROWTH AND INCOME #133 12/96
BEG OF PERIOD UV 6.090841 N/A 5.000000
# OF UNITS PURCHASED 164.180940 N/A 200.000000
END OF PERIOD UV 7.184112 N/A 7.184112
END OF PERIOD VALUE 1,179.49 N/A 1,436.82
DIFFERENCE 179.49 N/A 436.82
PERCENT CHANGE (HHCTR) 17.95% N/A 43.68%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(c)
USL GENERATIONS TOTAL
HYPOTHETICAL HISTORICAL RETURN
CUMULATIVE TOTAL RETURNS 1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================================
<S> <C> <C> <C>
LIT MONEY MARKET #137 12/88
BEG OF PERIOD UV 8.049846 7.058691 5.735668
# OF UNITS PURCHASED 124.225979 141.669327 174.347609
END OF PERIOD UV 8.337193 8.337193 8.337193
END OF PERIOD VALUE 1,035.70 1,181.12 1,453.57
DIFFERENCE 35.70 181.12 453.57
PERCENT CHANGE (HHCTR) 3.57% 18.11% 45.36%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT MORGAN STANLEY REAL ESTATE SECURITIES #138 07/95
BEG OF PERIOD UV 8.929881 N/A 5.000000
# OF UNITS PURCHASED 111.983575 N/A 200.000000
END OF PERIOD UV 7.782348 N/A 7.782348
END OF PERIOD VALUE 871.50 N/A 1,556.47
DIFFERENCE (128.50) N/A 556.47
PERCENT CHANGE (HHCTR) -12.85% N/A 55.65%
- - --------------------------------------------------------------------------------------------------------------------------------
LIT STRATEGIC STOCK #141 11/97
BEG OF PERIOD UV 5.113642 N/A 5.000000
# OF UNITS PURCHASED 195.555340 N/A 200.000000
END OF PERIOD UV 5.875314 N/A 5.875314
END OF PERIOD VALUE 1,148.95 N/A 1,175.06
DIFFERENCE 148.95 N/A 175.06
PERCENT CHANGE (HHCTR) 14.89% N/A 17.51%
- - --------------------------------------------------------------------------------------------------------------------------------
MS EMERGING MARKETS EQUITY #127 10/96
BEG OF PERIOD UV 4.812679 N/A 5.000000
# OF UNITS PURCHASED 207.784479 N/A 200.000000
END OF PERIOD UV 3.59658 N/A 3.59658
END OF PERIOD VALUE 747.31 N/A 719.32
DIFFERENCE (252.69) N/A (280.68)
PERCENT CHANGE (HHCTR) -25.27% N/A -28.07%
- - --------------------------------------------------------------------------------------------------------------------------------
MS ASIAN EQUITY PORTFOLIO #140 03/97
BEG OF PERIOD UV 2.789056 N/A 5.000000
# OF UNITS PURCHASED 358.544253 N/A 200.000000
END OF PERIOD UV 2.57285 N/A 2.57285
END OF PERIOD VALUE 922.48 N/A 514.57
DIFFERENCE (77.52) N/A (485.43)
PERCENT CHANGE (HHCTR) -7.75% N/A -48.54%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(c)
USL GENERATIONS TOTAL
HYPOTHETICAL HISTORICAL RETURN
CUMULATIVE TOTAL RETURNS 1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================================
<S> <C> <C> <C>
MS EQUITY GROWTH PORTFOLIO #132 01/97
BEG OF PERIOD UV 6.554457 N/A 5.000000
# OF UNITS PURCHASED 152.567940 N/A 200.000000
END OF PERIOD UV 7.713238 N/A 7.713238
END OF PERIOD VALUE 1,176.79 N/A 1,542.65
DIFFERENCE 176.79 N/A 542.65
PERCENT CHANGE (HHCTR) 17.68% N/A 54.26%
- - --------------------------------------------------------------------------------------------------------------------------------
MS GLOBAL EQUITY PORTFOLIO #130 01/97
BEG OF PERIOD UV 5.91755 N/A 5.000000
# OF UNITS PURCHASED 168.988855 N/A 200.000000
END OF PERIOD UV 6.62146 N/A 6.62146
END OF PERIOD VALUE 1,118.95 N/A 1,324.29
DIFFERENCE 118.95 N/A 324.29
PERCENT CHANGE (HHCTR) 11.90% N/A 32.43%
- - --------------------------------------------------------------------------------------------------------------------------------
MS INTERNATIONAL MAGNUM PORTFOLIO #135 01/97
BEG OF PERIOD UV 5.288281 N/A 5.000000
# OF UNITS PURCHASED 189.097365 N/A 200.000000
END OF PERIOD UV 5.682435 N/A 5.682435
END OF PERIOD VALUE 1,074.53 N/A 1,136.49
DIFFERENCE 74.53 N/A 136.49
PERCENT CHANGE (HHCTR) 7.45% N/A 13.65%
- - --------------------------------------------------------------------------------------------------------------------------------
MS FIXED INCOME PORTFOLIO #129 01/97
BEG OF PERIOD UV 5.420517 N/A 5.000000
# OF UNITS PURCHASED 184.484248 N/A 200.000000
END OF PERIOD UV 5.76714 N/A 5.76714
END OF PERIOD VALUE 1,063.95 N/A 1,153.43
DIFFERENCE 63.95 N/A 153.43
PERCENT CHANGE (HHCTR) 6.39% N/A 15.34%
- - --------------------------------------------------------------------------------------------------------------------------------
MS HIGH YIELD PORTFOLIO #134 01/97
BEG OF PERIOD UV 5.59785 N/A 5.000000
# OF UNITS PURCHASED 178.640014 N/A 200.000000
END OF PERIOD UV 5.785041 N/A 5.785041
END OF PERIOD VALUE 1,033.44 N/A 1,157.01
DIFFERENCE 33.44 N/A 157.01
PERCENT CHANGE (HHCTR) 3.34% N/A 15.70%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
<TABLE>
<CAPTION>
12/31/98 SEC FILING, PART C, ITEM 24, (13)(c)
USL GENERATIONS TOTAL
HYPOTHETICAL HISTORICAL RETURN
CUMULATIVE TOTAL RETURNS 1 YEAR 5 YEAR 10 YEAR
TOTAL TOTAL OR SINCE
USING HYPOTHETICAL UNIT VALUES RETURN RETURN INCEPTION
================================================================================================================================
<S> <C> <C> <C>
MS MID CAP VALUE PORTFOLIO #136 01/97
BEG OF PERIOD UV 6.949165 N/A 5.000000
# OF UNITS PURCHASED 143.902181 N/A 200.000000
END OF PERIOD UV 7.942056 N/A 7.942056
END OF PERIOD VALUE 1,142.88 N/A 1,588.41
DIFFERENCE 142.88 N/A 588.41
PERCENT CHANGE (HHCTR) 14.29% N/A 58.84%
- - --------------------------------------------------------------------------------------------------------------------------------
MS VALUE PORTFOLIO #139 01/97
BEG OF PERIOD UV 5.965428 N/A 5.000000
# OF UNITS PURCHASED 167.632566 N/A 200.000000
END OF PERIOD UV 5.756937 N/A 5.756937
END OF PERIOD VALUE 965.05 N/A 1,151.39
DIFFERENCE (34.95) N/A 151.39
PERCENT CHANGE (HHCTR) -3.49% N/A 15.14%
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
05/18/99
<PAGE>
EXHIBIT 13(d)
<PAGE>
USLIFE GENERATIONS VA
SEC FILING, PART C, ITEM 24, (13)(d)
HYPOTHETICAL HISTORICAL 30 DAY YIELDS FOR PERIOD ENDING DECEMBER 31, 1998
LIT DOMESTIC INCOME
- - --------------------------------------
(Based on Hypothetical Fund Data)
-1.11 yield
260.03 Dividends Paid
21.67 1/12 OF ANNUAL DIVIDENDS PAID
1,405.84 Expenses
117.15 1/12 OF ANNUAL EXPENSES
10,000.0000 Beginning Units
10,000.0000 Ending Units
10.314029 Unit Value At End Of Period
2*(((21.67-117.15)/(((10,000+10,000)/2)*10.314029)+1).6-1)
LIT US GOVERNMENT
- - --------------------------------------
(Based on Hypothetical Fund Data)
-0.40 yield
967.17 Dividends Paid
80.60 1/12 OF ANNUAL DIVIDENDS PAID
1,377.66 Expenses
114.81 1/12 OF ANNUAL EXPENSES
10,000.0000 Beginning Units
10,000.0000 Ending Units
10.162078 Unit Value At End Of Period
2*(((80.60-114.81)/(((10,000+10,000)/2)*10.162078)+1).6-1)
LIT GROWTH AND INCOME FUND
- - ------------------------------------------------------
(Based on Hypothetical Fund Data)
-1.19 yield
78.67 Dividends Paid
6.56 1/12 OF ANNUAL DIVIDENDS PAID
932.35 Expenses
77.70 1/12 OF ANNUAL EXPENSES
10,000.0000 Beginning Units
10,000.0000 Ending Units
7.184112 Unit Value At End Of Period
2*(((6.56-77.70)/(((10,000+10,000)/2)*7.184112)+1).6-1)
05/18/99
<PAGE>
EXHIBIT 13(e)
<PAGE>
SEC FILING, PART C, ITEM 24, (13)(e) USLIFE Generations VA
HYPOTHETICAL HISTORICAL SEVEN DAY YIELD AND EFFECTIVE YIELD
LIT MONEY MARKET DIVISION YIELD FOR 1998
(Based on Hypothetical Fund Data)
<TABLE>
<CAPTION>
UV Dates
<S> <C> <C>
12/31/98 8.337193
12/30/98 8.336495 0.004922 total return for 7 days
--------
12/29/98 8.335781 8.337193 - 8.332271
12/28/98 8.335068 0.000591 base period return
--------
12/27/98 no unit value 0.004922 / 8.332271
12/26/98 no unit value
12/25/98 no unit value 3.08% yield for 7 day period
--------
12/24/98 8.332271 ending 12/31/98
((8.337193-8.332271)/8.8.332271)*365
3.13% effective yield
--------
((0.000591+1).(365/7))-1
</TABLE>
05/18/99
