Registration Nos. 333-32387
811-3050
As filed with the Commission on February 6, 1998
--------------------------------------
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. 19 X
----- -----
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
300 South State Street, P.O. Box 1456
Syracuse, NY 13201-1456
(Address of Depositor's Principal Executive Officers) (Zip Code)
(315) 471-1121
(Depositor's Telephone Number, including Area Code)
Sandra M. Smith, Esq.
Associate General Counsel and Secretary
American General Life Insurance Company of New York
300 South State Street, P.O. Box 1456
Syracuse, NY 13201-1456
(Name and Address of Agent for Service)
Copies of all communications and order to
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
Attention: Gary O. Cohen, Esq.
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement.
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>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
FORM N-4
<TABLE>
Cross Reference Sheet
Pursuant to Rule 495(a)
Under the Securities Act of 1933
PART A
Showing Location of Information in Prospectuses
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . Glossary
3. Synopsis or Highlights. . . . . . . . . . . . . . . . . . . . Synopsis of Certificate Provisions
4. Condensed Financial Information . . . . . . . . . . . . . . . Synopsis of Certificate Provisions -
Performance Information; Cover Page;
Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies . . . . . . . . . . . . . . AGNY; Separate Account E; The Series;
Cover Page
6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . Charges Under the Certificates; Long-Term
Care and Terminal Illness
7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . . . . . . . . . Synopsis of Certificate Provisions -
Communications to Us; Owner Account
Value; Transfer, Automatic Rebalancing,
Surrender and Partial Withdrawal of Owner
Account Value; Owners, Annuitants and
Beneficiaries; Assignments; Rights
Reserved by Us
</TABLE>
i
<PAGE>
<TABLE>
PART A
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
8. Annuity Period. . . . . . . . . . . . . . . . . . . . . . . . Annuity Period and Annuity Payment Options
9. Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . Death Proceeds
10. Purchases and Contract Value. . . . . . . . . . . . . . . . . Certificate Issuance and Purchase Payments;
Variable Account Value; Distribution Arrangements;
One-Time Reinvestment Privilege
11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . Transfer, Automatic Rebalancing, Surrender and
Partial Withdrawal of Owner Account Value; Annuity
Payment Options; Certificate Issuance and Purchase
Payments; Synopsis of Certificate Provisions -
Surrenders, Withdrawals and Cancellations; Payment
and Deferment
12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Income Tax Matters; Synopsis of Certificate
Provisions -Limitations Imposed by Retirement Plans
and Employers
13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Table of Contents of Statement
of Additional Information . . . . . . . . . . . . . . . . . . Contents of Statement of Additional Information
</TABLE>
ii
<PAGE>
<TABLE>
PART B
<CAPTION>
Showing Location of Information in Statement of Additional Information
<CAPTION>
Caption in
Form N-4 Statement of
Item No. Additional Information
-------- ----------------------
<S> <C>
15. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . Cover Page
17. General Information and
History . . . . . . . . . . . . . . . . . . . . . . . . . . . General Information; Regulation and Reserves
18. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Auditors; Services
19. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
20. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . Principal Underwriter
21. Calculation of Performance
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Data for the Divisions; Effect of Tax-
Deferred Accumulation
22. Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
23. Financial Statements. . . . . . . . . . . . . . . . . . . . . Financial Statements
<FN>
* All required information is included in Prospectus.
</FN>
</TABLE>
iii
<PAGE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
iv
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
GENERATIONS (TM)
COMBINATION FIXED AND VARIABLE ANNUITY CERTIFICATE
SUPPLEMENT DATED FEBRUARY ___, 1998
TO
PROSPECTUS DATED FEBRUARY ___, 1998
ENHANCED RATE--THE GUARANTEED INTEREST RATE FOR THE GUARANTEE PERIOD THAT IS
PRESENTLY AVAILABLE UNDER A SPECIAL AUTOMATIC TRANSFER PLAN, REFERRED TO ON
PAGE 21 OF THE PROSPECTUS, IS 1.00% GREATER THAN THE GUARANTEED INTEREST RATE
FOR A GUARANTEE PERIOD OF THE SAME DURATION THAT IS NOT AVAILABLE UNDER A
SPECIAL AUTOMATIC TRANSFER PLAN.
<PAGE>
GENERATIONS (TM)
COMBINATION FIXED AND VARIABLE DEFERRED ANNUITY CERTIFICATES
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
ADMINISTRATIVE CENTER
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-281-8289; (315) 471-1121
American General Life Insurance Company of New York ("AGNY") is offering,
under a master group annuity contract, the flexible payment deferred
individual annuity certificates (the "Certificates") described in this
Prospectus.
You may use AGNY's Separate Account E for a variable investment return under
the Certificates based on one or more of the following mutual fund series of
the Van Kampen American Capital Life Investment Trust ("Trust") - the Domestic
Income Portfolio, Emerging Growth Portfolio, the Enterprise Portfolio, the
Government Portfolio, the Growth and Income Portfolio, the Money Market
Portfolio, the Morgan Stanley Real Estate Securities Portfolio, and the
Strategic Stock Portfolio; and one or more of the following mutual fund series
of the Morgan Stanley Universal Funds, Inc. ("Fund") - the Asian Equity
Portfolio, the Emerging Markets Equity Portfolio, the Equity Growth Portfolio
(formerly the Growth Portfolio), the Global Equity Portfolio, the
International Magnum Portfolio, the Fixed Income Portfolio, the High Yield
Portfolio, the Mid Cap Value Portfolio and the Value Portfolio.
You may also use AGNY's guaranteed interest accumulation option. This option
currently has one Guarantee Period, with a guaranteed interest rate.
This Prospectus is designed to provide information about the Certificates that
you should know before investing. Please read it carefully and keep it for
future reference. Information about certain aspects of the Certificates, in
addition to that found in this Prospectus, has been filed with the Securities
and Exchange Commission in the Statement of Additional Information (the
"Statement"). The Statement, dated February __, 1998, is incorporated by
reference into this Prospectus. The "Table of Contents" of the Statement
appears at page 40 of this Prospectus. You may obtain a free copy of the
Statement upon written or oral request to AGNY's Administrative Center, which
is located at 2727-A Allen Parkway, Houston, Texas 77019-2191. The telephone
number is 1-800-281-8289.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED
STATEMENT (OR ANY SALES LITERATURE APPROVED BY AGNY) IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE
CERTIFICATES ARE NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD
BE UNLAWFUL THEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT PROSPECTUSES OF THE
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST AND THE MORGAN STANLEY
UNIVERSAL FUNDS, INC.
PROSPECTUS DATED FEBRUARY __, 1998
<PAGE>
<TABLE>
CONTENTS
<S> <C>
Glossary.................................................................. 4
Fee Table................................................................. 6
Synopsis of Certificate Provisions........................................ 9
Minimum Investment Requirements......................................... 9
Purchase Payment Accumulation........................................... 9
Fixed and Variable Annuity Payments..................................... 10
Changes in Allocations Among Divisions and Guarantee Periods............ 10
Surrenders, Withdrawals and Cancellations............................... 10
Death Proceeds.......................................................... 11
Limitations Imposed by Retirement Plans and Employers................... 11
Communications to Us.................................................... 11
Performance Information................................................. 11
Financial Ratings....................................................... 12
Other Information....................................................... 13
Financial Information..................................................... 13
AGNY...................................................................... 13
Separate Account E........................................................ 13
The Series ............................................................... 14
Voting Privileges....................................................... 16
The Fixed Account......................................................... 16
Certificate Issuance and Purchase Payments................................ 18
Owner Account Value....................................................... 19
Variable Account Value.................................................. 19
Fixed Account Value..................................................... 20
Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner Account Value...................................................... 20
Transfers............................................................... 20
Automatic Rebalancing................................................... 21
Surrenders and Partial Withdrawals...................................... 21
Annuity Period and Annuity Payment Options................................ 22
Annuity Commencement Date............................................... 22
Application of Owner Account Value...................................... 23
Fixed and Variable Annuity Payments..................................... 23
Annuity Payment Options................................................. 23
Transfers............................................................... 26
Death Proceeds............................................................ 26
Death Proceeds Prior to the Annuity Commencement Date................... 26
Death Proceeds After the Annuity Commencement Date...................... 27
Proof of Death.......................................................... 28
Charges Under the Certificates ........................................... 28
Premium Taxes........................................................... 28
Surrender Charge........................................................ 28
Transfer Charges........................................................ 30
Annual Certificate Fee.................................................. 30
2
<PAGE>
Charge to Separate Account E............................................ 30
Miscellaneous........................................................... 31
Systematic Withdrawal Plan ............................................. 31
One-Time Reinvestment Privilege......................................... 31
Reduction in Surrender Charges and Administrative Charges............... 31
Other Aspects of the Certificates ........................................ 31
Owners, Annuitants and Beneficiaries; Assignments....................... 32
Reports................................................................. 32
Rights Reserved by Us................................................... 32
Payment and Deferment................................................... 33
Federal Income Tax Matters................................................ 33
General................................................................. 33
Non-Qualified Certificates ............................................. 34
Individual Retirement Annuities ("IRAs")................................ 35
Roth IRAs............................................................... 36
Simplified Employee Pension Plans....................................... 37
Simple Retirement Accounts.............................................. 37
Other Qualified Plans................................................... 37
Private Employer Unfunded Deferred Compensation Plans................... 38
Federal Income Tax Withholding and Reporting............................ 38
Taxes Payable by AGNY and Separate Account E............................ 39
Distribution Arrangements................................................. 39
Legal Matters............................................................. 40
Other Information on File................................................. 40
Contents of Statement of Additional Information........................... 40
</TABLE>
3
<PAGE>
GLOSSARY
WE, OUR AND US - American General Life Insurance Company of New York ("AGNY").
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 would generally be the Owner of a Certificate.
ACCOUNT VALUE - the sum of your Fixed Account Value and Variable Account Value
after deduction of any fees.
ACCUMULATION UNIT - a measuring unit used in calculating your interest in a
Division of Separate Account E prior to the Annuity Commencement Date.
ADMINISTRATIVE CENTER - our annuity service center to which all purchase
payments, requests, directions and other communications should be directed.
Our Administrative Center is located at 2727-A Allen Parkway, Houston, Texas
77019-2191.
ANNUITANT - the person named as such 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 a lump-sum distribution is elected instead.
ANNUITY PAYMENT OPTION - one of the several forms in which you can request us
to make annuity payments.
ANNUITY PERIOD - the period during which we make annuity payments under an
Annuity Payment Option.
ANNUITY UNIT - a measuring unit used in calculating 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.
CONTINGENT ANNUITANT - a person that you designate under a Non-Qualified
Certificate to become the Annuitant if the Annuitant dies before the Annuity
Commencement Date and the Contingent Annuitant survives the Annuitant.
CONTINGENT BENEFICIARY - a person that 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 survives at the time
such proceeds become payable.
DIVISION - one of the several different investment options into which Separate
Account E is divided. Each Division invests in shares of a series.
4
<PAGE>
FIXED ACCOUNT - the name of the investment alternative under which purchase
payments are allocated to AGNY's General Account.
FIXED ACCOUNT VALUE - the amount of your Account Value which is in 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 E.
GENERAL ACCOUNT - all assets of AGNY other than those in Separate Account E or
any other legally-segregated separate account established by AGNY.
GUARANTEED INTEREST RATE - the rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD - the period for which a Guaranteed Interest Rate is
credited.
HOME OFFICE - our office at the following addresses and phone numbers:
American General Life Insurance Company of New York, 300 South State Street,
P. O. Box 1456, Syracuse, NY 13201-1456; 1-800-281-8289; (315) 471-1121.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT") - a federal law governing the
operations of investment companies such as the Series and Separate Account E.
NON-QUALIFIED - not eligible for the special federal income tax treatment
applicable in connection with retirement plans pursuant to Sections 401, 403,
or 408 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 special federal income tax treatment applicable
in connection with retirement plans pursuant to sections 401, 403, or 408 of
the Code.
SEPARATE ACCOUNT E - the segregated asset account referred to as American
General Life Insurance Company of New York Separate Account E established to
receive and invest purchase payments under the Certificates.
SERIES - an individual portfolio of a mutual fund available for investment
under the Certificates. Currently, the Series available under the Certificates
are part of either the Van Kampen American Capital Life Investment Trust or
the Morgan Stanley Universal Funds, Inc.
SURRENDER CHARGE - a charge for sales expenses that may be assessed upon
surrenders of and payments of certain other amounts from a Certificate.
VALUATION DATE - all days on which we are open for business except, with
respect to any Division, days on which the related Series does not value its
shares.
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 succeeding Valuation Date.
5
<PAGE>
VARIABLE ANNUITY PAYMENTS - annuity payments that vary in amount based on the
investment experience of one or more of the Divisions of Separate Account E.
VARIABLE ACCOUNT VALUE - the amount of your Account Value that is in Separate
Account E.
WRITTEN - signed, dated, in form and substance satisfactory to us and received
at either our Home Office or Administrative Center as specified in this
Prospectus. See "Synopsis of Certificate Provisions Communications to Us." You
must use special forms provided by us or your sales representative to
authorize telephone transfers, elect an Annuity Option or exercise your
one-time reinvestment privilege.
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 pursuant to a
Certificate and in connection with the Series. The table reflects expenses of
the Separate Account as well as the Series. Amounts for state premium taxes or
similar assessments may also be deducted, where applicable.
<TABLE>
PARTICIPANT TRANSACTION CHARGES
<S> <C>
Front-End Sales Charge Imposed on Purchases........................... 0%
Maximum Surrender Charge1............................................. 6%
(computed as a percentage of purchase payments surrendered)
Transfer Fee.......................................................... $ 0 (2)
ANNUAL CERTIFICATE FEE (3)................................................ $30
SEPARATE ACCOUNT E ANNUAL EXPENSES
(as a percentage of average daily net asset value)
Mortality and Expense Risk Charge.................................... 1.25%
Administrative Expense Charge........................................ 0.15%
------
Total Separate Account E Annual Expenses............................. 1.40%
======
<FN>
(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
prior to the Annuity Commencement Date. There is an exception to this
charge. See "Automatic Rebalancing."
(3) This charge is not imposed during the Annuity Period.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
THE SERIES' ANNUAL EXPENSES (1) (as a percentage of average net assets)
<CAPTION>
Management Other
Fees After Expenses Total Series
Expense After Expense Operating
Reimbursement Reimbursement Expenses
------------- ------------- ------------
<S> <C> <C> <C>
Domestic Income 0.00% 0.60% 0.60%
Emerging Growth 0.00% 0.85% 0.85%
Enterprise 0.37% 0.23% 0.60%
Government 0.33% 0.27% 0.60%
Growth and Income 0.00% 0.75% 0.75%
Money Market 0.00% 0.60% 0.60%
Morgan Stanley Real
Estate Securities 0.83% 0.27% 1.10%
Strategic Stock 0.50% 0.15% 0.65%
Asian Equity 0.80% 0.40% 1.20%
Emerging Markets Equity 1.25% 0.50% 1.75%
Equity Growth 0.55% 0.30% 0.85%
Global Equity 0.80% 0.35% 1.15%
International Magnum 0.80% 0.35% 1.15%
Fixed Income 0.40% 0.30% 0.70%
High Yield 0.50% 0.30% 0.80%
Mid Cap Value 0.75% 0.30% 1.05%
Value 0.55% 0.30% 0.85%
<FN>
(1) The annual expenses are estimated for the current fiscal year for the
Emerging Growth, Growth and Income, Morgan Stanley Real Estate
Securities, Strategic Stock, Asian Equity, Emerging Markets Equity,
Equity Growth, Global Equity, International Magnum, Fixed Income, High
Yield, Mid Cap Value and Value Portfolios because none of the Series has
financial statements covering a period of at least ten months.
(2) The following table sets out management fees, other expenses, and total
expenses absent certain voluntary expense reimbursements from the
investment adviser. For the Domestic Income, Enterprise, Government, and
Money Market Portfolios, these figures indicate what the management
fees, other expenses, and total expenses would have been, absent
reimbursement, for the 1996 fiscal year. For each of the other Series,
such fees and expenses, absent reimbursement, are estimated for the
current fiscal year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
------------- ------------- ------------
<S> <C> <C> <C>
Domestic Income 0.50% 0.79% 1.29%
Enterprise 0.50% 0.25% 0.75%
Government 0.50% 0.30% 0.80%
Money Market 0.50% 0.79% 1.29%
</TABLE>
7
<PAGE>
EXAMPLE (3) If you surrender your Certificate (or if you annuitize under
circumstances where a surrender charge is payable)4 at the end
of the applicable time period, a $1,000 investment would be
subject to the following expenses, assuming a 5% annual return
on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 Year 3 Years 5 Years 10 Years
in one of the following ------ ------- ------- --------
Divisions:
---------------------------
<S> <C> <C> <C> <C>
Domestic Income $75 $110 $147 $239
Emerging Growth $78 $118 N/A N/A
Enterprise $75 $110 $147 $239
Government $75 $110 $147 $239
Growth and Income $77 $114 N/A N/A
Money Market $75 $110 $147 $239
Morgan Stanley Real Estate Securities $80 $125 N/A N/A
Strategic Stock $76 $111 N/A N/A
Asian Equity $87 $139 N/A N/A
Emerging Markets Equity $87 $144 N/A N/A
Equity Growth $78 $118 N/A N/A
Global Equity $81 $127 N/A N/A
International Magnum $81 $127 N/A N/A
Fixed Income $76 $113 N/A N/A
High Yield $78 $118 N/A N/A
Mid Cap Value $80 $124 N/A N/A
Value $78 $118 N/A N/A
</TABLE>
EXAMPLE (3) If you do NOT surrender your Certificate (or if you annuitize
under circumstances where a surrender charge is not payable)4
at the end of the applicable time period a $1,000 investment
would be subject to the following expenses, assuming a 5%
annual return on assets:
<TABLE>
<CAPTION>
If all amounts are invested 1 Year 3 Years 5 Years 10 Years
in one of the following ------ ------- ------- --------
Divisions:
---------------------------
<S> <C> <C> <C> <C>
Domestic Income $21 $65 $111 $239
Emerging Growth $24 $73 N/A N/A
Enterprise $21 $65 $111 $239
Government $21 $65 $111 $239
Growth and Income $23 $69 N/A N/A
Money Market $21 $65 $111 $239
Morgan Stanley Real Estate Securities $26 $80 N/A N/A
Strategic Stock $22 $66 N/A N/A
Asian Equity $33 $94 N/A N/A
Emerging Markets Equity $33 $99 N/A N/A
Equity Growth $24 $73 N/A N/A
Global Equity $27 $82 N/A N/A
International Magnum $27 $82 N/A N/A
Fixed Income $22 $68 N/A N/A
High Yield $24 $73 N/A N/A
Mid Cap Value $26 $79 N/A N/A
Value $24 $73 N/A N/A
<FN>
(3) In these Examples, "N/A" indicates that SEC rules require that
the Emerging Growth, Growth and Income, Morgan Stanley Real
Estate Securities, Strategic Stock, Asian Equity, Emerging
Markets Equity, Equity Growth, Global Equity, International
Magnum, Fixed Income, High Yield, Mid Cap Value and Value
Portfolios complete the Example for only the one and three
year periods.
(4) For a description of the circumstances under which the
Surrender Charge may be payable under annuitization, see
"Surrender Charge."
</FN>
</TABLE>
8
<PAGE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Similarly,
the assumed 5% annual rate of return is not an estimate or a guarantee of
future investment performance. The examples are based, with respect to all of
the Divisions, on an estimated average Account Value of $40,000.
SYNOPSIS OF CERTIFICATE PROVISIONS
This synopsis should be read together with the other information set forth in
this Prospectus. Variations due to requirements particular to your state are
described in this Prospectus or in your Certificate, as appropriate.
The Certificates are designed to provide retirement benefits through the
accumulation of purchase payments on a fixed or variable basis and by the
application of such accumulations to provide Fixed or Variable Annuity
Payments.
MINIMUM INVESTMENT REQUIREMENTS
Your initial purchase payment must be at least $5,000. 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 interest in the Certificate
and treat it as a full surrender. We also may transfer funds from a Division
(other than the Money Market Division) or Guarantee Period under your
Certificate without charge 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
Purchase payments will be accumulated 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
Separate Account E. Each such Division invests solely in shares of one of 17
corresponding Series. See "The Series." As the value of the investments in a
Series' shares increases or decreases, the value of accumulated purchase
payments allocated to the corresponding Division increases or decreases,
subject to applicable 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. While allocated to a
Guarantee Period, the value of accumulated purchase payments increases at the
Guaranteed Interest Rate applicable to that Guarantee Period. See "The Fixed
Account."
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.
9
<PAGE>
FIXED AND VARIABLE ANNUITY PAYMENTS
You may elect to receive Fixed or Variable Annuity Payments or a combination
thereof commencing on the Annuity Commencement Date. Fixed Annuity Payments
are periodic payments from AGNY, the amount of which is fixed and guaranteed
by AGNY. The amount of the payments will depend on the Annuity Payment Option
chosen, the age and, in some cases, sex 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 AGNY will vary reflecting the net
investment return of the Division or Divisions chosen in connection with a
variable Annuity Payment Option. 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 greater than the previous payment. If the
net investment return for a month is less than the assumed interest rate, the
monthly payment will be less than the previous payment. The assumed interest
rate used in the Certificate's annuity tables is 3.5%. AGNY may in the future
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
Prior to the Annuity Commencement Date, you may modify your election with
respect to the allocation of future purchase payments to each of the various
Divisions and Guarantee Periods, without charge.
In addition, you may reallocate your Account Value among the Divisions and
Guarantee Periods prior to the Annuity Commencement Date. Transfers out of a
Guarantee Period, however, are subject to limitations as to amount. For these
and other terms and conditions of transfer, see "Transfer, Surrender and
Partial Withdrawal of Owner Account Value - Transfers."
After the Annuity Commencement Date, you may make transfers among the
Divisions or to a fixed Annuity Payment Option, but you may not make transfers
from a fixed Annuity Payment Option. See "Annuity Period and Annuity Payment
Options - Transfers."
SURRENDERS, WITHDRAWALS AND CANCELLATIONS
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 Charge may be assessed and some surrenders and withdrawals may
subject you to tax penalties. See "Surrenders and Partial Withdrawals."
You may cancel your Certificate by delivering it or mailing it with a Written
cancellation request to our Administrative Center or to the sales
representative through whom it was purchased, before the close of business on
the 10th day after you receive the Certificate. (In some cases, the
Certificate may provide for a 20 or 30-day, rather than a 10-day period.) If
the foregoing items are sent by mail, properly addressed and postage prepaid,
they will be deemed to be received by us on the date actually received.
10
<PAGE>
We will refund to you the Owner Account Value plus any premium taxes that have
been deducted. In states where the law so requires, however, we will refund
the greater of that amount or the amount of your purchase payments, or, if the
law permits, the amount of your purchase payments.
DEATH PROCEEDS
In the event that the Annuitant or Owner dies prior to the Annuity
Commencement Date, a benefit is payable to the Beneficiary. See "Death
Proceeds Prior to the Annuity Commencement Date."
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
Certain rights you would otherwise have under a Certificate may be limited by
the terms of any applicable employee benefit plan. These limitations may
restrict such things as total and partial surrenders, the amount or timing of
purchase payments that may be made, when annuity payments must start and the
type of annuity options that may be selected. Accordingly, you should
familiarize yourself with these and all other aspects of any retirement plan
in connection with which a Certificate is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
COMMUNICATIONS TO US
All communications to us should include your Certificate number, your name
and, if different, the Annuitant's name. Communications may be directed to the
addresses and phone numbers on the first page of this Prospectus.
Except as otherwise specified in this Prospectus, purchase payments or other
communications are deemed received at our Home Office on the actual date of
receipt there in proper form unless received (1) after the close of regular
trading on The New York Stock Exchange or (2) on a date that is not a
Valuation Date. In either of these two cases, the date of receipt will be
deemed to be the next Valuation Date.
PERFORMANCE INFORMATION
From time to time, Separate Account E may include in advertisements and other
sales materials several types of performance information for the Divisions,
including "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 may be presented is not an estimate or
guarantee of future investment performance and does not represent the actual
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 calculations measure the net income of a Division
plus the effect of any realized or unrealized appreciation or depreciation of
the underlying investments in the Division for the period in question. Average
annual total return figures are annualized and, therefore, represent the
average annual
11
<PAGE>
percentage change in the value of an investment in a Division over the
applicable period. Total return figures are also annualized, but do not, as
described below, include the effect of any applicable Surrender Charge or
Annual Certificate Fee. Cumulative total return figures represent the
cumulative change in value of an investment in a Division for various periods.
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 it is
assumed that the Division generates the same level of net income over a one
year period which is compounded on a semi-annual basis. The effective yield
for the Money Market Division is calculated similarly but includes the effect
of 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 include the deduction of all recurring
charges and fees applicable under the Certificate to all Owner accounts,
including the Mortality and Expense Risk Charge, the Administrative Expense
Charge, the applicable Surrender Charge that may be imposed at the end of the
period in question, and a pro-rated portion of the Annual Certificate Fee.
Yield, effective yield, total return, and cumulative total return figures do
not include the effect of any Surrender Charge that may be imposed upon the
redemption of Accumulation Units, and thus may be higher than if such charge
were deducted. Total return and cumulative total return figures also do not
include the effect of the Annual Certificate Fee.
DIVISION PERFORMANCE. The investment performance for each Division that
invests in a corresponding Series of the Trust will generally reflect the
investment performance of that corresponding Series for the periods stated.
This information appears in the Statement. For periods prior to the date the
Certificates became available, the performance information for a Division will
be calculated on a hypothetical basis by applying current Separate Account
fees and charges under the Certificate to the historical performance of the
corresponding Series. We may waive or reimburse certain fees or charges
applicable to the Certificate and such waivers or reimbursements will affect
each Divisions's performance results.
Information about the experience of the investment advisers to the Series of
the Fund appears in the prospectus for the Fund.
FINANCIAL RATINGS
AGNY 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 their 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. An
A++ rating means, in the opinion of A. M. Best, that the insurer has
demonstrated the strongest ability to meet its respective policyholder and
other contractual obligations. A. M. Best publishes Best's Insurance Reports,
Life-Health Edition. As of July 22, 1997, A.M. Best reaffirmed AGNY's rating
of A++ (Superior) for financial position and operating performance.
In addition, the claims-paying ability of AGNY as measured by the Standard &
Poor's Corporation may be referred to in advertisements or in reports to
Owners. A Standard & Poor's insurance claims-paying ability rating is an
assessment of an operating insurance company's financial capacity to meet
12
<PAGE>
the obligations of its insurance policies in accordance with their terms.
Standard & Poor's ratings range from AAA to D. As of June 18, 1997, Standard &
Poor's reaffirmed AGNY's claims-paying ability rating of AA+ (Excellent).
AGNY may additionally advertise its rating from Duff & Phelps Credit Rating
Co. A Duff & Phelps rating is an assessment of a company's insurance
claims-paying ability. Duff & Phelps ratings range from AAA to CCC. Duff &
Phelps reaffirmed the claims paying ability of AGNY as AAA, as of August 5,
1997.
The ratings from A. M. Best, Standard & Poors, and Duff & Phelps reflect the
claims-paying ability and financial strength of AGNY. 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
In addition, AGNY may include in certain advertisements endorsements in the
form of a list of organizations, individuals or other parties that recommend
AGNY or the Certificates. AGNY may occasionally include in advertisements
comparisons of currently taxable and tax-deferred investment programs, based
on selected tax brackets, or discussions of alternative investment vehicles
and general economic conditions.
FINANCIAL INFORMATION
The financial statements of AGNY are located in the Statement. See the first
page of the Prospectus for information on how to obtain a copy of the
Statement. The financial statements of AGNY should be considered only as
bearing on the ability of AGNY to meet its contractual obligations under the
Certificates; they do not bear on the investment performance of Separate
Account E. See "Contents of Statement of Additional Information."
AGNY
AGNY is a stock life insurance company, the predecessor of which was organized
under the laws of the State of New York in 1953. AGNY is an indirect,
wholly-owned subsidiary of American General Corporation (formerly American
General Insurance Company), a diversified financial services holding company
engaged primarily in the insurance business. The commitments under the
Certificates are AGNY's, and American General Corporation has no legal
obligation to back those commitments.
SEPARATE ACCOUNT E
Separate Account E was originally established on February 15, 1979. From 1992
until the commencement of the offering of the Certificates described in this
prospectus, Separate Account E was inactive, funding no contracts or
certificates and holding no assets. Separate Account E is registered with the
Securities and Exchange Commission as a unit investment trust under the 1940
Act.
13
<PAGE>
Each Division of Separate Account E is part of AGNY's general business, and
the assets of Separate Account E belong to AGNY. Under New York law and the
terms of the Certificates, the assets of Separate Account E will not be
chargeable with liabilities arising out of any other business which AGNY may
conduct, but will be held exclusively to meet AGNY's obligations under
variable annuity Certificates. Furthermore, the income, gains, and losses,
whether or not realized, from assets allocated to Separate Account E are, in
accordance with the terms of the Certificates, credited to or charged against
the Separate Account without regard to other income, gains, or losses of AGNY.
THE SERIES
The variable benefits under the Certificates are funded by 17 Divisions of the
Separate Account. 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 offer shares
to variable annuity and variable life insurance separate accounts of insurers
that are not affiliated with AGNY.
We do not foresee any disadvantage to Owners of Certificates 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, unless remedial action were taken. If a material
irreconcilable conflict arises between separate accounts, a separate account
may be required to withdraw its participation in the Trust or the Fund. If it
becomes necessary for any separate account to replace shares of the Trust or
the Fund with another investment, the Trust or the Fund may have to liquidate
portfolio securities on a disadvantageous basis. 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, should be taken to remedy or eliminate the
conflict.
Any dividends or capital gain distributions attributable to Certificates are
automatically reinvested in shares of the Series from which they are received
at the Series' net asset value on the date payable. Such dividends and
distributions will have the effect of reducing the net asset value of each
share of the corresponding Series and increasing, by an equivalent value, the
number of shares outstanding of the Series. However, the value of your
interest in the corresponding Division will not change as a result of any such
dividends and distributions.
The names of the Series of the Trust in which the available Divisions invest
are as follows:
VAN KAMPEN AMERICAN CAPITAL 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 American Capital Asset Management, Inc. is the investment adviser
of each Series of the Trust. Van Kampen American Capital Distributors, Inc.,
is the distributor of shares of each Series
14
<PAGE>
of the Trust. The investment adviser and the distributor are wholly-owned
indirect subsidiaries of Morgan Stanley Group Inc. Morgan Stanley Group Inc.
and various of its directly or indirectly owned subsidiaries, including Morgan
Stanley & Co. Incorporated, a registered broker-dealer and investment adviser
and Morgan Stanley International, are engaged in a wide range of financial
services. Their principal businesses include securities underwriting,
distribution and trading; merger, acquisition, restructuring and other
corporate finance advisor activities; merchant banking; stock brokerage and
research services; asset management; trading of futures, options, foreign
exchange, commodities and swaps (involving foreign exchange, commodities,
indices and interest rates); real estate advice, financing and investing; and
global custody, securities clearance services and securities lending.
The names of the Series of the Fund in which the available Divisions invest
are as follows:
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Asian Equity Portfolio
Emerging Markets Equity Portfolio
Equity Growth Portfolio
Global Equity Portfolio
International Magnum Portfolio
Fixed Income Portfolio
High Yield Portfolio
Mid Cap Value Portfolio
Value Portfolio
Morgan Stanley Asset Management Inc. is the investment adviser of the Asian
Equity, Emerging Markets Equity, Equity Growth, Global Equity and
International Magnum Portfolios. Miller Anderson & Sherrerd, LLP is the
investment adviser of the Fixed Income, High Yield, Mid Cap Value and Value
Portfolios. Van Kampen American Capital Distributors, Inc. is the distributor
of shares of each Series of the Fund.
Before selecting any Division, you should carefully read the prospectus that
includes 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 and 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 AGNY's Administrative
Center at the addresses and phone number set forth on the first page of this
Prospectus. When making your request, please specify the single or the several
Series in which you are interested.
High yielding fixed-income securities such as those in which the Domestic
Income Portfolio invests are subject to greater market fluctuations and risk
of loss of income and principal than investments in lower yielding
fixed-income securities. Potential investors in this Division should carefully
read the prospectus and related statement of additional information that
pertains to this Series and consider their ability to assume the risks of
making an investment in this Division.
15
<PAGE>
VOTING PRIVILEGES
The Owner prior to the Annuity Commencement Date and the Annuitant or other
payee during the Annuity Period will be entitled to give us instructions as to
how Series shares held in the Divisions of Separate Account E attributable to
their Certificate should be voted at meetings of shareholders of the Series.
Those persons entitled to give voting instructions and the number of votes for
which they may give directions will be determined as of the record date for a
meeting. Separate Account E will vote all shares of each Series that it holds
of record in accordance with instructions received with respect to all AGNY
Certificates participating in that Series.
Separate Account E will also vote all shares of each Series for which no
instructions have been received for or against any proposition in the same
proportion as the shares for which voting instructions were received.
Prior to the Annuity Commencement Date, the number of votes each Owner is
entitled to direct with respect to a particular Series is equal to (a) the
Owner's Variable Account Value attributable to that Series divided by (b) the
net asset value of one share of that Series. In determining the number of
votes, fractional votes will be recognized. While a variable Annuity Payment
Option is in effect, the number of votes an Annuitant or payee is entitled to
direct with respect to a particular Series will be computed in a comparable
manner, based on our liability for future Variable Annuity Payments with
respect to that Annuitant or payee as of the record date. Such liability for
future payments will be calculated on the basis of the mortality assumptions
and the assumed interest rate used in determining the number of Annuity Units
under a Certificate and the applicable value of an Annuity Unit on the record
date.
Series shares held by insurance company separate accounts other than Separate
Account E will generally be voted in accordance with instructions of
participants in such other separate accounts.
We believe that AGNY's voting instruction procedures comply with current
federal securities law requirements and interpretations thereof. However, AGNY
reserves the right to modify these procedures in any manner consistent with
applicable legal requirements and interpretations as in effect
from time to time.
THE FIXED ACCOUNT
AMOUNTS IN THE FIXED ACCOUNT OR SUPPORTING FIXED ANNUITY PAYMENTS BECOME PART
OF OUR GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. WE HAVE BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS THAT
RELATE TO THE FIXED ACCOUNT OR FIXED ANNUITY PAYMENTS. DISCLOSURES REGARDING
THESE MATTERS, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY-APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS IN PROSPECTUSES.
Our obligations with respect to the Fixed Account are legal obligations of
AGNY and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
16
<PAGE>
property of AGNY and Owners have no legal rights in such investments.
Account Value that is allocated by the Owner to the Fixed Account earns a
Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years selected by the Owner
from among the Guarantee Periods that we then offer. At the end of a Guarantee
Period, the Owner's Account Value in that Guarantee Period, including interest
accrued thereon, will be allocated to a new Guarantee Period of the same
length unless AGNY has received a Written request from the Owner to allocate
this amount to a different Guarantee Period or Periods or to one or more of
the Divisions of Separate Account E. We must receive this Written request at
least three business days prior to the end of the Guarantee Period. If the
Owner has not provided such Written request and the renewed Guarantee Period
extends beyond the scheduled Annuity Commencement Date, we will nevertheless
contact the Owner regarding the scheduled Annuity Commencement Date. If the
Owner elects to annuitize in this circumstance, the Surrender Charge may be
waived. (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 prior to 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 automatically transfer without charge, the balance to
the Money Market Division at the end of that Guarantee Period, unless we have
received in good order Written instructions to transfer such balance to a
different Division.
We declare the Guaranteed Interest Rates from time to time as market
conditions dictate. We advise an Owner of the Guaranteed Interest Rate for a
chosen Guarantee Period at the time a purchase payment is received, a transfer
is effectuated or a Guarantee Period is renewed. A different rate of interest
may be credited 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 received from an exchange, rollover or transfer by us within 60 days
following the date of application for a Certificate will accrue interest. The
interest will be credited to the Fixed Account during the Guarantee Period and
will be calculated at a rate which is the higher of: (1) the current interest
rate being used by us on the date of the application for the Guarantee Period
selected; or (2) the current interest rate being used by us on the date of
receipt of proceeds. Proceeds received more than 60 days after the date the
application is signed will receive interest at the rate in effect on the date
of receipt of such proceeds.
Interest will be credited to the Fixed Account as of the date of receipt of
such proceeds, and the interest rate used to calculate such interest will
remain in effect for the duration of the Guarantee Period.
Each Guarantee Period has its own Guaranteed Interest Rate, which may differ
from those for other Guarantee Periods. From time to time we will, at our
discretion, 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 commenced. Each
allocation or transfer of an amount to a Guarantee Period commences the
running of a new Guarantee Period with respect to that amount, which 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. One or more Guarantee
Periods may be offered with a
17
<PAGE>
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 are making available at any
time, except that a one year Guarantee Period will always be
available.
AGNY'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED INTEREST
RATES TO BE DECLARED. AGNY CANNOT PREDICT OR ASSURE THE LEVEL OF ANY FUTURE
GUARANTEED INTEREST RATES IN EXCESS OF THE MINIMUM GUARANTEED INTEREST RATE
STATED IN YOUR CERTIFICATE.
Information concerning the Guaranteed Interest Rates applicable to the various
Guarantee Periods at any time may be obtained from your sales representative
or from the addresses or phone numbers
set forth on the cover page of this Prospectus.
CERTIFICATE ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $5,000. The amount of any subsequent
purchase payment must be at least $100. We reserve the right to modify these
minimums at our discretion.
An application to purchase a Certificate must be made by a signed Written
application form provided by AGNY or by such other medium or format as may be
agreed to by AGNY and Van Kampen American Capital Distributors, Inc. as
distributor of the Certificates. When a purchase payment accompanies an
application to purchase a Certificate and the application is properly
completed, 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
at our Administrative Center.
If the application is not complete or is incorrectly completed, we will
request additional documents or information within five Valuation Dates after
receipt of the application at our Administrative Center. If a
correctly-completed application is not received within five Valuation Dates
after receipt of the purchase payment at our Administrative Center, we will
return the purchase payment immediately unless the prospective purchaser
specifically consents to our retaining the purchase payment until the
application is made complete, in which case the initial purchase payment is
credited as of the end of the Valuation Period in which we receive at our
Administrative Center the last information required to process the
application. Subsequent purchase payments are credited as of the end of the
Valuation Period in which they and any required Written identifying
information are received at our Home Office. We reserve the right to reject
any application or purchase payment for any reason.
If the Owner's 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 the
Owner's 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
Division, Divisions or Fixed Account to which the transfer was made. These
minimum requirements are waived for transfers under the Automatic Rebalancing
program. See "Automatic Rebalancing." If the Owner's total Account Value falls
below $500, we may cancel the Certificate. Such a cancellation would be
considered a full surrender of the Certificate. We will provide you with 60
days' advance notice of any such cancellation.
18
<PAGE>
So long as the Account Value does not fall below $500, you need make no
further purchase payments. You may, however, elect to make subsequent purchase
payments at any time prior to the Annuity Commencement Date and while the
Owner and Annuitant are still living. Checks for subsequent purchase payments
should be made payable to American General Life Insurance Company of New York
and forwarded directly to our Administrative Center. 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 cover page of this Prospectus. Purchase payments
pursuant to salary reduction plans may be made only with our agreement.
Your purchase payments begin to earn a return in the Divisions of Separate
Account E 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 is
to be allocated to each Division and each Guarantee Period. You can change
these allocation percentages at any time by Written notice to us.
AGNY issues the Certificates under a master group annuity contract ("master
contract") that AGNY has issued to the trustee of a group trust, pursuant to
New York State insurance 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 a Certificate 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
Prior to 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
Your Variable Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Variable Account Values in each Division
of Separate Account E as of that date. Your Variable Account Value in any such
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 Separate Account E, you bear
the entire risk of investment losses.
Accumulation Units in a Division are credited to you when you allocate
purchase payments or transferred amounts to that Division. Similarly, such
Accumulation Units are canceled to the extent you transfer or withdraw amounts
from a Division or to the extent necessary to pay certain charges under the
Certificate. The crediting or cancellation of Accumulation Units is based on
the value of such Accumulation Units at the end of the Valuation Date as of
which the related amounts are being credited to or charged against your
Variable Account Value, as the case may be.
19
<PAGE>
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 with respect to 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 as determined at the
end of the previous Valuation Period, and subtracting from that result a
factor representing the mortality risk, expense risk and administrative
expense charge.
FIXED ACCOUNT VALUE
Your Fixed Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Fixed Account Value in each Guarantee
Period as of that date. 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.
The Fixed Account Value is guaranteed by AGNY. Therefore, AGNY bears the
investment risk with respect to amounts allocated to the Fixed Account, except
to the extent that AGNY 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
Commencing 30 days after the Certificate's date of issue and prior to the
Annuity Commencement Date, you may transfer your Account Value at any time
among the available Divisions of Separate Account E and Guarantee Periods,
subject to the conditions described below. Such transfers will be effective at
the end of the Valuation Period in which we receive your Written transfer
request.
If a transfer would cause your Account Value in any Division or Guarantee
Period to fall below $500, we reserve the right to also transfer the remaining
balance in that Division or Guarantee Period in the same proportions as the
transfer request.
Prior to the Annuity Commencement Date and after the first 30 days following
the date the Certificate was issued, you may make up to 12 transfers each
Certificate Year without charge, but additional transfers will be subject to a
$25 charge. Also, no more than 25% of the Account Value you allocated to a
Guarantee Period at its inception may be transferred during any Certificate
Year. This 25% limitation does not apply to transfers within 15 days before or
after the end of the Guarantee
20
<PAGE>
Period in which the transferred amounts were being held or to a renewal at the
end of the Guarantee Period to the same Guarantee Period.
Subject to the above general rules concerning transfers, you may establish an
automatic transfer plan, whereby amounts are automatically transferred by us
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 on a monthly, quarterly, semi-annual or annual basis. This kind of
automatic transfer plan is also referred to as a dollar cost averaging plan,
under which the Owner will select the amount to be transferred and the period
of time over which transfers are to occur. We may offer certain automatic
transfer plans to Owners who make new purchase payments and who are not
presently owners of any annuity contract or certificate offered by AGNY or an
affiliate of AGNY. Under such plans, known as "special automatic transfer
plans," we will establish the period of time over which equal monthly
transfers will be made, and we may offer a higher Guaranteed Interest Rate,
set forth in a prospectus supplement, than would otherwise be available for
another Guarantee Period of the same duration that is not offered under such
plans. Transfers under all automatic transfer plans will not count towards the
12 free transfers each Certificate Year, and will not incur a $25 charge, nor
will such transfers from the Guarantee Period be subject to the 25% limitation
or the Account value minimum 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 front cover of this Prospectus.
The Certificates are not designed for professional market timing organizations
or other entities utilizing programmed and frequent transfers. We reserve the
right at any time and without prior notice to any party to terminate, suspend,
or modify our policy regarding transfers.
AUTOMATIC REBALANCING
Automatic Rebalancing within the Separate Account is available for
Certificates with an Account Value of $25,000 and larger at the time the
application for Automatic Rebalancing is received. Application for Automatic
Rebalancing can be made either at issue or after issue, and may subsequently
be discontinued.
Automatic Rebalancing occurs when funds are transferred by us among the
Separate Account Divisions so that the values in each Division match the
Owner's percentage allocation for Automatic Rebalancing then in effect.
Automatic Rebalancing is available on a quarterly, semi-annual or annual
basis, measured from the Certificate Anniversary date. A Certificate
Anniversary date which falls on the 29th, 30th, or 31st of the month will
result in Automatic Rebalancing as of 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.
SURRENDERS AND PARTIAL WITHDRAWALS
At any time prior to the Annuity Commencement Date and while the Annuitant is
still living, the Owner may make a full surrender of or partial withdrawal
from his or her Certificate.
The amount payable to the Owner upon full surrender is the Owner's Account
Value at the end of the Valuation Period in which we receive a Written
surrender request in good order, minus any applicable
21
<PAGE>
Surrender Charge, minus the amount of 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 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 with respect
to the Certificate will terminate, subject to 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 or partial withdrawal.
Your Written request for a partial withdrawal should specify the Divisions of
Separate Account E, or the Guarantee Periods of the Fixed Account, from which
you wish the partial withdrawal to be made. If you do not specify, or if the
withdrawal cannot be made in accordance with your specification, to the extent
necessary the withdrawal will be taken pro-rata from the Divisions and
Guarantee Periods, based on your Account Value in each. 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, without charge, the remaining
balance to the Money Market Division. Unless you request otherwise, upon a
partial withdrawal, your Accumulation Units and Fixed Account interests that
are canceled will have a total value equal to the amount of the withdrawal
request, plus any Surrender Charge, and premium tax if applicable, payable
upon the partial withdrawal. The amount payable to you, therefore, will be the
amount of the withdrawal request.
We also make available a systematic withdrawal plan under which you may make
automatic partial withdrawals at periodic intervals in a specified amount,
subject to the terms and conditions applicable to other partial withdrawals.
Additional information about how to establish such a systematic withdrawal
plan may be obtained from your sales representative or from us at the
addresses and phone numbers set forth on the cover page of this Prospectus. We
reserve the right to modify or terminate our procedures for systematic
withdrawals at any time.
The Code provides that a penalty tax will be imposed on certain premature
surrenders or withdrawals. For a discussion of this and other tax implications
of total surrenders and systematic and other partial withdrawals, including
withholding requirements, see "Federal Income Tax Matters."
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Owner may select the Annuity Commencement Date when applying to purchase a
Certificate and may change a previously-selected date at any time prior to the
beginning of an Annuity Payment Option by submitting a Written request,
subject to Company approval. The Annuity Commencement Date may be any day of
any month between the Annuitant's 50th and 90th birthday. See "Federal Income
Tax Matters" for a description of the penalties that may attach to
distributions prior to the Annuitant's attaining age 59 1/2 under any
Certificate or after April 1 of the year following the calendar year in which
the Annuitant attains age 70 1/2 under certain Qualified Certificates.
22
<PAGE>
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, if you give us other
Written instructions at least 30 days prior to the Annuity Commencement Date,
we will apply your Account Value in different proportions.
We deduct any applicable state and local premium taxes from the amount of
Account Value being applied to an Annuity Payment Option. In some cases, we
may deduct a Surrender Charge from the amount being applied. See "Surrender
Charge." Subject to any such adjustments, your Variable and Fixed Account
Values are applied to an Annuity Payment Option, as discussed below, as of the
end of the Valuation Period that contains the 10th day prior to the Annuity
Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
The amount of the first monthly Fixed or Variable Annuity Payment will be at
least as favorable as that produced by the annuity tables set forth in the
Certificate, based on the amount of your Account Value that is applied to
provide the Fixed or Variable Annuity Payments. Thereafter, the amount of each
monthly Fixed Annuity Payment is fixed and specified by the terms of the
Annuity Payment Option selected.
The Account Value that is applied to provide Variable Annuity Payments is
converted to a number of Annuity Units by dividing the amount of the first
Variable Annuity Payment by the value of an Annuity Unit of the relevant
Division as of the end of the Valuation Period that includes the 10th day
prior to the Annuity Commencement Date. This number of Annuity Units
thereafter remains constant with respect to any Annuitant, and the amount of
each subsequent Variable Annuity Payment is determined by multiplying this
number by the value of an Annuity Unit as of the end of the Valuation Period
that contains the 10th day prior to the date of each payment. If the Variable
Annuity Payments are based on more than one Division, these calculations are
performed 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.
As a result of the foregoing computations, if the net investment return for a
Division for any month is at an annual rate of more than the assumed interest
rate used in the Certificate's annuity tables, any Variable Annuity Payment
based on that Division will be greater than the Variable Annuity Payment based
on that Division for the previous month. If the net investment return for a
Division for any month is at an annual rate of less than the assumed interest
rate used in the Certificate's annuity tables, any Variable Annuity Payment
based on that Division will be less than the Variable Annuity Payment based on
that Division for the previous month.
ANNUITY PAYMENT OPTIONS
The Owner may elect to have annuity payments made beginning on the Annuity
Commencement Date under any one of the Annuity Payment Options described
below. We will notify the Owner 60 to 90 days prior to the scheduled Annuity
Commencement Date that the Certificate is scheduled to mature,
23
<PAGE>
and request that an Annuity Payment Option be selected. If the Owner has not
selected an Annuity Payment Option ten days prior to the Annuity Commencement
Date, we will proceed as follows: (1) if the scheduled Annuity Commencement
Date is any date prior to the Annuitant's 90th birthday, we will extend the
Annuity Commencement Date to the Annuitant's 90th birthday; or (2) if the
scheduled Annuity Commencement Date is the Annuitant's 90th birthday, the
Account Value less any applicable charges and premium taxes will be paid in
one sum to the Owner.
The Code imposes minimum distribution requirements that have a bearing on the
Annuity Payment Option that should be chosen in connection with Qualified
Certificates. See "Federal Income Tax Matters." We are not responsible for
monitoring or advising Owners as to whether the minimum distribution
requirements are being met, unless we have received a specific Written request
to do so.
No election of any Annuity Payment Option may be made unless an initial
annuity payment of at least $20 would be provided, where only Fixed or only
Variable Annuity Payments are elected, and $10 on each basis when a
combination of Variable and Fixed Annuity Payments is elected. If these
minimums are not met, we will first reduce the frequency of annuity payments,
and if the minimums are still not met, we will make a lump-sum payment to the
Annuitant or other properly-designated payee in the amount of the Owner's
Account Value, less any applicable Surrender Charge, any uncollected Annual
Certificate Fee and any applicable premium tax.
The Owner, or if the Owner has not done so, the Beneficiary may, within 60
days after the death of the Owner or Annuitant, elect that any amount due to
the Beneficiary be applied under any option described below, subject to
certain tax law requirements. See "Death Proceeds." Thereafter, the
Beneficiary will have all the remaining rights and powers under the
Certificate and be subject to all the terms and conditions thereof. The first
annuity payment will be made at the beginning of the second month following
the month in which we approve the settlement request. Annuity Units will be
credited based on Annuity Unit Values at the end of the Valuation Period that
contains the 10th day prior to the beginning of said second month.
When an Annuity Payment Option becomes effective, the Certificate must be
delivered to our Administrative Center, in exchange for a payment contract
providing for the option elected.
Information about the relationship between the Annuitant's sex and the amount
of annuity payments, including requirements for gender-neutral annuity rates
in certain states and in connection with certain employee benefit plans is set
forth under "Gender of Annuitant" in the Statement. See "Contents of Statement
of Additional Information."
OPTION 1 - LIFE ANNUITY - Annuity payments are payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due prior to the
death of the Annuitant. It would be possible under this arrangement for the
Annuitant or other payee to receive only one annuity payment if the Annuitant
died prior to the second annuity payment, since no minimum number of payments
is guaranteed.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN -
Annuity payments are payable monthly during the lifetime of an Annuitant;
provided, that if the Annuitant dies during the period certain, the
Beneficiary is entitled to receive monthly payments for the remainder of the
period certain.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - Annuity payments are payable
monthly during the lifetime of the Annuitant and another payee and continue
during the lifetime of the survivor,
24
<PAGE>
ceasing with the last payment prior to the death of the survivor. It is
possible under this option for the Annuitant or other payee to receive only
one annuity payment if both die before the second annuity payment, since no
minimum number of payments is guaranteed. If one of these persons dies before
the Annuity Commencement Date, the election of this option is revoked, the
survivor becomes the sole Annuitant, and no death proceeds are payable by
virtue of the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR DESIGNATED PERIOD - Annuity payments are payable
monthly to an Annuitant or other properly-designated payee, or at his or her
death, 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 such Annuitant or other properly-designated
payee.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - The amount due is paid in
equal monthly installments of a designated dollar amount (not less than $125
nor more than $200 per annum per $1,000 of the original amount due) until the
remaining balance is less than the amount of one installment. If the person
receiving these payments dies, the remaining payments continue to be made 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, such balance
at the end of the previous month is decreased by the amount of any installment
paid during the month and the result will be accumulated at an interest rate
not less than 3.5% compounded annually. If the remaining balance at any time
is less than the amount of one installment, such balance will be paid and will
be the final payment under the option.
Under the fourth option there is no mortality guarantee by us, even though
Variable Annuity Payments will be reduced as a result of a charge to Separate
Account E, which is partially for mortality risks. See "Charge to Separate
Account E."
A payee receiving Variable (but not Fixed) Annuity Payments under the fourth
option can elect at any time to commute (terminate) such option and receive
the current value of the annuity, which would be based on the values next
determined after the Written request for payment is received by us. The
current value of the annuity under the fourth option is the value of all
remaining annuity payments, assumed to be level, discounted to present value
at an annual rate of 3.5%. Other than by election of such a lump-sum payment
under the fourth option, an Annuity Payment Option may not be terminated once
annuity payments have commenced.
Under federal tax regulations, the election of the fourth or fifth options may
be treated in the same manner as a surrender of the total account. For tax
consequences of such treatment, see "Federal Income Tax Matters." Also, in
such a case, tax-deferred treatment of subsequent earnings may not be
available.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - Each Certificate
provides that when Fixed Annuity Payments are to be made under one of the
first three Annuity Payment Options described above, the Owner (or if the
Owner has not elected a payment option, the Beneficiary) may elect monthly
payments to the Annuitant or other properly-designated payee equal to the
monthly payment available under similar circumstances based on single payment
immediate fixed annuity rates then in use by us. The purpose of this provision
is to assure the Annuitant that, at retirement, if the fixed annuity purchase
rate then offered by us for new single payment immediate annuity certificates
is
25
<PAGE>
more favorable than the annuity rates guaranteed by the Certificate, the
Annuitant or other properly-designated payee will be given the benefit of the
new annuity rates.
In lieu of monthly payments, payments may be elected on a quarterly,
semi-annual or annual basis, in which case the amount of each annuity payment
will be determined 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 Separate Account E or from the Divisions to a fixed
Annuity Payment Option. No charge will be assessed for such transfer. No
transfers from a fixed to a variable Annuity Payment Option are permitted. If
a transfer would cause the value that is attributable to a Certificate 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.
Transfers will be effected 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 PRIOR TO THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under the
Certificate if, prior to the Annuity Commencement Date, any of the following
events occurs: (a) the Annuitant dies and no Contingent Annuitant has been
named under a Non-Qualified Certificate; (b) the Annuitant dies and we also
receive proof of death of any named Contingent Annuitant; or (c) the Owner
(including the first to die in the case of joint Owners) of a Non-Qualified
Certificate dies, regardless of whether said 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 then the surviving spouse may elect
to continue the Certificate as described in the seventh paragraph below).
If the deceased Owner was a joint Owner, then the death proceeds are payable
to the surviving joint Owner. In this case, the surviving joint Owner will be
treated as the Beneficiary, and we will not recognize any other designation of
Beneficiary. However, joint Owners may provide written instructions that death
proceeds are to be paid in a different manner.
The death proceeds, prior to deduction of any applicable premium taxes, will
equal the greatest of (1) the sum of all net purchase payments made (less any
previously-deducted premium taxes and all prior partial withdrawals), (2) 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 (3) the highest anniversary value prior to the
date of death, as defined below.
The highest anniversary value prior to 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 occurred prior to the deceased's
81st birthday;
Second, each of the Account Values will be increased by the amount of
net purchase payments made since the end of such Certificate Years; and
26
<PAGE>
Third, the result will be reduced by the amount of any withdrawals made
since the end of such Certificate Years.
The highest anniversary value will be an amount equal to the highest of such
values. The highest anniversary value will not be calculated after the 81st
birthday. Net purchase payments are purchase payments less applicable premium
tax.
We will pay the death proceeds to the Beneficiary as of the date the proceeds
become payable. Such date is the end of the Valuation Period in which we
receive proof of the Owner's or Annuitant's death and a Written request in
good order from the Beneficiary as to 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 a lump sum or in the form of one of the Annuity Payment Options
provided in the Certificate. See "Annuity Payment Options." If we receive no
request as to the manner of payment, we will make a lump-sum payment, based on
values determined at that time.
If the Owner under a Non-Qualified Certificate dies prior to the Annuity
Commencement Date, the Code requires that all amounts payable under the
Certificate be distributed (a) within five years of the date of death or (b)
as annuity payments beginning within one year of the date of death and
continuing over a period not extending beyond the life expectancy of the
Beneficiary. If the Beneficiary is the Owner's surviving spouse, the spouse
may elect to continue the Certificate as the new Owner and, if the original
Owner was the Annuitant, as the new Annuitant. This election is also available
to the surviving spouse who is a joint Owner, though not the Beneficiary. In
this case, the surviving spouse will be treated as the Beneficiary, and any
other designation of Beneficiary will not be recognized by the Company. If the
Owner is not a natural person, these requirements apply upon the death of the
primary Annuitant within the meaning of the Code. Failure to satisfy these
Code distribution requirements may result in serious adverse tax consequences.
Under a parallel section of the Code, similar requirements apply to retirement
plans in connection with which Qualified Certificates are issued.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies following the Annuity Commencement Date, the only
amounts payable to the Beneficiary or other properly-designated payee are any
continuing payments provided for under the Annuity Payment Option selected.
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 thereof. Also, if the Annuitant dies following 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, any remaining amounts payable under the terms of the
Annuity Payment Option must be distributed at least as rapidly as under the
method of distribution then in effect. If the payee is not a natural person,
this requirement applies upon the death of the primary Annuitant within the
meaning of the Code. Failure to satisfy these requirements of the Code may
result in serious adverse tax consequences. Under a parallel section of the
Code, similar requirements apply to the retirement plans in connection with
which Qualified Certificates are issued.
27
<PAGE>
PROOF OF DEATH
We accept the following as proof of any person's death: a copy of a certified
death certificate; a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; 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 we have
no further obligations thereunder.
CHARGES UNDER THE CERTIFICATES
PREMIUM TAXES
When applicable, we will deduct an amount to cover premium taxes imposed by
certain states. We may deduct such amount either at the time the tax is
imposed or later. Such deduction may be made, in accordance with applicable
state law:
(1) from purchase payment(s) when received; or
(2) from the Owner's Account Value at the time annuity payments begin;
or
(3) from the amount of any partial withdrawal; or
(4) from proceeds payable upon termination of the Certificate for any
other reason, including death of the Annuitant or Owner, or
surrender of the Certificate.
If premium tax is paid, AGNY may reimburse itself for such tax when deduction
is being made under items 2, 3, or 4 above calculated 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% and 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 related to
distributing the Certificates. We believe, however, that the amount of such
expenses will exceed the amount of revenues generated by the Surrender Charge.
We will pay such excess 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 is withdrawn during the first seven years after it was received. The
percentage declines depending on how many years have passed since the
withdrawn purchase payment was originally credited to your Account Value, as
follows:
28
<PAGE>
<TABLE>
<CAPTION>
Surrender Charge as a
Year of Purchase Percentage of Purchase
Payment Withdrawal Payment Withdrawn
------------------ -------------------------
<S> <C>
1st 6%
2nd 6%
3rd 5%
4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
</TABLE>
Only for the purpose of computing the Surrender Charge, the earliest purchase
payments are deemed to be withdrawn first, and before any amounts in excess of
purchase payments are withdrawn from your Account Value. The following
transactions will be considered as withdrawals for purposes of assessing the
Surrender Charge: total surrender, partial withdrawal, commencement of an
Annuity Payment Option, and termination due to insufficient Account Value.
Nevertheless, 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, prior to 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;
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.
Upon selection of an annuity option that does not qualify for a Surrender
Charge exception above, the amount of the Owner's Account Value applied 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.
The Surrender Charge also does NOT apply to the surrender of a Certificate, or
to 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 AGNY. These waivers of Surrender Charge are
based upon the Certificate Owner's status at the time the Certificate was
purchased.
29
<PAGE>
In addition, the Surrender Charge does NOT apply to the portion of your first
withdrawal or total surrender in any Certificate Year that does not exceed 10%
of the amount of your purchase payments that (a) have not previously been
withdrawn and (b) have been credited to the Certificate for at least one year.
If multiple withdrawals are made during a Certificate Year, the amount
eligible for the free withdrawal will be recalculated at the time of each
withdrawal. After the first Certificate Year, non-automatic and automatic
withdrawals may be made in the same Certificate Year subject to the 10%
limitation. For withdrawals under a systematic withdrawal plan, Purchase
Payments credited for 30 days or more are eligible for the 10% free
withdrawal.
The Surrender Charge will not apply to any amounts withdrawn which are in
excess of the amount permitted by the 10% free withdrawal privilege, described
above, if such amounts are required to be withdrawn 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 assets are withdrawn from a Certificate funding such trust more rapidly
than the 10% free withdrawal privilege would permit. This exception is subject
to our approval.
A free withdrawal pursuant to any of the foregoing Surrender Charge exceptions
is not deemed to be a withdrawal of purchase payments, except for purposes of
computing the 10% free withdrawal described in the preceding paragraph. A
penalty tax may be imposed on distributions if the recipient is under age 59
1/2. See "Penalty Tax on Premature Distributions."
TRANSFER CHARGES
The charges to defray the expense of effecting transfers are described under
"Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of Owner
Account Value - Transfers" and "Annuity Period and Annuity Payment Options -
Transfers." These charges are designed not to yield a profit to us.
ANNUAL CERTIFICATE FEE
An Annual Certificate Fee of $30 will be deducted from each Owner's Account
Value at the end of each Certificate Year prior to the Annuity Commencement
Date. This Fee is for administrative expenses (which do not include expenses
of distributing the Certificates), and we do not expect that the revenues we
will derive from this Fee will exceed such expenses. Unless paid directly, the
Fee will be allocated among the Guarantee Periods and Divisions in proportion
to your Account Value in each. Certain states, however, restrict the amount of
the Fee which can be allocated to the Guarantee Periods. The entire Fee for
the year will be deducted from the proceeds of any full surrender. We reserve
the right to waive the Fee.
CHARGE TO SEPARATE ACCOUNT E
To offset other administrative expenses not covered by the Annual Certificate
Fee discussed above, and to compensate us for assuming mortality and expense
risks under the Certificates, Separate Account E will incur a daily charge at
an annualized rate of 1.40% of the average daily net asset value of Separate
Account E attributable to the Certificates. Of this amount, .15% is for
administrative expenses and 1.25% is for the assumption of mortality and
expense risks. We do not expect to earn a profit on that portion of the charge
which is for administrative expenses, but we do expect to derive a profit from
the portion which is for the assumption of mortality and expense risks. There
is no necessary relationship
30
<PAGE>
between the amount of administrative charges imposed on a given Certificate
and the amount of expenses actually attributable to that Certificate.
In assuming the mortality risk, we are subject to the risk that our actuarial
estimate of mortality rates may prove erroneous and that Annuitants will live
longer than expected, or that more Owners or Annuitants than expected will die
at a time when the death benefit guaranteed by us is higher than the net
surrender value of their interests in the Certificates. In assuming the
expense risk, we are subject to the risk that the revenues from the expense
charges under the Certificates (which charges are guaranteed not to be
increased) will not cover our expense of administering the Certificates.
MISCELLANEOUS
Charges and expenses are paid out of the assets of each Series, as described
in the prospectus relating to that Series. We reserve the right to impose
charges or establish reserves for any federal or local taxes incurred or that
may be incurred by us, and that may be deemed attributable to the
Certificates.
SYSTEMATIC WITHDRAWAL PLAN
Automatic partial withdrawals, with minimum payments of $100, may be made at
periodic intervals through a systematic withdrawal program and the Certificate
Owner may choose from payment schedules of monthly, quarterly, semi-annually,
or annually, and may start, stop, increase or decrease payments. Withdrawals
may start as early as 30 days after the issue date of the Certificate and may
be taken from the Fixed Account or any Division, as specified by the Owner.
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, the Owner may elect to reinvest all of
the proceeds that were previously liquidated from the Certificate within the
past 30 days and have the Surrender Charge and any Annual Certificate Fee not
then due credited back to the Certificate. The funds will be reinvested at the
value next following the date of receipt of the reinvested Account Value.
Unless you request otherwise, the reinvested Account Value will be allocated
among the Divisions and Guarantee Periods in the same proportions as the prior
surrender. 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 in connection with employer-sponsored plans.
Any such reductions will reflect differences in costs or services (due to such
factors 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) and will not be
unfairly discriminatory as to any person.
OTHER ASPECTS OF THE CERTIFICATES
Only an officer of AGNY can agree to change or waive the provisions of any
Certificate. The Certificates are non-participating and are not entitled to
share in any dividends, profits or surplus of AGNY.
31
<PAGE>
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
The Owner of a Certificate will be the same as the Annuitant, unless the
purchaser designates a different Owner when applying to purchase a
Certificate. In the case of joint ownership, both Owners must join in the
exercise of any rights or privileges under the Certificate. The Annuitant and
any Contingent Annuitant are designated in the application for a Certificate
and may not thereafter be changed.
The Beneficiary and any Contingent Beneficiary are designated when applying to
purchase a Certificate. A Beneficiary or Contingent Beneficiary may be changed
by the Owner prior to the Annuity Commencement Date, while the Annuitant is
still alive, and by the payee following the Annuity Commencement Date. Any
designation of a new Beneficiary or Contingent Beneficiary is effective as of
the date it is signed but will not affect any payments we make or action we
take before receiving the Written request. We also need the Written consent of
any irrevocably-named Beneficiary or Contingent Beneficiary before making a
change. Under certain retirement programs, spousal consent may be required to
name a Beneficiary other than the spouse or to 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 no named Beneficiary or Contingent Beneficiary is living at the time any
payment is to be made, the Owner, will be the Beneficiary, or if the Owner is
not then living, the Owner's estate will be the Beneficiary.
In the case of joint ownership, the surviving joint Owner will be treated as
the Beneficiary upon the death of a joint Owner, and we will not recognize any
other designation of Beneficiary. However, joint Owners may provide written
instructions that death proceeds are to be paid in a different manner.
Rights under a Qualified Certificate may be assigned only in certain narrow
circumstances referred to therein. 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. A change in
ownership rights must be made in Writing and a copy must be sent to our
Administrative Center. The change will be effective on the date it was made,
although 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 persons receiving payments following the Annuity
Commencement Date), at their last known address of record, any reports and
communications required by applicable law or regulation. You should therefore
give us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, a Certificate may be modified by us, to the extent
necessary in order to (1) operate Separate Account E in any form permitted
under the 1940 Act or in any other form permitted by law; (2) transfer any
assets in any Division to another Division, or to one or more
32
<PAGE>
separate accounts, or the Fixed Account; (3) add, combine or remove Divisions
in Separate Account E, or combine the Separate Account with another separate
account; (4) add, restrict or remove Guarantee Periods of the Fixed Account;
(5) make any new Division available to you on a basis to be determined by us;
(6) 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; (7) make any changes required by the Code or by any other
applicable law, regulation or interpretation in order to continue treatment of
the Certificate as an annuity; (8) commence deducting premium taxes or adjust
the amount of premium taxes deducted in accordance with applicable state law;
or (9) make any changes required to comply with the rules of any Series. When
required by law, we will obtain your approval of changes and the approval of
any appropriate regulatory authority.
PAYMENT AND DEFERMENT
Amounts surrendered or withdrawn from a Certificate will normally be paid
within seven calendar days after the end of the Valuation Period in which we
receive the Written surrender or withdrawal request in good order. In the case
of payment of death proceeds, if we do not receive a Written request as to the
manner of payment within 60 days after the death proceeds become payable, any
death benefit proceeds will be paid as a lump sum, normally within seven
calendar days after the end of the Valuation Period that contains the last day
of said 60 day period. We reserve the right, however, to defer payment or
transfers of amounts out of the Fixed Account 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 and annuity
payment amounts or death benefit amounts of any portion of the Variable
Account Value if (a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted; (b) an emergency exists, as a result of which disposal
of securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Variable Account Value; or (c) the
Securities and Exchange Commission by order permits the delay for the
protection of Owners. Transfers and allocations of Account Value among the
Divisions and the Fixed Account may also be postponed under these
circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
It is not possible to comment on all of the federal income tax consequences
associated with the Certificates. Federal income tax law is complex and its
application to a particular person may vary according to facts peculiar to
such person. Consequently, this discussion is not intended as tax advice, and
you should consult with a competent tax adviser before purchasing a
Certificate.
The discussion is based on the law, regulations and interpretations existing
on the date of this Prospectus. Congress has in the past and may again in the
future enact legislation changing the tax treatment of annuities in both the
Qualified and the Non-Qualified markets. The Treasury Department may issue new
or amended regulations or other interpretations of existing tax law. Judicial
interpretations may also affect the tax treatment of annuities. It is possible
that such changes could have retroactive effect. We suggest that you consult
your legal or tax advisor on these issues.
33
<PAGE>
The discussion does not address state or local tax, estate and gift tax, or
social security 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 therefore "Non-Qualified" may not deduct from
their gross income the amount of purchase payments made.
TAX DEFERRAL PRIOR TO ANNUITY COMMENCEMENT DATE. Owners who are natural
persons are not taxed currently on increases in their Account Value resulting
from interest earned in the Fixed Account or, if certain diversification
requirements are met, the investment experience of Separate Account E. This
treatment applies to Separate Account E only if it invests in Series that are
"adequately diversified" in accordance with Treasury Department regulations.
Although we do not control the Series, the investment advisers to the Series
have undertaken to use their best efforts to operate the Series in compliance
with these diversification requirements. A Contract investing in a Series that
failed to meet the diversification requirements would subject Owners to
current taxation of income in the Contract that has not previously been taxed.
Income means the excess of the Account Value over the Owner's investment in
the Contract (discussed below).
Current regulations do not provide guidance as to any circumstances in which
control over allocation of values among different investment alternatives may
cause Owners or persons receiving annuity payments to be treated as the owners
of Separate Account E assets for tax purposes. We reserve the right to amend
the Contracts in any way necessary to avoid any such result. The Treasury
Department has stated that it may establish standards in this regard through
regulations or rulings. Such standards may apply only prospectively, although
retroactive application is possible if such standards are considered not to
embody 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 exist for, among other things, Owners that are
not natural persons but that hold the Contract as an agent for a natural
person.
TAXATION OF ANNUITY PAYMENTS. Each annuity payment received after the Annuity
Commencement Date is excludible from gross income in part. In the case of
Fixed Annuity Payments, the excludible portion is determined by multiplying
the amount paid by the ratio of the investment in the Contract (discussed
below) to the expected return under the fixed Annuity Payment Option. In the
case of Variable Annuity Payments, the amount paid is multiplied by the ratio
of the investment in the Contract to the number of expected payments. In both
cases, the remaining portion of each annuity payment, and all payments made
after the investment in the Contract has been reduced to zero, are included in
the payee's income. Should annuity payments cease on account of the death of
the Annuitant before the investment in the Contract has been fully recovered,
the payee is allowed a deduction for the unrecovered 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 recover the balance of the total
investment as payments are made or on the Beneficiary's final tax return. An
Owner's "investment in the Contract" 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 Contract that were not included in income.
34
<PAGE>
TAXATION OF PARTIAL WITHDRAWALS AND TOTAL SURRENDERS. Partial withdrawals from
a Contract are includible in income to the extent that the Owner's Account
Value exceeds the investment in the Contract. In the event a Contract is
surrendered in its entirety, any amount received in excess of the investment
in the Contract is includible in income, and any remaining amount received is
excludible from income. All annuity contracts issued by us to the same Owner
during any calendar year are to be aggregated for purposes of determining the
amount of any distribution that is includible in gross income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A penalty tax is imposed on
distributions under a Contract equal to 10% of the amount includible in
income. The penalty tax will not apply, however, to (1) distributions made on
or after the recipient attains age 59 1/2, (2) distributions on account of the
recipient's becoming disabled, (3) distributions that are made after the death
of the Owner prior to the Annuity Commencement Date or 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), and
(4) distributions that are part of a series of substantially equal periodic
payments made over the life (or life expectancy) of the Annuitant or the joint
life (or joint life expectancies) of the Annuitant and the Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, an early surrender, partial withdrawal from or assignment
of a Contract, or the early death of an Annuitant, unless clause (3) above
applies.
PAYMENT OF DEATH PROCEEDS. Special rules apply to the distribution of any
death proceeds payable under the Contract. See "Death Proceeds."
ASSIGNMENTS AND LOANS. An assignment, loan, or pledge with respect to a
Non-Qualified Contract 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 excess
of $30,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $40,000 will not be able to deduct purchase
payments, and for those with adjusted gross income between $30,000 and $40,000
the deduction is phased out based on the amount of income. Beginning in 1999,
the income range over which the otherwise deductible portion of an IRA
purchase payment will be phased out for single persons will increase, as
follows: 1999-- $31,000 to $41,000; 2000--$32,000 to $42,000; 2001--$33,000 to
$43,000; 2002--$34,000 to $44,000; 2003--$40,000 to $50,000; 2004--$45,000 to
$55,000; and 2005 and thereafter--$50,000 to $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 $50,000 and $60,000, and in the case of married
individuals filing separately, with adjusted gross income between $0 and
$10,000. Beginning in 1999, 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
35
<PAGE>
increase as follows: 1999--$51,000 to $61,000; 2000--$52,000 to $62,000;
2001--$53,000 to $63,000; 2002-- $54,000 to $64,000; 2003--$60,000 to $70,000;
2004--$65,000 to $75,000; 2005-- $70,000 to $80,000; 2006--$75,000 to $85,000;
and 2007 and thereafter--$80,000 to $100,000.
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 such an individual, the income range over
which the otherwise deductible portion of an IRA purchase payment will be
phased out is $150,000 to $160,000.
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 included in income. A 10% penalty tax is imposed on the amount
includible in gross income from distributions that occur before the Annuitant
attains 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 over the life (or
life expectancy) of the Annuitant or the joint lives (or joint life
expectancies) of the Annuitant and the Beneficiary. These exceptions also
include distributions for qualified first-time home purchases for the
individual, a spouse, children, grandchildren, or ancestor, 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 specified by the Code must commence by April 1 of the calendar year
following the calendar year in which the Annuitant attains age 70 1/2.
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 NonQualified Contract. See
"Death Proceeds." Failure to comply with the minimum distribution rules will
result in the imposition of a penalty tax of 50% of the amount by which the
minimum distribution required exceeds the actual distribution.
TAX FREE ROLLOVERS. Amounts may be transferred in a tax-free rollover from a
tax-qualified plan to an IRA (and from one IRA to another IRA) if certain
conditions are met. All taxable distributions ("eligible rollover
distributions") from tax qualified plans are eligible to be rolled over 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) of the Code.
Rollovers may be accomplished in two ways. First, an eligible rollover
distribution may be paid directly to an IRA (a "direct rollover"). Second, the
distribution may be paid directly to the Annuitant and then, within 60 days of
receipt, the amount may be rolled over to an IRA. However, any amount that was
not distributed as a direct rollover will be subject to 20% income tax
withholding.
ROTH IRAS
Beginning in 1998, 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 limitation 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 $15,000 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.
36
<PAGE>
Qualified distributions from Roth IRAs are entirely tax free. A qualified
distribution requires that the individual has held the Roth IRA for at least
five years and, in addition, that 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, subject to $10,000 lifetime maximum, for
the individual, a spouse, child, grandchild, or ancestor.
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. For rollovers in 1998, the
individual may pay that tax ratably in 1998 and over the succeeding three
years. There are no similar limitations on rollovers from a Roth IRA to
another Roth IRA.
SIMPLIFIED EMPLOYEE PENSION PLANS
Employees and 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. However, total employer contributions are limited to
15% of an employee's compensation or $30,000, whichever is less.
SIMPLE RETIREMENT ACCOUNTS
Employees and employers may establish an IRA plan known as a simple retirement
account ("SRA"), if certain requirements are met. Under an SRA, the employer
contributes elective employee compensation deferrals up to a maximum of $6,000
a year. The employer must, in general, make a fully vested matching
contribution for employee deferrals up to 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. Such
purchase payments are also excluded from the current income of the employee.
DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE. To the extent that
purchase payments are includible in an employee's taxable income, they (less
any amounts previously received that were not includible in the employee's
taxable income) represent his or her "investment in the Contract." Amounts
received prior to the Annuity Commencement Date under a Contract 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 Contract 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 employee's investment in the Contract), to another
tax-qualified plan or 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
in the case of certain lump-sum distributions that are not rolled over to
another plan or IRA.
37
<PAGE>
A 10% penalty tax is imposed on the amount includible in gross income from
distributions that occur before the employee's attaining age 59 1/2 and that
are not made on account of death or disability, with certain exceptions. These
exceptions include distributions that are (1) part of a series of
substantially equal periodic payments 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, (2) made after the employee's separation from service on account
of early retirement after attaining age 55, or (3) made to an alternate payee
pursuant to a qualified domestic relations order.
ANNUITY PAYMENTS. A portion of annuity payments received under Contracts in
connection with 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
Contracts - Taxation of Annuity Payments," except that the number of expected
payments is determined under a provision in the Code. Distributions of minimum
amounts specified by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee attains age 70
1/2 or retires, if later. Failure to comply with the minimum distribution
rules will result in the imposition of 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.
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.
These types of programs allow individuals to defer receipt of up to 100% of
compensation that would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts, as well as earnings
thereon. Purchase payments made by the employer, however, are not immediately
deductible by the employer, and the employer is currently taxed on any
increase in Account Value.
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.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual 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. The payee may, however,
elect to have no income tax withheld by submitting a withholding exemption
certificate to us.
38
<PAGE>
In some cases, if you own more than one Qualified annuity contract or
certificate, such contracts or certificates may be aggregated for purposes of
determining whether the federal tax law requirement for minimum distributions
after age 70 1/2, or retirement in appropriate circumstances, has been
satisfied. If, under this aggregation procedure, you are relying on
distributions pursuant to another annuity contract or certificate to satisfy
the minimum distribution requirement under a Qualified Certificate issued by
us, 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 AGNY AND SEPARATE ACCOUNT E
AGNY is taxed as a life insurance company under the Code. The operations of
Separate Account E are part of the total operations of AGNY and are not taxed
separately. Under existing federal income tax laws, AGNY is not taxed on
investment income derived by Separate Account E (including realized and
unrealized capital gains) with respect to the Certificates. AGNY reserves the
right to allocate to the Certificates any federal, state or other tax
liability that may result in the future from maintenance of Separate Account E
or the Certificates.
Certain Series may elect to pass through to AGNY any taxes withheld by foreign
taxing jurisdictions on foreign source income. Such an election will result in
additional taxable income and income tax to AGNY. The amount of additional
income tax, however, may be more than offset by credits for the foreign taxes
withheld which are also passed through. These credits may provide a benefit to
AGNY.
DISTRIBUTION ARRANGEMENTS
The Certificates will be sold by individuals who, in addition to being
licensed by state insurance authorities to sell the Certificates of AGNY, are
also registered representatives of American General Securities Incorporated
("AGSI"), the principal underwriter of the Certificates, or registered
representatives of Van Kampen American Capital Distributors, Inc. or other
broker-dealer firms or representatives of other firms that are exempt from
broker-dealer regulation. AGSI, Van Kampen American Capital Distributors, Inc.
and any such other 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 a wholly-owned subsidiary of American General Life
Insurance Company. AGSI's principal business address is 2727 Allen Parkway,
Houston, Texas 77019-2191. The interests under the Certificates are offered on
a continuous basis. AGSI and Van Kampen American Capital Distributors, Inc.
have entered into certain revenue and cost-sharing arrangements in connection
with the marketing of the Certificates.
AGNY compensates Van Kampen American Capital Distributors, Inc. ("VKAC
Distributors") and other broker-dealers that sell the Certificates according
to one or more compensation schedules. The schedules provide for commissions
of up to 6.0% of first year purchase payments received pursuant to the
Certificates. AGNY also has agreed to pay VKAC Distributors for its
promotional activities such as the solicitation of selling group agreements
between broker-dealers and AGNY, agent appointments with AGNY, printing and
development of sales literature to be used by AGNY appointed agents as well as
related marketing support and related special promotional campaigns. From time
to time, VKAC Distributors may engage in special promotions resulting in the
payment by VKAC Distributors of additional compensation to one or more of the
broker-dealers that sell the
39
<PAGE>
Certificates. None of these distribution expenses results in any additional
charges under the Certificates that are not described under "Charges under the
Certificates."
LEGAL MATTERS
The legality of the Certificates described in this Prospectus has been passed
upon by Sandra M. Smith, Esquire, Associate General Counsel of AGNY. Freedman,
Levy, Kroll & Simonds, Washington, D.C., has advised AGNY on certain federal
securities law matters.
OTHER INFORMATION ON FILE
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to the Certificates
discussed in this Prospectus. Not all of the information set forth in the
Registration Statement and exhibits thereto has been included in this
Prospectus. Statements contained in this Prospectus concerning the
Certificates and other legal instruments are intended to be summaries. For a
complete statement of the terms of these documents, reference should be made
to the instruments filed with the Securities and Exchange Commission.
A Statement is available from us on request. Its contents are as follows:
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
General Information .................................................. 2
Regulation and Reserves .............................................. 2
Independent Auditors.................................................. 2
Services.............................................................. 3
Principal Underwriter................................................. 3
Annuity Payments...................................................... 3
A. Gender of Annuitant............................................. 3
B. Misstatement of Age or Sex and Other Errors .................... 3
Change of Investment Adviser or Investment Policy .................... 4
Performance Data for the Divisions ................................... 4
Effect of Tax-Deferred Accumulation................................... 8
Financial Statements.................................................. 8
Index to Financial Statements ........................................ 9
40
<PAGE>
(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS.)
Generations VARIABLE ANNUITY
Disclosures and Forms Section
<TABLE>
INDEX
<S> <C>
Individual Retirement Annuity Disclosure Statement and
Financial Disclosure................................................... page 1
1035 Exchange Instructions............................................... page 9
Qualified and Non-Qualified Funds Transfer Instructions.................. page 10
Absolute Assignment Form................................................. page 11
Qualified Funds Transfer Form............................................ page 13
Non-Qualified Funds Transfer Form........................................ page 14
Change Request Form...................................................... page 15
Systematic Withdrawals Request Form...................................... page 17
Automatic Additional Purchase Payment Form............................... page 19
Change of Beneficiary Form............................................... page 21
Statement of Additional Information Request Form......................... page 23
<PAGE>
</TABLE>
(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 AMERICAN
GENERAL LIFE INSURANCE COMPANY OF NEW YORK AFTER DECEMBER 31, 1997.
This Disclosure Statement is not part of your 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:
American General Life Insurance Company of New York
Administrative Center
P. O. Box 1401
Houston, Texas 77251-1401
(Phone No. (800) 281-8289).
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 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.
Page 1
<PAGE>
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:
<TABLE>
<CAPTION>
Threshold Level
For taxable years beginning in : ---------------
Single Married (filing jointly)
------ -------
<S> <C> <C>
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
</TABLE>
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
Page 2
<PAGE>
(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
-------------------- x Maximum Allowable Deduction = Deduction Limit
$20,000
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 $31,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $31,619
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
---------------- x $2,000 = $676 (rounded to $680)
$10,000
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:
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
---------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
Page 3
<PAGE>
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.
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).
Page 4
<PAGE>
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).
<TABLE>
<CAPTION>
Year Deductible Non-Deductible
<S> <C> <C>
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).
</TABLE>
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:
<TABLE>
<S> <C>
Total non-deductible contributions $ 2,400
Total account balance in the IRAs, before distributions $ 9,000 x $3,000 = $800
</TABLE>
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.
Page 5
<PAGE>
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 ss.1.401(a)(31)-1, ss.1.402(c)-2T and
ss.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 ss.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.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code ss.408(b)(3) and ss.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 ss.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.
Page 6
<PAGE>
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as
that term is defined in Code ss.4975.
Borrowing any money from this IRA would, under Code ss.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 ss.408(e)(4), cause the portion so
used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code ss.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.
IRS APPROVAL
Your certificate and IRA endorsement have been approved 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. 96033N)
This Financial Disclosure is applicable to IRAs using a Generations Variable
Annuity (certificate form numbers 96033N) purchased from American General Life
Insurance Company of New York on or after February 1, 1998.
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.
Page 7
<PAGE>
(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;
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 0.15% 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 1.75%.
Page 8
<PAGE>
1035 EXCHANGE INSTRUCTIONS
1. Processing Rules
A 1035 exchange is one that qualified under IRC Section 1035 guidelines.
A 1035 exchange is for non-qualified funds only.
The Home Office does not offer tax advice. Applicants and contractowners
should contact their own tax advisors.
To qualify as a 1035 exchange, the following contract types are
required:
* An annuity or life insurance contract in exchange for an annuity
contract.
In addition, the following contract type exchanges are required:
* Individual contract to individual contract;
* Joint contract to joint contract; and
* Two individual contracts on same annuitant(s) with the same
owner(s) to individual or joint contract.
The annuitant and owner on the exchanged contract must be the same on
the new contract.
To qualify as a full 1035 exchange, all existing cash value must be
transferred to the new contract and none of the cash value can be
refunded.
Money from a 1035 exchange cannot be added to an existing annuity
contract_it must fund a new contract.
2. Forms Requirements
* Annuity Application (form number which is approved in the state of
application)
* Replacement form as required by state, if applicable
* Absolute Assignment form (AGNY 8714-1) 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 contract must sign the Annuity Application
and the Absolute Assignment Form (AGNY 8714-1).
If the owner is a trust, then the trustee's signature and title are
required on the application and the Absolute Assignment Form (AGNY
8714-1).
Page 9
<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, administration of qualified plans
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/contract
statement.
* Qualified Funds Transfer Form (AGNY 6742-1) if the funds are
qualified and the Home Office is to request the funds.
* Non-Qualified Funds Transfer Authorization (AGNY 8190-1) if the
funds are non-qualified and coming from a non-insurance/annuity
contract and the Home Office 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 contract (age 15 or older) must
sign the Annuity Application (if different individuals, both must sign).
The owner must sign the Qualified Funds Transfer Form (AGNY 6742-1) or
the Non-Qualified Funds Transfer Authorization (AGNY 8190-1) (whichever
is applicable).
If the owner is a trust, then the trustee's signature and title are
required on all appropriate forms.
Page 10
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
Subsidiaries of American General Corporation
P.O. Box 1401 Houston, Texas 77251-1401
[American General Logo]
GENERATIONS(TM)
===========
Variable Annuity
ABSOLUTE ASSIGNMENT
TO EFFECT A SECTION 1035(a) EXCHANGE AND ROLLOVER OF A LIFE INSURANCE OR AN
ANNUITY CONTRACT
-----------------------------------------------------------------------------
TO BE COMPLETED ON THE EXISTING CONTRACT:
Contract No.:________________________ Cash Value:_________________________
Annuitant/Insured:___________________ Insurer:____________________________
Owner:_______________________________ Address_____________________________
of Insurer:_________________________
-----------------------------------------------------------------------------
I hereby assign and transfer to American General Life Insurance Company of New
York all rights, title and interest of every nature and transfer to character
in and to the contract described above (contract) in an exchange intended to
qualify under Section 1035(a) of the Internal Revenue Code. In accordance with
Section 1035 and its regulations, the Owner and Annuitant on the contract
described above will be the same as on the contract to be issued.
I understand that if the Company underwrites, approves my application for, and
issues to me a new annuity contract which I accept on the life of the same
annuitant in the contract, then the Company intends to surrender the contract
for its cash value.
I UNDERSTAND THAT AS OF THE DATE OF SURRENDER OF THE CONTRACT BY THE COMPANY,
THE CONTRACT WILL NO LONGER PROVIDE ANY COVERAGE.
I UNDERSTAND THAT UPON RECEIPT OF THE SURRENDER VALUE BY THE COMPANY, THE
PROCEEDS WILL BE APPLIED AS AN INITIAL OR ADDITIONAL PREMIUM FOR THE NEW
ANNUITY CONTRACT. The first premium must be paid no later than when the new
contract is delivered. The contract assigned shall not be considered a premium
until the cash surrender value is actually received by the Company. A contract
will not be in effect until the first premium is paid while all statements and
answers in all parts of my application remain correct.
I understand that by executing this assignment, I irrevocably waive all
rights, claims and demands under the contract.
I represent and agree that the Company is furnished this form and is
participating in this transaction at my specific request and as an
accommodation to me. I represent and agree that the Company has made no
representations concerning my tax treatment under Internal Revenue Code
Section 1035 or otherwise.
The Company assumes no responsibility or liability for the undersigned's tax
treatment under Internal Revenue Code Section 1035 or otherwise.
I represent and warrant that no person, firm or corporation has a legal or
equitable interest in the contract, except the undersigned and that no
proceedings of either a legal or equitable nature have been instituted or are
pending against undersigned.
I UNDERSTAND THAT THE FIRST PREMIUM MUST BE PAID NO LATER THAN THE TIME THE
CONTRACT APPLIED FOR IS DELIVERED AND THAT THE CASH VALUE OF THE ASSIGNED
CONTRACT SHALL NOT BE CONSIDERED PART OF THE PREMIUM UNTIL THE CASH SURRENDER
VALUE IS ACTUALLY RECEIVED BY THE COMPANY. I FURTHER UNDERSTAND THAT AN
ANNUITY CONTRACT WILL NOT COME INTO FORCE AS A RESULT OF THIS ASSIGNMENT.
Signed this______day of___________, 19___ at_________________________________
___________________________________ _____________________________________
WITNESS SIGNATURE OF OWNER(ASSIGNEE)
___________________________________ _____________________________________
WITNESS SIGNATURE OF CO-OWNER
(IF APPLICABLE)
-----------------------------------------------------------------------------
HOME OFFICE or Administrative Center USE ONLY
Received and duplicate filed at the Administrative Center of the Company at
2727-A Allen Parkway, Houston, Texas 77019.
By________________________, ___________________________
(TITLE)
Page 11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 12
<PAGE>
[American General Logo]
GENERATIONS(TM)
===========
Variable Annuity
QUALIFIED FUNDS TRANSFER FORM
For use by customers transferring Qualified funds (IRA, 401(k), pension plan,
or other qualified deferred compensation) to American General Life Insurance
Company of New York when funds to be invested are not in a life insurance
contract or policy_THIS FORM IS NOT TO BE USED FOR NON-QUALIFIED 1035
EXCHANGES. Disclosure forms required of the Insurer (i.e., IRA Disclosure,
etc.) must be delivered to the customer.
-----------------------------------------------------------------------------
CURRENT TRUSTEE OR CUSTODIAN
Name:______________________________________________________________
Address:___________________________________________________________
Phone Number:______________________________________________________
-----------------------------------------------------------------------------
PARTICIPANT
Name:______________________________________________________________
Account Number:____________________________________________________
Sum to be transferred: [ ]Full Account Balance [ ]Other___________
-----------------------------------------------------------------------------
NOTICE TO CURRENT TRUSTEE OR CUSTODIAN
You are directed to convert to cash the assets held for the Participant under
the IRC 408(a) (Individual Retirement Annuity or Account) or other qualified
account indicated above and transfer the funds to American General Life
Insurance Company of New York as described under "Transfer Information."
Signature--Participant:_______________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company of New
York
for the benefit (FBO) of______________________________________
Print Name of Participant
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company of New York will accept on behalf of
the above named Participant, the transfer of funds from the above account and
deposit said funds into an IRC 408(b) Individual Retirement Annuity or other
qualified account as directed with American General Life Insurance Company of
New York, subject to the terms and conditions of said annuity or account.
By:_____________________________________________/_________________
Authorized Representative of American General Date
Life Insurance Company of New York
If this is a full account balance transfer, Participants who have reached
their required distribution age, 701/2 (or older) must take any required
distribution prior to completing this transaction.
AGNY 6742-1
Page 13
<PAGE>
[American General Logo]
GENERATIONS(TM)
===========
Variable Annuity
NON-QUALIFIED FUND TRANSFER AUTHORIZATION
For use by customers transferring Non-Qualified funds from a Financial
Institution or Mutual Fund to American General Life Insurance Company of New
York. THIS FORM IS NOT TO BE USED FOR 1035 EXCHANGES.
THIS FORM IS NOT TO BE USED FOR 1035 EXCHANGES
-----------------------------------------------------------------------------
CURRENT FINANCIAL INSTITUTION
Name: ______________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
Phone No.: _________________________________________________________
-----------------------------------------------------------------------------
ACCOUNT OWNER
Name: ______________________________________________________________
Account/Certificate Number(s): 1. __________________________________
2.______________________________________________
3.______________________________________________
-----------------------------------------------------------------------------
NOTICE TO CURRENT FINANCIAL INSTITUTION
I hereby request and direct the following action to be taken in order to
transfer the proceeds of the account/certificate identified above (Complete
number 1, 2, or 3 as appropriate.):
1.[ ] Certificate of Deposit Withdrawal:
[ ] Full [ ] Partial $____________________
Indicate Amount
(Complete a or b.)
a.[ ] On the Maturity date of___/___/___ .
b.[ ] Upon receipt of this request.
2. Fully liquidate Mutual Fund Account (copy of recent
statement attached).
3.[ ] Other type of Account (e.g. savings, checking)
[ ]Full [ ]Partial $____________________
Indicate Amount
Signature of Account Owner:_________________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company of New
York
for the benefit (FBO) of______________________________________
Print Name of Participant
Funds should be sent to:
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company of New York will accept on behalf of
the above named Participant, the transfer of funds from the above account(s)
and deposit said funds in a flexible premium deferred annuity or other
account as directed with American General Life Insurance Company of New York,
subject to the terms and conditions of said annuity or account.
By:_____________________________________________/_________________
Authorized Representative of American General Date
Life Insurance Company of New York
8878-1
Page 14
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Syracuse, NY
CHANGE REQUEST
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
GENERATIONS(TM)
===========
Variable Annuity
-----------------------------------------------------------------------------
1. [X] CERTIFICATE IDENTIFICATION (COMPLETE SECTION 1 AND 6 FOR ALL
REQUESTS.) INDICATE CHANGE OR REQUEST DESIRED BELOW.
CERTIFICATE #:______________________ ANNUITANT:______________________
CERTIFICATE OWNER:_________________________________________________
ADDRESS: __________________________________________________________
__________________________________________________________
[ ] Check here if change of address
S.S. NO. OR TAX I.D. NO.:___/___/___ Phone Number:(___)___________
-----------------------------------------------------------------------------
2. [ ] DOLLAR COST AVERAGING
Dollar-cost average [ ] $______ OR [ ] %______% (whole % only)
Begin Date:__/__/__
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 division(s) as indicated. (Use only
dollars OR percentages)
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% Other________________ ____%
Equity Growth (132) ____% Mid Cap Value (136) ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
-----------------------------------------------------------------------------
3. [ ] AUTOMATIC REBALANCING ($25,000 MINIMUM)
Use whole percentages. Total must equal 100%
[ ]ADD [ ]CHANGE automatic rebalancing of variable investments to the
percentage allocations indicated below:
[ ]Quarterly [ ]Semiannually [ ]Annually (Based on certificate anniversary)
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% Other________________ ____%
Equity Growth (132) ____% Mid Cap Value (136) ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
[ ]STOP automatic rebalancing
NOTE: Automatic rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
4. [ ] CHANGE ALLOCATION OF FUTURE PURCHASE PAYMENTS
Use whole percentages. Total must equal 100%
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% 1-Year Guarantee Period ____%
Equity Growth (132) ____% Mid Cap Value (136) ____% Other________________ ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
NOTE: A change to the allocation of future purchase payments, will not
alter Automatic Rebalancing allocations.
-----------------------------------------------------------------------------
5. [ ] TRANSFER OF ACCUMULATED VALUES
(Available by either $ or % allocation)
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
<TABLE>
<S> <C>
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
</TABLE>
NOTE: If a transfer is elected and Automatic Rebalancing is active on your
account, you may want to consider changing the Automatic Rebalancing
allocations (Section 3). Otherwise, the Automatic Rebalancing will
transfer funds in accordance with instructions on file.
-----------------------------------------------------------------------------
6. [ ] AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS.)
CERTIFICATION: Under penalties of perjury, I certify: (1) that the number
shown on this form is my correct taxpayer identification number; and (2) that
I am not subject to backup withholding under Section 3406(a)(1)(c) of the
Internal Revenue Code.
The Internal Revenue Service does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
_________________ _____________________________________
DATE SIGNATURE OF OWNER(S)
-----------------------------------------------------------------------------
AGNY 8878-1
Page 15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 16
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Syracuse, NY
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
GENERATIONS(TM)
===========
Variable Annuity
SYSTEMATIC WITHDRAWALS REQUEST
-----------------------------------------------------------------------------
1. [X] CERTIFICATE IDENTIFICATION
CERTIFICATE #:______________________ ANNUITANT:______________________
CERTIFICATE OWNER:_________________________________________________
ADDRESS: __________________________________________________________
__________________________________________________________
[ ] Check here if change of address
S.S. NO. OR TAX I.D. NO.:___/___/___ Phone Number:(___)___________
-----------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL ELECTION (Minimum check amount is $100)
(USE EITHER DOLLARS OR WHOLE PERCENTAGES.)
(DOLLARS MUST TOTAL SPECIFIED AMOUNT, OR PERCENTAGES MUST TOTAL 100%.)
WITHDRAWALS PRIOR TO AGE 59 1/2 MAY BE SUBJECT TO AN IRS PENALTY.
Consult your tax advisor for additional information.
HOW OFTEN SHOULD PAYMENTS BE MADE:
[ ]MONTHLY [ ]QUARTERLY [ ]SEMIANNUALLY [ ]ANNUALLY
First check to be processed on ____/____/____. Subsequent checks will be
MM DD YY
processed at the next payout dates. on the SAME DAY of the month elected
as your start date. (Date must be between the 5th and 24th of the month
and at least 30 days after issue date.)
SPECIFIED DOLLAR AMOUNT $_______________ (Not to be used for partial
withdrawal request)
Unless specified below, withdrawals will be taken from the divisions as
they are currently allocated in your contract.
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% 1-Year Guarantee Period ____%
Equity Growth (132) ____% Mid Cap Value (136) ____% Other________________ ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
NOTE: The systematic withdrawal option terminates on the certificate's
annuity date. You may cancel the systematic withdrawal process at any time
by notifying AGNY in writing.
-----------------------------------------------------------------------------
3. MAILING OF YOUR SYSTEMATIC WITHDRAWEL
[ ] Mail to owner at address in Section 1. [ ] Mail to name/address other
than owner (complete information below:
__________________________________________________________________________
INDIVIDUAL OR BANK/FIRM NAME
__________________________________________________________________________
ADDRESS
__________________________________________________________________________
CITY/STATE/ZIP
__________________________________________________________________________
IF BANK/FIRM, PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT
-----------------------------------------------------------------------------
3. MAILING OF YOUR SYSTEMATIC WITHDRAWEL
[ ] Mail to owner at address in Section 1. [ ] Mail to name/address other
than owner (complete information below:
__________________________________________________________________________
INDIVIDUAL OR BANK/FIRM NAME
__________________________________________________________________________
ADDRESS
__________________________________________________________________________
CITY/STATE/ZIP
__________________________________________________________________________
IF BANK, PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT
-----------------------------------------------------------------------------
4. NOTICE OF WITHHOLDING
The taxable portion of the distribution you receive from your annuity
certificate is subject to federal income tax withholding unless you elect
not to have withholding apply. Withholding of state income tax may also be
required by your state of residence. You may elect not to 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.
[ ] I do NOT want income tax withheld from each distribution.
[ ] I do want _____% or [ ] 10% income tax withheld from each distribution.
-----------------------------------------------------------------------------
5. AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS)
CERTIFICATION: Under penalties of perjury, I certify: (1) the number shown
on this form is my correct taxpayer identification number; and (2) that I
am not subject to backup withholding under Section 3406(a)(1)(c) of the
Internal Revenue Code. The Internal Revenue Service does not require your
consent to any provision of this document other than the certifications
required to avoid backup withholding.
Dated __________________ this ______ day of ___________ 19 ___________
____________________________
CERTIFICATE OWNER
_______________________________ ____________________________
WITNESS JOINT OWNER (if applicable)
AGNY 8879-1
Page 17
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 18
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Syracuse, NY
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
GENERATIONS(TM)
===========
Variable Annuity
AUTOMATIC ADDITIONAL PURCHASE PAYMENT
Certificate #:_______________________________________
Annuitant:___________________________________________________________________
Certificate Owner(s):________________________________________________________
(Name and ___________________________________________________________________
Address:)
___________________________________________________________________
Amount of Investment:______________________________
(Minimum $100 per certificate)
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Date of 1st withdrawal:_____/______/______
Name of Bank:_____________________________________________________
Account Number:___________________________________________________
ATTACH A VOIDED CHECK
___________________________________________________________________________
| |
| |
| |
| |
| |
| |
| |
| |
| |
|___________________________________________________________________________|
PLEASE SIGN AND DATE THE AUTHORIZATION BELOW.
I, the undersigned bank account owner, hereby authorize and request
American General Life Insurance Company of New York ("Company") to
initiate electronic or other commercially accepted type debits against the
indicated bank account in the depository institution named above
("Depository") for purchase payments due on the contract listed above. I
hereby agree to indemnify and hold the Company harmless from any loss,
claim, or liability of any kind by reason or dishonor of any debit.
I agree that this Authorization may be terminated by me or the Company at
any time and for any reason by providing written notice of such
termination to the non-terminating party and may be terminated by the
Company immediately if any debit is not honored by the Depository named
above for any reason.
______________________________________ __________________________
Signature of Bank Account Owner(s) Date
AGNY 8877-1
Page 19
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
Page 20
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Syracuse, NY
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
GENERATIONS(TM)
===========
Variable Annuity
CHANGE OF BENEFICIARY
(Before completing this form
please read instructions below and on reverse side.)
_____________________________________________________________________________
| |
Certificate No. | 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 Certificate
Owner, and if this form or the 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 survive the deceased
Annuitant or Certificate 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 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 Certificate
Owner.
I represent and certify that no insolvency or bankruptcy proceedings are
now pending against me.
Dated at___________________________this________day of_____________, 19_____.
_______________________________________ ___________________________________
WITNESS CERTIFICATE OWNER
_______________________________________ ___________________________________
WITNESS Additional Signature if Required
=============================================================================
This change of beneficiary and/or method of settlement has been approved
by the Company at its Home Office or its Administrative Office, and
presentation of the Certificate for endorsement has been waived.
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
DATE OF APPROVAL:_____________ BY:___________________________________________
AGNY 8876-1
Page 21
<PAGE>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
1. All signatures must be in INK and should appear exactly as the name is
given in the certificate. A separate election for change of beneficiary
must be completed for each 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 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.
<TABLE>
<S> <C>
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 Jane Doe, wife of the Annuitant,
Beneficiaries if living; otherwise to John Doe and
Mary Doe, children of the Annuitant,
equally, or to the survivor.
4. One Primary and One Contingent Jane Doe, wife of the Annuitant, if
Beneficiary living; otherwise to John Doe, son.
5. Two Primary and One Contingent John Doe and Mary Doe, parents of the
Beneficiaries Annuitant, equally, or to the
survivor; otherwise, to Jane Doe,
sister of the Annuitant.
6. Wife, Primary; Named and Jane Doe, wife of the Annuitant,
Un-named Children, if living; otherwise to Henry Doe,
Contingent Beneficiaries 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 Mary Doe, wife of the Annuitant,
and Step-Children if living; otherwise, Henry Doe,
Contingents son of 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 Jane Doe, wife of the Annuitant, if
with Second Contingents 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.
</TABLE>
AGNY 8876-1
Page 22
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Syracuse, New York
GENERATIONS(TM)
===========
Variable Annuity
To Obtain a Statement of Additional Information, please complete the form
below and mail to:
American General Life Insurance Company of New York
Attn: Annuity Correspondence Unit
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
Page 23
AGNY 8953
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
SEPARATE ACCOUNT E
GENERATIONS(TM)
COMBINATION FIXED AND VARIABLE DEFERRED ANNUITY CERTIFICATES
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE
300 SOUTH STATE STREET, P.O. BOX 1456, SYRACUSE, NY 13201-1456
1-800-281-8289; (315) 471-1121
STATEMENT OF ADDITIONAL INFORMATION
Dated February __, 1998
This Statement of Additional Information ("Statement") is not a prospectus. It
should be read with the Prospectus for American General Life Insurance Company
of New York Separate Account E ("Separate Account E"), dated February __,
1998, concerning flexible payment deferred individual annuity Generations(TM)
Certificates investing in certain Series of the Van Kampen American Capital
Life Investment Trust and the Morgan Stanley Universal Funds, Inc. You can
obtain a copy of the Prospectus for the Certificates, and any supplements
thereto, by contacting American General Life Insurance Company of New York
("AGNY") at the address or telephone numbers given above. You have the option
of receiving benefits on a fixed basis through AGNY's Fixed Account or on a
variable basis through AGNY's Separate Account E. Terms used in this Statement
have the same meanings as are defined in the Prospectus under the heading
"Glossary."
TABLE OF CONTENTS
General Information ........................................................ 2
Regulation and Reserves .................................................... 2
Independent Auditors ....................................................... 2
Services ................................................................... 3
Principal Underwriter ...................................................... 3
Annuity Payments ........................................................... 3
A. Gender of Annuitant ................................................... 3
B. Misstatement of Age or Sex and Other Errors ........................... 3
Change of Investment Adviser or Investment Policy .......................... 4
Performance Data for the Divisions ......................................... 4
Effect of Tax-Deferred Accumulation ........................................ 8
Financial Statements ....................................................... 8
Index to Financial Statements .............................................. 9
1
<PAGE>
GENERAL INFORMATION
AGNY is a stock life insurance company established under the laws of the state
of New York. The Company is a wholly-owned subsidiary of American General Life
Insurance Company ("AGL"), which in turn is a wholly-owned subsidiary of AGC
Life Insurance Company, a Missouri corporation ("AG Missouri") 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
AGNY is subject to regulation and supervision by the insurance departments of
the states in which 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. AGNY's operations and accounts
are subject to periodic examination by insurance regulatory authorities.
Under insurance guaranty fund laws in most states, insurers doing business
therein can be assessed up to prescribed limits for insurance contract losses,
if covered, incurred by insolvent companies. The amount of any future
assessments of AGNY under these laws cannot be reasonably estimated. Most of
these laws do provide, however, that an assessment may be excused or deferred,
if it would threaten an insurer's own financial strength.
Although the federal government generally has not directly regulated the
business of insurance, 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 have under consideration various insurance regulatory
matters, which could ultimately result in direct federal regulation of some
aspects of the insurance business. It is not possible to predict whether this
will occur or, if so, what the effect on AGNY would be.
Pursuant to state insurance laws and regulations, AGNY is obligated to carry
on its books, as liabilities, reserves to meet its obligations under
outstanding insurance contracts. These reserves are based on assumptions
about, among other things, future claims experience and investment returns.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if AGNY were to incur claims or expenses at rates
significantly higher than expected, for example, due to acquired immune
deficiency syndrome or other infectious diseases or catastrophes, or
significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1996 financial statements of AGNY included in this Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report appearing elsewhere herein. Such financial statements have been
included in this Statement in reliance upon such report of Ernst &
2
<PAGE>
Young LLP given upon the authority of such firm as experts in accounting and
auditing. Ernst & Young LLP is located at One Houston Center, 1221 McKinney,
Suite 2400, Houston, TX 77010-2007. There are no current financial statements
for Separate Account E in that Separate Account E has been inactive since
1992, and from that time until February __, 1998, Separate Account E has
neither supported any contracts or certificates, nor held any assets of any
kind.
SERVICES
An Administrative Service Agreement ("Agreement") exists between AGNY and AGL,
its parent company under which AGL performs certain administrative functions
for AGNY and Separate Account E. The Services are performed by AGL at cost.
The Agreement has been approved by the New York Insurance Department.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal underwriter
with respect to the Contracts. AGSI also serves as principal underwriter to
AGL's Separate Account A, Separate Account D, and Separate Account VL-R, which
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 with respect to Separate Account E, AGSI expects to
receive from AGNY less than $1,000 of compensation for each of the next three
fiscal years.
The securities offered pursuant to the Certificates are offered on a
continuous basis.
ANNUITY PAYMENTS
A. 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, there will be no differences between males and females in any
jurisdiction, including Montana, where such differences are not permitted. We
will also make available Certificates with no such differences in connection
with certain employer-sponsored benefit plans. Employers should be aware that,
under most such plans, Certificates that make distinctions based on gender are
prohibited by law.
B. MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of an Annuitant has been misstated to us, any amount payable
will be that which the purchase payments paid would have purchased at the
correct age and sex. If we made any overpayments because of incorrect
information about age or sex 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. The amount of any adjustment will be
credited or charged with interest at the assumed interest rate used in the
Certificate's annuity tables.
3
<PAGE>
CHANGE OF INVESTMENT ADVISER OR INVESTMENT POLICY
Unless otherwise required by law or regulation, neither the investment adviser
to any Series nor any investment policy may be changed without the consent of
AGNY. If required, approval of or change of any investment objective will be
filed with the insurance department of each state where a Certificate has been
delivered. The Owner (or, after annuity payments start, the payee) will be
notified of any material investment policy change that has been approved. You
will be notified of any investment policy change prior to its implementation
by Separate Account E, if your comment or vote is required for such change.
PERFORMANCE DATA FOR THE DIVISIONS
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. Each Division's
average annual total return quotation is computed in accordance with a
standard method prescribed by the SEC. The average annual total return for a
Division for a specific period is found by first taking a hypothetical $1,000
investment in the Division's Accumulation Units on the first day of the period
at the maximum offering price, which is the Accumulation Unit value per unit
("initial investment"), and computing the ending redeemable value ("redeemable
value") of that investment at the end of the period. The redeemable value
reflects the effect of the applicable Surrender Charge that may be imposed at
the end of the period as well as all other recurring charges and fees
applicable under the Certificate to all Owner accounts. Such other charges and
fees include the Mortality and Expense Risk Charge, the Administrative Expense
Charge, and the Annual Certificate Fee. Any premium taxes are not reflected.
The redeemable value is then divided by the initial investment and this
quotient is taken to the Nth root (N represents the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage.
TOTAL RETURN CALCULATIONS (WITHOUT SURRENDER CHARGE OR ANNUAL CONTRACT FEE)
Each Division may also advertise its non-standardized total return, which is
calculated in the same manner and for the same time periods as the
standardized average annual total returns described immediately above, except
that the redeemable value does not reflect the deduction of any applicable
Surrender Charge that may be imposed at the end of the period, since it is
assumed that the Certificate will continue through the end of each period, or
the deduction of the Annual Certificate Fee. If reflected, these charges would
reduce the performance results presented.
CUMULATIVE TOTAL RETURN CALCULATIONS
No standardized formula has been prescribed by the SEC for calculating
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, which 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 or any applicable Surrender Charge or the Annual
Certificate Fee. Cumulative total return quotations reflect changes in
Accumulation Unit value and are calculated by finding the cumulative rates of
return of the hypothetical initial investment over various periods, according
to the following formula, and then expressing that as a percentage:
4
<PAGE>
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
The tables below provide hypothetical performance information for certain of
the available Divisions of Separate Account E 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 all Separate Account charges and deductions, except for any premium
taxes, with respect to the Certificates, that hypothetically would have been
made had the Separate Account, with respect to the Certificates, been invested
in these Series for all the periods indicated.
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
<S> <C> <C> <C>
Domestic Income (0.90)% 8.02% 6.39%
Emerging Growth 8.93% N/A 18.03%
Enterprise 16.95% 12.00% 9.56%
Government (5.39)% 3.24% 5.33%
Money Market (2.61)% 1.84% 4.12%
Real Estate Securities 32.46% N/A 27.22%
</TABLE>
Hypothetical Historical Total Returns
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
<S> <C> <C> <C>
Domestic Income 5.18% 8.61% 6.45%
Emerging Growth 15.02% N/A 21.44%
Enterprise 23.05% 12.52% 9.60%
Government 0.69% 3.94% 5.39%
Money Market 3.47% 2.58% 4.19%
Real Estate Securities 38.57% N/A 30.57%
</TABLE>
5
<PAGE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
<S> <C> <C> <C>
Domestic Income 5.18% 51.12% 77.26%
Emerging Growth 15.02% N/A 33.76%
Enterprise 23.05% 80.34% 167.60%
Government 0.69% 21.33% 75.68%
Money Market 3.47% 13.56% 55.35%
Real Estate Securities 38.57% N/A 49.10%
</TABLE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS INCEPTION*
<S> <C> <C> <C>
Domestic Income $1,051.83 $1,511.17 $1,772.61
Emerging Growth $1,150.17 N/A $1,337.59
Enterprise $1,230.46 $1,803.37 $2,676.01
Government $1,006.89 $1,213.31 $1,756.76
Money Market $1,034.68 $1,135.62 $1,553.53
Real Estate Securities $1,385.65 N/A $1,490.98
<FN>
* The inception dates for each Series funding the Divisions are: April 7,
1986 for the Money Market, Enterprise, and Government Divisions;
November 4, 1987 for the Domestic Income Division; July 3, 1995 for the
Emerging Growth Division and the Real Estate Securities Division.
</FN>
</TABLE>
YIELD CALCULATIONS
The yields for the Domestic Income Division and the Government Division are
each computed in accordance with a standard method prescribed by the SEC. The
hypothetical yields for the Domestic Income Division and the Government
Division, based upon the one month period ended December 31, 1996, were 7.29%
and 5.23%, respectively. The yield quotation is computed 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:
a - b 6
YIELD = 2[(------- +1) - 1]
cd
a = net dividends and interest earned during the period by the Portfolio
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
6
<PAGE>
The yield of each Division reflects the deduction of all recurring fees and
charges applicable to each Division such as the Mortality and Expense Risk
Charge and the Administrative Expense Charge but does not reflect the
deduction of Surrender Charges or premium taxes.
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
The Money Market Division's yield is computed in accordance with a standard
method prescribed by the SEC. Under that method, the current yield quotation
is based on a seven day period and is computed as follows: the net change in
the Accumulation Unit value during the period is divided by the Accumulation
Unit value at the beginning of the period to obtain the base period return;
the base period return is then multiplied by the fraction 365/7 to obtain the
current yield figure, which is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of the Division's Portfolio are not included in the calculation.
The Money Market Division's hypothetical historical yield for the seven day
period ended December 31, 1996, was 3.42%.
The Money Market Division's effective yield is determined 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, 1996, was 3.48%.
Yield and effective yield do not reflect the deduction of Surrender Charges or
premium taxes that may be imposed upon the redemption of Accumulation Units.
PERFORMANCE COMPARISONS
The performance of each or all of the available Divisions of Separate Account
E may be compared in advertisements and sales literature to the performance of
other variable annuity issuers in general or to the performance of particular
types of variable annuities investing in mutual funds, or series of mutual
funds, with investment objectives similar to each of the Divisions of Separate
Account E. Lipper Analytical Services, Inc. ("Lipper") and the Variable
Annuity Research and Data Service ("VARDS(R)") are independent services which
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 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, assuming reinvestment of dividends and distributions, but do not
take sales charges, redemption fees or certain expense deductions at the
separate account level into consideration. In addition, VARDS(R) prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance.
In addition, each Division's performance may be compared in advertisements and
sales literature to the following benchmarks: (1) 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; (2) the Dow Jones
Industrial Average, an unmanaged unweighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange and generally
considered representative of the United States stock market; (3) 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
expenditure groups and generally is considered to be a measure of inflation;
(4) 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
7
<PAGE>
represent the performance of intermediate and long term bonds during various
market cycles; and (5) the Morgan Stanley Capital International Europe
Australia 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 accumulation potential effectively grows
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 (1) 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 (2) 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.
<TABLE>
<CAPTION>
5 YEARS 10 YEARS 20 YEARS
------- -------- --------
<S> <C> <C> <C>
(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
</TABLE>
The hypothetical tables do not reflect any fees or charges imposed under a
Certificate or Taxable Investment. However, the Certificates impose 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% 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 Separate Account E due to the
fact that, since 1992 until the commencement of the offering of the
Certificates described in this Statement, Separate Account E was inactive,
funding no contracts or certificates and holding no assets.
The financial statements of AGNY that are included in this Statement should be
considered primarily as bearing on the ability of AGNY to meet its obligations
under the Certificates.
8
<PAGE>
INDEX TO
FINANCIAL STATEMENTS
PAGE NO.
AGNY Financial Statements
Report of Ernst & Young LLP, Independent Auditors ................... 12
Balance Sheets ...................................................... 13
Statements of Operations ............................................ 15
Statements of Changes in Capital and Surplus ........................ 16
Statements of Cash Flows ............................................ 17
Notes to Financial Statements ....................................... 18
Financial Statements - Statutory Basis (Unaudited)
Nine Months Ended September 30, 1997 and 1996 ....................... 34
9
<PAGE>
Financial Statements - Statutory Basis
American General Life Insurance Company of New York
Years ended December 31, 1996 and 1995
10
<PAGE>
American General Life Insurance Company of New York
Financial Statements - Statutory Basis
Years ended December 31, 1996 and 1995
Contents
Report of Independent Auditors..............................................12
Audited Financial Statements
Balance Sheets - Statutory Basis............................................13
Statements of Operations - Statutory Basis..................................15
Statements of Changes in Capital and Surplus - Statutory Basis..............16
Statements of Cash Flows - Statutory Basis..................................17
Notes to Financial Statements...............................................18
11
<PAGE>
Report of Independent Auditors
Board of Directors
American General Life Insurance Company of New York
We have audited the accompanying statutory-basis balance sheets of American
General Life Insurance Company of New York (the "Company") as of December 31,
1996 and 1995, and the related statutory-basis statements of operations,
changes in capital and surplus, and cash flows for the years then ended. 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.
As discussed in Note A to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the State of New York Insurance Department, which practices
differ from generally accepted accounting principles. The variances between
such practices and generally accepted accounting principles are described in
Note A. The effects on the financial statements of these variances are not
reasonably determinable, but are presumed to be material.
In our opinion, because of the materiality of the effects of the variances
between generally accepted accounting principles and the accounting practices
referred to in the preceding paragraph, the financial statements referred to
above are not intended to and do not present fairly, in conformity with
generally accepted accounting principles, the financial position of American
General Life Insurance Company of New York at December 31, 1996 and 1995, or
the results of its operations or its cash flows for the years then ended.
Also, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of American General
Life Insurance Company of New York at December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting practices prescribed or permitted by the State of
New York Insurance Department.
March 20, 1997 /S/ ERNST & YOUNG LLP
12
<PAGE>
American General Life Insurance Company of New York
Balance Sheets - Statutory Basis
<TABLE>
<CAPTION>
December 31
1996 1995
-------------- --------------
<S> <C> <C>
ADMITTED ASSETS
Cash and investments:
Fixed maturities:
Bonds, at amortized cost (NAIC market value:
$712,758,917 in 1996 and $695,937,868 in 1995):
United States and Canadian governments $ 18,029,835 $ 27,112,663
State, municipal, and political subdivisions $ 4,435,634 $ 3,920,375
Special revenue $ 179,553,184 $ 180,381,101
Public Utility $ 89,654,128 $ 104,043,046
Industrial and miscellaneous $ 407,625,728 $ 357,281,208
-------------- --------------
Total fixed maturities $ 699,298,509 $ 672,738,393
Equity securities:
Preferred, at cost (NAIC market value: $2,382,463
in 1996 and $2,859,038 in 1995) $ 1,987,826 $ 2,441,426
Common, at market (cost: $5,000 in 1996 and 1995) $ 183,133 $ 162,805
-------------- --------------
Total equity securities $ 2,170,959 $ 2,604,231
Cash on hand and on deposit $ 2,301,293 $ 3,653,173
Short-term investments $ 1,499,417 $ 8,988,216
Mortgage loans on real estate $ 10,066,501 $ 7,051,817
Policy loans $ 93,297,703 $ 87,953,087
Surplus notes, at cost (NAIC market value:
$17,922980 in 1995) - $ 16,328,663
Investment in joint ventures $ 5,200,000 $ 4,630,000
Other invested assets $ 178,134 -
-------------- --------------
Total cash and investments $ 814,012,516 $ 803,947,580
Other assets:
Accrued investment income $ 11,580,951 $ 10,960,416
Premiums due, deferred and uncollected, less loading
($1,931,125 in 1996 and $1,668,465 in 1995) $ 8,980,478 $ 12,924,900
Reinsurance receivables and other $ 8,981,891 $ 7,686,146
-------------- --------------
$ 29,543,320 $ 31,571,462
-------------- --------------
Total admitted assets $ 843,555,836 $ 835,519,042
============== ==============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Reserve for future policy benefits $ 706,254,905 $ 696,682,499
Premium and other deposit liabilities $ 42,426,975 $ 42,527,905
Policy and contract claims payable $ 8,550,225 $ 12,173,758
Dividends payable to policyholders $ 2,735,248 $ 2,941,282
General expenses and other liabilities $ 17,838,280 $ 14,222,675
Federal income taxes $ 1,092,466 $ 1,277,013
Cash overdraft $ 431,938 $ 2,017,524
Asset valuation reserve $ 8,680,653 $ 7,860,222
Interest maintenance reserve $ 419,836 $ 1,105,704
-------------- --------------
Total liabilities $ 788,430,526 $ 780,808,582
Capital and surplus:
Common stock - par value $200 per share; 15,000
shares authorized, issued, and outstanding $ 3,000,000 $ 3,000,000
Additional paid-in surplus $ 44,210,030 $ 44,210,030
Group contingency life reserve $ 28,332 $ 50,764
Unassigned surplus $ 7,886,948 $ 7,449,666
Total capital and surplus $ 55,125,310 $ 54,710,460
-------------- --------------
Total liabilities and capital and surplus $ 843,555,836 $ 835,519,042
============== ==============
</TABLE>
See accompanying notes.
14
<PAGE>
American General Life Insurance Company of New York
Statements of Operations - Statutory Basis
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------- --------------
<S> <C> <C>
Revenues:
Premiums and annuity consideratios $ 95,937,377 $ 105,629,903
Considerations for supplementary contracts $ 5,240,549 $ 3,183,826
Net investment income $ 62,028,779 $ 63,216,012
Amortization of interest maintenance reserve $ 89,692 $ 64,967
Allowances and reserve adjustments on reinsurance
ceded, net $ 5,505,788 $ 4,414,596
Reinsurance experience refunds $ 118,674 $ 154,571
Other income $ 327,768 $ 157,941
-------------- --------------
Total revenues $ 169,248,627 $ 176,821,816
Benefits and expenses:
Benefits paid or provided $ 99,920,088 $ 88,346,434
Increase in policy reserves and other deposit funds $ 7,853,296 $ 33,794,038
Commissions $ 11,652,164 $ 12,736,614
General insurance expenses and taxes other than
federal income taxes $ 26,178,858 $ 31,747,104
-------------- --------------
Total benefits and expenses $ 145,604,406 $ 166,624,190
Net gain from operations before dividends to
policyholders and federal income taxes $ 23,644,221 $ 10,197,626
Dividends to policyholders $ 2,578,903 $ 2,988,344
-------------- --------------
Net gain from operations before federal income taxes $ 21,065,318 $ 7,209,282
Federal income taxes $ 7,128,647 $ 7,243,990
-------------- --------------
Net gain (loss) from operations after dividends to
policyholders and federal income taxes $ 13,936,671 $ (34,708)
Netrealized capital losses, net of tax expense of
$1,000 in 1996 and $138,816 in 1995, and excluding
($596,176) in 1996 and $68,453) in 1995
transferred to the interest maintenance reserve $ (136,954) $ (122,826)
-------------- --------------
Net income (loss) $ 13,799,717 $ (157,534)
============== ==============
</TABLE>
See accompanying notes.
15
<PAGE>
American General Life Insurance Company of New York
Statements of Changes in Capital and Surplus - Statutory Basis
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------- --------------
<S> <C> <C>
Capital and surplus:
Balance at beginning of year $ 54,710,460 $ 66,478,790
Net income (loss) $ 13,799,717 $ (157,534)
Cash dividend to parent $ (13,163,850) $ (10,000,000)
Increase in asset valuation reserve $ (820,431) $ (1,031,701)
Decrease (increase) in nonadmitted assets $ 647,311 $ (123,899)
Change in net unrealized capital gains $ 154,562 $ 151,404
(Increase) decrease in liability for reinsurance in
unauthorized companies $ (71,451) $ 51,698
Increase in reserves due to change in valuation basis
$ (131,008) $ (127,267)
Accounting for post retirement benefits $ 470,000
Prior year federal income tax adjustments $ (1,001,031)
-------------- --------------
Balance at end of year $ 55,125,310 $ 54,710,040
============== ==============
</TABLE>
See accompanying notes.
16
<PAGE>
American General Life Insurance Company of New York
Statements of Cash Flows - Statutory Basis
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Premiums and annuity considerations received $ 100,186,136 $ 107,247,256
Considerations for supplementary contracts received $ 5,255,331 $ 3,180,374
Allowances and reserve adjustments received on
reinsurance ceded, net $ 6,257,392 $ 3,858,673
Net investment income received $ 60,107,429 $ 61,916,598
Other income received $ 271,214 $ 552,574
Benefits paid $(103,847,572) $ (90,243,888)
Commissions, general insurance expenses and taxes paid,
other than federal income taxes $ (38,729,115) $ (44,154,208)
Federal income taxes paid, exluding tax on capital gains $ (7,313,194) $ (4,752,870)
Dividends paid to policyholders $ (2,784,937) $ (3,230,845)
-------------- --------------
Net cash provided by operations $ 19,402,684 $ 34,373,664
INVESTING ACTIVITIES
Proceeds from investments sold, matured, or repaid, net
of federal income taxes paid on capital gains $ 169,243,093 $ 96,399,981
Cost of investments acquired $(181,950,836) $(114,576,029)
Net increase in policy loans $ (5,344,616) $ (4,963,848)
-------------- --------------
Net cash used in investing activities $ (18,052,359) $ (23,139,896)
FINANCING ACTIVITIES
Dividend to parent $ (13,163,850) $ (10,000,000)
Proceeds from short-term notes $ 65,484,000 $ 78,902,000
Repayment of short-term notes $ (65,484,000) $ (78,902,000)
Other $ 2,972,846 $ 2,670,923
-------------- --------------
Net cash used in financing activities $ (10,191,004) $ (7,329,077)
-------------- --------------
Net (decrease) increase in cash and short-term
investments $ (8,840,679) $ 3,904,691
Cash and short-term investments at beginning of year $ 12,641,389 $ 8,736,698
-------------- --------------
$ 3,800,710 $ 12,641,389
============== ==============
</TABLE>
See accompanying notes.
17
<PAGE>
American General Life Insurance Company of New York
Notes to Financial Statements
December 31, 1996
A. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
American General Life Insurance Company of New York (the "Company") is a
wholly owned subsidiary of American General Life Insurance Company ("AGL"),
which is domiciled in the state of Texas. All of the issued and outstanding
stock of AGL is owned by AGC Life Insurance Company, which is domiciled in the
state of Missouri. American General Corporation ("AGC"), a General Business
Holding Company domiciled in the state of Texas, owns all the issued and
outstanding stock of AGC Life Insurance Company. The Company has one wholly
owned subsidiary, Winchester Agency, Ltd., a life insurance agency.
Effective December 31, 1995, the Company's parent, AGL, acquired Franklin
United Life Insurance Company ("FULIC"), a subsidiary of The Franklin Life
Insurance Company ("Franklin"), which is a subsidiary of AGC. Concurrent with
this acquisition, FULIC was merged with and into the Company in compliance
with the laws of the State of New York and the requirements of the State of
New York Insurance Department. The statutory-basis statements for 1996 and
1995 have been prepared on a combined basis to reflect the merger of the
Company and FULIC as if it were effective January 1, 1995 as permitted by the
State of New York Insurance Department. Prescribed statutory practices do not
address the accounting for this transaction.
The Company is licensed in fifty states and the District of Columbia, with a
majority of its business written in the State of New York. The Company's
portfolio includes universal life, interest-sensitive whole life, traditional
life, and annuity plans marketed to upper-income consumers and sponsored
markets (payroll deduction, credit unions, and government allotment). During
1996 and 1995, business generated through one general agency accounted for
approximately 62% and 52%, respectively, of first-year life insurance premiums
and 42% and 40%, respectively, of renewal life insurance premiums.
The preparation of financial statements of insurance companies requires
management to make estimates and assumptions that affect amounts reported in
the financial statements and accompanying notes. Such estimates and
assumptions could change in the future as more information becomes known,
which could impact the amounts reported and disclosed herein.
BASIS OF PRESENTATION
The accompanying financial statements of the Company have been prepared in
conformity with accounting practices prescribed or permitted by the National
Association of Insurance Commissioners ("NAIC") and the Insurance Department
of the State of New York. "Prescribed" statutory accounting practices include
18
<PAGE>
state laws, regulations, and general administrative rules, as well as a
variety of publications of the NAIC. "Permitted" statutory accounting
practices encompass all accounting practices that are not prescribed; such
practices may differ from state to state, may differ from company to company
within a state, and may change in the future. The NAIC is currently in the
process of recodifying statutory accounting practices, the result of which is
expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, expected to be completed in 1997, will
likely change, to some extent, prescribed statutory accounting practices and
may result in changes to the accounting practices that the Company uses to
prepare its statutory-basis financial statements.
The prescribed practices used as a basis to prepare the accompanying financial
statements of the Company differ in certain respects from generally accepted
accounting principles ("GAAP"). The effects on the financial statements of
these variances are not reasonably determinable, but are presumed to be
material. The more significant differences from GAAP are as follows:
INSURANCE POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when
incurred. Under GAAP, acquisition costs related to traditional life
insurance and certain long-duration accident and health insurance,
to the extent recoverable from future policy revenues, would be
deferred and amortized over the premium-paying period of the related
policies using assumptions consistent with those used in computing
policy benefit reserves. For universal life insurance and investment
products, to the extent recoverable from future gross profits,
deferred policy acquisition costs are amortized generally in
proportion to the present value of expected gross profits from
surrender charges and investment, mortality, and expense margins.
INVESTMENTS
Investments in bonds and mandatorily redeemable preferred stocks are
reported at amortized cost or market value based on their NAIC
rating; for GAAP, such fixed maturity investments would be designated
at purchase as held-to-maturity, trading, or available-for-sale.
Held-to-maturity fixed investments would be reported at amortized
cost, and the remaining fixed maturity investments would be reported
at fair value with unrealized holding gains and losses reported in
operations for those designated as trading and as a separate
component of shareholder's equity for those designated as
available-for-sale.
Nonredeemable preferred stocks are reported at cost or amortized
cost, if in good standing. If not in good standing, nonredeemable
preferred stocks are valued at market or other values furnished by
the NAIC. Common stocks are reported at market value. Market values
are based on the values prescribed by the securities valuation office
of the NAIC. The related unrealized capital gain (loss) is reported
in unassigned surplus without any adjustments for federal income
taxes. For GAAP, nonredeemable preferred stock and common stock would
be designated as trading or available-for-sale and would be reported
at fair value with unrealized holding gains and losses reported in
operations for those designated as trading and as a separate
component of shareholder's equity for those designated as
available-for-sale.
19
<PAGE>
NONADMITTED ASSETS
Certain assets designated as "nonadmitted" assets, principally
receivables and furniture and equipment, are excluded from the
balance sheet and changes therein are charged directly to unassigned
surplus.
ASSET VALUATION RESERVE AND INTEREST MAINTENANCE RESERVE
As prescribed by the NAIC, the Company reports an Asset Valuation
Reserve ("AVR"). The AVR is computed in accordance with a prescribed
formula and represents a provision for possible fluctuations in the
value of bonds, equity securities, mortgage loans, real estate, and
other invested assets. Changes to the AVR are charged or credited
directly to unassigned surplus. Under GAAP, valuation allowances
would be provided when there has been a decline in value deemed other
than temporary; the provision for such declines would be charged to
earnings.
As also prescribed by the NAIC, the Company reports an Interest
Maintenance Reserve ("IMR") that represents the net accumulated
unamortized realized capital gains and losses attributable to changes
in the general level of interest rates on sales of fixed income
investments, principally bonds and mortgage loans. Such gains or
losses are amortized into income on a straight-line basis over the
remaining period to maturity based on groupings of individual
securities sold in five-year bands. Under GAAP, realized gains and
losses would be reported in the income statement on a pre-tax basis
in the period that the asset giving rise to the gain or loss is sold.
SUBSIDIARIES
The accounts and operations of the Company's subsidiary are not
consolidated with the accounts and operations of the Company, as would
be required under GAAP.
POLICY RESERVES
Policy reserves are provided based on assumptions and methods prescribed
by insurance regulatory authorities rather than on expected mortality,
morbidity, interest, and withdrawal assumptions deemed appropriate by
the Company as would be required under GAAP.
FEDERAL INCOME TAXES
Federal income taxes are provided based on estimated liabilities for
taxes incurred. Under GAAP, deferred income taxes would also be provided
for differences between financial reporting and taxable income.
RECOGNITION OF PREMIUM REVENUES
Life insurance and annuity premiums are recognized as revenue when due.
Accident and health premiums are earned pro rata over the terms of the
20
<PAGE>
policies. Under GAAP, most receipts of premiums for interest-sensitive
life insurance policies and annuities are classified as deposits instead
of revenue. GAAP-basis revenues for these contracts consist of mortality,
expense, and surrender charges assessed against the account balance.
REINSURANCE
A liability for reinsurance balances has been provided for unsecured
policy reserves ceded to reinsurers unauthorized by license to assume
such business. Changes to those amounts are credited or charged directly
to unassigned surplus. Under GAAP, an allowance for amounts deemed
uncollectible would be established through a charge to earnings.
Policy and contract liabilities ceded to reinsurers have been reported
as reductions of the related reserves, rather than as assets as would be
required under GAAP.
Commissions allowed by reinsurers on business ceded are reported as
income when received, rather than being deferred and amortized with
deferred policy acquisition costs as would be required under GAAP.
Certain reinsurance contracts meeting risk transfer requirements under
statutory-basis accounting practices have been accounted for using
traditional reinsurance accounting, whereas such contracts would be
accounted for using deposit accounting under GAAP.
GUARANTY FUND ASSESSMENTS
Guaranty fund assessments are accrued when the Company receives notice
that an amount is payable to a guaranty fund. Under GAAP, future
assessments which are probable and estimatable are also accrued.
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
terms of the related policies as would be required under GAAP.
Other significant accounting policies are as follows:
INVESTMENTS
Short-term investments include investments with maturities of less than one
year at the date of acquisition.
Bonds, preferred stocks, common stocks and short-term investments are stated
at values prescribed by the NAIC. Bonds not backed by other loans are stated
at amortized cost using the scientific method. Loan-backed bonds and
structured securities are valued at amortized cost using the interest method
including anticipated prepayments. Changes in estimated cash flows from
original assumptions are accounted for using the retrospective method.
21
<PAGE>
Redeemable preferred stocks are reported at cost or amortized cost and
nonredeemable preferred stocks are reported at cost or amortized cost, if in
good standing, and at market or other NAIC prescribed values if not in good
standing. Common stocks are reported at market value as prescribed by the
NAIC.
Policy loans are reported at unpaid principal balances. Mortgage loans are
reported at unpaid principal balances less an allowance for impairment.
Security transactions are accounted for on the date the order to buy or sell
is executed.
Interest earned on fixed maturity securities, mortgage loans, and policy loans
is recorded as income when earned and is adjusted for any amortization of
premium or discount. Dividends are recorded as income on the ex-dividend
dates.
Realized capital gains and losses are recognized using the specific
identification method. Net realized capital gains and losses in excess of
amounts transferred to the IMR are credited or charged directly to net income,
while net unrealized capital gains and losses are recorded as adjustments of
unassigned surplus.
POLICY RESERVES
The Company computes ordinary business policy reserves using the Modified
Preliminary Term, Net Level Premium, Commissioners' Reserve Valuation, and New
Jersey Standard Valuation methods. Generally, the 1941, 1958, and 1980
Commissioners' Standard Ordinary Mortality Tables with interest rates ranging
from 2% to 6% are utilized. Annuities are valued primarily using the 1983a,
1971 Individual, 1971 Group, and 1951 Group Annuity Mortality Tables with
interest assumptions ranging from 2.5% to 11.0%. Additional minimum reserves
are calculated on policies with a guaranteed gross premium less than the net
premium based on minimum reserve requirements of the laws of the State of New
York. Additional premiums are charged for substandard lives. Mean substandard
reserves are determined by computing the regular mean reserve for the plan and
holding in addition a factor times the extra premium charge for the year. The
factor varies by duration and type of plan and is based on appropriate
multiples of standard rates of mortality. Tabular interest, tabular less
actual reserve released, and tabular cost have been determined by formula,
except for universal life insurance and deferred annuity reserves which
include fund accumulations, for which tabular interest has been determined
from basic data. For the determination of tabular interest on funds not
involving life contingencies, the actual credited interest is used.
The Company waives deduction of deferred fractional premiums upon death of
insured and returns any portion of the final premium beyond the date of death.
Surrender values are not promised in excess of the legally computed reserves.
POLICY AND CONTRACT CLAIMS
Policy and contract claims represent the estimated ultimate net cost of all
22
<PAGE>
reported and unreported claims incurred during the year. Reserves for unpaid
claims are estimated using individual case-basis valuations and statistical
analyses. These estimates are subject to the effects of trends in claim
severity and frequency. The estimates are continually reviewed and adjusted as
necessary, as experience develops or new information becomes known; such
adjustments are included in current operations.
RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
B. INVESTMENTS
FIXED MATURITY SECURITIES
The statement value and NAIC market value of fixed maturities by type at
December 31, 1996 and 1995 were as follows (in 000s):
<TABLE>
<CAPTION>
GROSS GROSS NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1996 VALUE GAIN LOSS VALUE
---------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
United States and governments
of other countries $ 18,030 $ 1,332 $ 65 $ 19,297
State, municipal, and political
subdivisions $ 4,436 $ 518 $ 4,954
Special revenue $ 179,553 $ 179,553
Public utility $ 89,654 $ 832 $ 308 $ 90,178
Industrial and miscellaneous $ 407,626 $ 12,663 $ 1,512 $ 418,777
---------------------------------------------
Total $ 699,299 $ 15,345 $ 1,885 $ 712,759
=============================================
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS NAIC
STATEMENT UNREALIZED UNREALIZED MARKET
DECEMBER 31, 1995 VALUE GAIN LOSS VALUE
---------------------------------------------
<S> <C> <C> <C> <C>
Bonds:
United States and governments
of other countries $ 27,113 $ 1,867 $ 28,980
State, municipal, and political
subdivisions $ 3,920 $ 722 $ 4,642
Special revenue $ 180,381 $ 180,381
Public utility $ 104,043 $ 2,044 $ 34 $ 106,053
Industrial and miscellaneous $ 357,281 $ 18,999 $ 398 $ 375,882
---------------------------------------------
Total $ 672,738 $ 23,632 $ 432 $ 695,938
=============================================
</TABLE>
Fair values generally represent quoted market value prices for securities
traded in the public marketplace, or analytically determined values using bid
or closing prices for securities not traded in the public marketplace.
However, for certain investments for which the NAIC does not provide a value,
the Company uses the amortized cost amount as a substitute for fair value in
23
<PAGE>
accordance with prescribed guidance. As of December 31, 1996 and 1995, the
fair value of investments in bonds includes $392,271,964 and $397,745,351,
respectively, of bonds that were valued at amortized cost.
Fixed maturities are not intended to be sold in the normal course of business
and are usually held until maturity. Therefore, the presentation of fair
values for fixed maturities without a corresponding revaluation of related
policyholder liabilities can be misinterpreted, and care should be exercised
in drawing conclusions from such data.
The contractual maturities of fixed maturity securities at December 31, 1996
were as follows (in 000s):
<TABLE>
<CAPTION>
NAIC
STATEMENT MARKET
VALUE VALUE
---------------------
<S> <C> <C>
Due in one year or less $ 9,530 $ 9,630
Due after one year through five years $ 105,273 $ 107,995
Due after five years through ten years $ 178,620 $ 181,913
Die after ten years $ 212,265 $ 219,608
Mortgage-backed securities $ 193,611 $ 193,613
---------------------
$ 699,299 $ 712,759
=====================
</TABLE>
Actual maturities may differ from contractual maturities, as 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 and redemptions of fixed maturities were $151,766,798 and
$84,628,897 during 1996 and 1995, respectively. Gross gains of $1,539,597 and
$980,410 and gross losses of $2,412,289 and $1,123,929 were realized on those
sales during 1996 and 1995, respectively.
At December 31, 1996, the Company held unrated or less-than-investment grade
corporate bonds of $28,191,716 with an aggregate fair value of $28,649,038.
Those holdings amounted to 4.0% of the Company's investments in bonds and 3.3%
of the Company's total admitted assets. The holdings of less-than-investment
grade bonds are widely diversified and of satisfactory quality based on the
Company's investment policies and credit standards.
The Company has fixed maturity investments on deposit with various state
insurance departments to satisfy regulatory requirements. These investments
had an amortized cost of $2,228,985 and $2,392,141 at December 31, 1996 and
1995, respectively.
PREFERRED AND COMMON STOCKS
Unrealized gains and losses on investments in preferred and common stocks are
reported directly in unassigned surplus and do not affect operations. The
gross unrealized gains and losses on, and the cost and fair value of, those
investments are summarized as follows (in 000s):
24
<PAGE>
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
Preferred stocks $ 1,988 $ 395 $ 2,383
Common stocks $ 5 $ 178 $ 183
------------------------------------------------
Total $ 1,993 $ 573 $ 0 $ 2,566
================================================
AT DECEMBER 31, 1995
Preferred stocks $ 2,441 $ 418 $ 2,859
Common stocks $ 5 $ 158 $ 163
------------------------------------------------
Total $ 2,446 $ 576 $ 0 $ 3,022
================================================
</TABLE>
MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property
collateralizing mortgage loans reduces the concentration of credit risk. The
Company requires collateral on all real estate loans based upon management's
credit assessment of the borrower. Non-performing mortgage loans are defined
as the outstanding balance of loans 60 days or more past due (includes
mortgages over 90 days as shown in the annual statement, Schedule B, Part 2,
Section 2), mortgage loans in the process of foreclosure, and commercial loans
whose original terms have been modified. There were no nonperforming mortgage
loans at December 31, 1996. As of December 31, 1996, the mortgage loan
portfolio was distributed as follows (dollars in 000s):
<TABLE>
<CAPTION>
Outstanding % of
Amount Total Fair Value
-------------------------------
<S> <C> <C> <C>
Geographic Distribution:
South Atlantic $ 3,237 32% $ 3,247
East South Central $ 2,996 30% $ 3,056
West South Central $ 2,800 28% $ 2,892
Pacific $ 1,034 10% $ 776
-------------------------------
Total $ 10,067 100% $ 9,971
===============================
Property Type:
Retail $ 5,796 58% $ 5,948
Industrial $ 3,237 32% $ 3,247
Office $ 1,034 10% $ 776
-------------------------------
Total $ 10,067 100% $ 9,971
===============================
</TABLE>
Fair values for mortgage loans were estimated using discounted cash flow
analysis. Cash flows were based upon contractual maturities, with the discount
rates being based on U.S. Treasury rates for similar maturity ranges, adjusted
for risk, based upon property type. Loans with similar characteristics were
aggregated for the calculations. Assumptions regarding future economic
25
<PAGE>
activity have been made in estimating the fair value. Future economic activity
may deviate from the assumptions. Care should be exercised in drawing
conclusions based on the estimated fair value at the end of a year, since the
Company usually holds its mortgage loans until maturity.
During 1996, the maximum and minimum lending rates for mortgage loans were
8.75% and 6.8%. At the issuance of a loan, the percentage of loan to value on
any one loan does not exceed 75%. At December 31, 1996, the Company has no
investments in mortgage loans subject to prior liens. All properties covered
by mortgage loans have fire insurance at least equal to the excess of the loan
over the maximum loan that would be allowed on the land without the building.
POLICY LOANS
The fair value of policy loans at December 31, 1996 was $89,092,777. The fair
value was estimated using discounted cash flow analysis and actuarially
determined assumptions, incorporating market rates. Loans with similar
characteristics were aggregated for the calculations.
INVESTMENT INCOME
Major categories of the Company's net investment income are summarized as
follows (in 000s):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1996 1995
-----------------------
<S> <C> <C>
Investment income:
Bonds $ 55,084 $ 55,220
Preferred stocks $ 197 $ 359
Common stocks $ 66
Mortgage loans on real estate $ 898 $ 423
Policy loans $ 5,752 $ 5,364
Short-term investments and cash $ 262 $ 987
Other invested assets $ 1,299 $ 1,285
Miscellaneous investment income $ 41
-----------------------
Gross investment income $ 63,533 $ 63,704
Investment expenses $ 1,504 $ 488
-----------------------
Net investment income $ 62,029 $ 63,216
=======================
</TABLE>
Realized capital gains and losses are reported net of federal income taxes and
amounts transferred to the IMR as follows (in 000s):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1996 1995
-----------------------
<S> <C> <C>
Realized capital losses $ (732) $ (52)
Less federal income taxes on tax-basis
realized capital gains before effect
of transfer to IMR $ (1) $ (139)
-----------------------
$ (733) $ (191)
Less amount transferred to IMR $ 596 $ 68
-----------------------
Net realized capital losses $ (137) $ (123)
=======================
</TABLE>
26
<PAGE>
C. NONADMITTED ASSETS
Equipment is recorded at cost ($708,207 and $666,896 at December 31, 1996 and
1995, respectively) less accumulated depreciation ($474,280 and $342,760 at
December 31, 1996 and 1995, respectively). Depreciation expense for 1996 and
1995 was $90,562 and $232,952, respectively, computed on a straight-line basis
over five years. These assets are considered nonadmitted and their values and
related depreciation expense are excluded from the statutory-basis financial
statements.
D. ANNUITY RESERVES
At December 31, 1996, the Company's annuity reserves and deposit fund
liabilities that are subject to discretionary withdrawal (with adjustment),
subject to discretionary withdrawal (without adjustment), and not subject to
discretionary withdrawal provisions are summarized as follows (dollars in
000s):
<TABLE>
<CAPTION>
Amount %
------------------
<S> <C> <C>
Subject to discretionary withdrawal (with adjustment):
With market value adjustment $ 27,784 10.69%
At book value, less surrender charge of 5% or more $ 46,648 17.94%
------------------
Total with adjustment $ 74,432 28.63%
Subject to discretionary withdrawal (without adjustment) at
book value with minimal or no charge or adjustment $ 136,216 52.40%
Not subject to discretionary withdrawal $ 49,304 18.97%
------------------
Total annuity reserves and deposit fund liabilities before
reinsurance $ 259,952 100.00%
=======
Less reinsurance ceded $ 2,744
---------
Net annuity reserves and deposit fund liabilities $ 257,208
=========
</TABLE>
The tabular interest, tabular less actual reserve released, and tabular costs
have all been computed in accordance with the regulations of the State of New
York.
E. FAIR VALUE OF INVESTMENT CONTRACTS
Investment contracts are long-duration contracts that do not subject the
insurer to significant risks arising from policyholder mortality or morbidity.
The majority of the Company's annuity products are considered investment
contracts.
The carrying amounts and fair values of the Company's liabilities for
investment-type insurance contracts at December 31 are as follows (in 000s):
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
1996 1995 1996 1995
---------------------------------------------
<S> <C> <C> <C> <C>
Investment contracts $ 215,940 $ 230,146 $ 210,816 $ 228,504
</TABLE>
27
<PAGE>
E. FAIR VALUE OF INVESTMENT CONTRACTS (CONTINUED)
Fair values were estimated using cash flows discounted at market interest
rates. Assumptions regarding future economic activity have been made in
estimating fair value. Care should be exercised in drawing conclusions based
on the estimated fair value of insurance investment contracts, since the
liabilities are scheduled to mature over a number of years.
F. FEDERAL INCOME TAXES
The Company and its subsidiary, together with certain other subsidiaries of
AGC, are included in a life/nonlife consolidated tax return with AGC. The
Company participates in a tax-sharing agreement with other companies included
in the consolidated tax return. Under this agreement, tax payments are made to
AGC as if the companies filed separate tax returns, and companies incurring
operating and/or capital losses are reimbursed for the use of these losses by
the consolidated return group.
FULIC filed a life/nonlife consolidated federal income tax return for the
period February 1, 1995 through December 31, 1995 with the following entities:
The Franklin Life Insurance Company and The American Franklin Life Insurance
Company. For the period from January 1, 1995 through January 31, 1995 (prior
to AGC's acquisition of Franklin and subsidiaries), FULIC filed a life/nonlife
consolidated return with the American Brand Companies, FULIC's ultimate parent
before the acquisition.
In 1996, the Company provided $7,129,647 in federal income taxes, of which
$7,128,647 was related to operations and $1,000 resulted from net realized
tax-basis capital gains. A reconciliation of the statutory tax rate to the
Company's effective tax rate on operations follows (dollars in 000s):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995
------------------------------------------
<S> <C> <C> <C> <C>
Tax at statutory tax rate $ 7,373 35.0% $ 2,523 35.0%
Sec. 848 (DAC Tax) $ 1,463 6.9 1,496 20.8
Change in deferred and uncollected
premiums $ 1,142 5.4 251 3.4
Reserve adjustments (849) (4.0) 2,395 33.2
Adjustment of prior period tax liability (738) (3.5) - -
Investment accruals and deductions (450) (2.1) 723 10.0
Other (812) (3.9) (144) (1.9)
------------------------------------------
$ 7,129 33.8% $ 7,244 100.5%
==========================================
</TABLE>
Prior to 1984, a portion of the Company's income was not taxed, but was
accumulated in a "policyholders' surplus account." In the event that those
amounts are distributed to the Company's shareholder, or the balance of the
account exceeds certain limitations under the Internal Revenue Code, the
excess amounts would become taxable at current rates. The policyholders'
surplus account balance at December 31, 1996 was $4,572,448. Management does
not intend to take actions nor does management expect any events to occur that
would cause income taxes to become payable on that amount.
28
<PAGE>
The Internal Revenue Service ("IRS") has completed examinations of the
consolidated tax returns through 1988 and is currently examining the
consolidated tax returns for 1989 through 1992. In connection with the
settlement of certain issues associated with the years 1977 through 1988, the
Company paid net additional taxes of $5,000 in 1995 and $ -0- in 1996. The IRS
is continuing to dispute the consolidated tax treatment of certain other items
for the years 1977 through 1988. Although the outcome of these issues is
uncertain, the Company believes that no significant adjustment to its
financial position will result fromsettlement of the open tax issues.
G. REINSURANCE
The Company is routinely involved in reinsurance transactions covering all
lines of business to help reduce the loss on any insured. The Company limits
its exposure to loss on any single insured to $350,000 by ceding additional
risks through reinsurance contracts with other insurers. The Company
diversifies its risk of exposure to reinsurance loss by using several
reinsurers that have strong claims-paying ability ratings. The Company remains
obligated for amounts ceded in the event that the reinsurers do not meet their
obligations.
Reinsurance premiums were as follows (in 000s):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995
-----------------------
<S> <C> <C>
Assumed premiums $ 191 $ 46
Ceded premiums $ 19,522 $ 15,760
</TABLE>
Reserve credits for reinsurance ceded reduced the reserve for future policy
benefits by $42,615,112 and $41,753,149 for the years ended December 31, 1996
and 1995, respectively. Reserves related to reinsurance assumed amounted to
$13,196,448 and $14,084,056 at December 31, 1996 and 1995, respectively.
Policy and contract claim liabilities were reduced for reinsurance ceded by
$2,007,410 and $1,788,998 in 1996 and 1995, respectively. Claim liabilities
related to reinsurance assumed amounted to $73,040 and $276,558 at December
31, 1996 and 1995, respectively. Benefits paid or provided for reinsurance
ceded totaled $11,173,080 and $8,762,718 in 1996 and 1995, respectively.
The regulatory required liability for unsecured reserves ceded to unauthorized
reinsurers was $91,258 and $19,807 at December 31, 1996 and 1995,
respectively.
Amounts payable or recoverable for reinsurance on policy and contract
liabilities are not subject to periodic or maximum limits. At December 31,
1996, the Company's reinsurance recoverables are not material and no
individual reinsurer owed the Company an amount that was equal to or greater
than 3% of the Company's surplus.
29
<PAGE>
G. REINSURANCE (CONTINUED)
In 1996 and 1995, the Company did not commute any ceded reinsurance, nor did
it enter into or engage in any agreement that reinsures policies or contracts
that were in force or had existing reserves as of the effective date of such
agreements.
No policies issued by the Company have been reinsured with a foreign company
which is controlled, either directly or indirectly, by a party not primarily
engaged in the business of insurance.
The Company has not entered into any reinsurance agreements in which the
reinsurer may unilaterally cancel any reinsurance for reasons other than
nonpayment of premiums or other similar credits. The Company does not have any
reinsurance agreements in effect in which the amount of losses paid or accrued
through December 31, 1996 would result in a payment to the reinsurer of
amounts which, in the aggregate and allowing for offset of mutual credits from
other reinsurance agreements with the same reinsurer, exceed the total direct
premiums collected under the reinsured policies.
H. BENEFIT PLANS
Substantially all employees of the Company are covered under noncontributory,
defined-benefit pension plans of AGC (the "Plans"). Pension benefits are based
on the participant's average monthly compensation and length of credited
service. The Company's funding policy is to contribute annually no more than
the maximum amount deductible for federal income tax purposes. The Company
uses the projected unit credit method to compute pension expense. More than
95% of the Plans' assets were invested in fixed maturity and equity securities
at the Plans' most recent balance sheet date.
Current pension costs are funded as they accrue. Pension (income) cost
allocated to the Company totaled $(44,955) and $23,000 in 1996 and 1995,
respectively.
The following table sets forth the Plans' accumulated benefit obligation,
determined in accordance with Statement of Financial Accounting Standards No.
87, Employers' Accounting for Pensions, and valued as of November 1 (the most
recent actuarial valuation date) (dollars in 000s):
<TABLE>
<CAPTION>
1996 1995
----------------------
Actuarial present value of benefit obligation:
<S> <C> <C>
Vested $ 1,855 $ 2,010
Non-vested $ 149 $ 204
----------------------
Accumulated benefit obligation $ 2,004 $ 2,214
======================
Projected benefit obligation $ 2,204 $ 2,637
Plan assets at fair value $ 3,022 $ 3,183
Weighted average discount rate on benefit obligation 7.50% 7.25%
Rate of increase in compensation levels 4.00% 4.00%
Expected long-term rate of return on plan assets 10.00% 10.00%
</TABLE>
30
<PAGE>
Substantially all employees of AGC, and certain of its subsidiaries, who have
completed at least one year of service or have reached the age of 35 are
eligible to participate in a qualified defined contribution plan.
Additionally, nonsalaried employees who have completed one thousand hours of
service in one service year and have attained age 21 are also eligible to
participate. Employees who elect to participate may contribute from 1% to 16%
of their base pay. The Company's contributions are based on a rate which will
range from 50% to 100% of the first 6% of employee contributions. At December
31, 1996, the fair value of the defined contribution plan's assets was
approximately $241 million.
Certain officers of the Company participate in American General Corporation's
Stock and Incentive Plan which provides for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Under the
Stock and Incentive Plan, awards may be granted for a total of 3,264,019
shares of AGC's common stock. For stock options, option prices must be at
least 100% of the fair market value of the common stock on the date of grant.
Stock options were granted during the years 1986 - 1996.
As of December 31, 1996, 2,933,184 shares of AGC's common stock were subject
to options granted under the Stock and Incentive Plan, with stock option
prices ranging from $15.375 to $37.500. During 1996, options for 543,014
shares of AGC's common stock became exercisable under the Stock and Incentive
Plan, with option prices ranging from $25.969 to $36.563. During this year,
318,547 shares of AGC's common stock were exercised under options subject to
the Stock and Incentive Plan, with option prices ranging from $15.375 to
$35.250 and the fair market value prices ranging from $33.500 to $41.250.
The Company also has an agents' defined-contribution money purchase pension
plan for its independent field force. The Company does not fund this plan.
In addition to pension benefits, the Company provides life, 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.
I. CAPITAL AND SURPLUS
On January 1, 1993, the NAIC adopted a Risk-Based Capital ("RBC") formula that
can be used to evaluate the adequacy of life insurance companies' statutory
capital and surplus. Calculations at December 31, 1996, using the RBC formula,
indicate the Company's level of capitalization exceeds regulatory
requirements.
The amount of dividends which can be paid by the Company during any 12-month
period to its parent, without prior notification to the Superintendent of
Insurance, is limited according to regulations of the State of New York.
31
<PAGE>
J. LEASES
The Company has various leases, substantially all of which are for office
space and facilities. The Company is a partner in a joint venture which owns
the home office building. Rentals under financing leases and contingent
rentals are not material.
Effective April 1, 1994, the Company extended its lease for eight years for an
annual amount of $1,147,414 on the premises occupied in the home office
building. The Company also extended for ten years, effective November 1, 1994,
its lease for a regional office in New York City for an annually increasing
amount, currently at $261,234. The Company is also obligated to make annual
lease payments of an annually increasing amount currently of $225,163 until
October 31, 2004 on additional rental property.
Total rental expense for all leases was $2,483,841 and $2,205,614 in 1996 and
1995, respectively. The future minimum rental commitments for leases as of
December 31, 1996 are approximately $1,634,827 for 1997, $1,641,895 for 1998,
$1,657,102 for 1999, $1,685,296 for 2000, and $4,443,869 for the years
thereafter. Several of the leases have renewal options.
K. COMMITMENTS AND CONTINGENCIES
The Company is named as a defendant in various legal actions arising
principally from claims made under insurance policies and contracts. Those
actions are considered by the Company in estimating policy and contract
liabilities. The Company's management believes that the resolution of those
actions will not have an adverse material effect on the Company's financial
position or results of operations.
L. TRANSACTIONS WITH AFFILIATES
Various American General companies provide services to the Company,
principally data processing, investment advisory and professional services.
The Company incurred expenses of approximately $9,638,016 and $8,777,580 for
such services in 1996 and 1995, respectively. Accounts payable for such
services at December 31, 1996 and 1995 were not material to the Company's
financial position.
As noted previously, the Company is a partner in a joint venture which owns
the home office building. The annual rent for premises occupied in the home
office building is $1,147,414.
FULIC, in the normal course of business, established reinsurance treaties with
its former parent, Franklin. One such treaty is a 50% quota share ceded
reinsurance agreement for certain group annuity contracts. In addition, FULIC
ceded life insurance risks in excess of its retention limit to Franklin. Both
treaties are still in effect.
The Company may borrow funds from AGC under an intercompany short-term
borrowing agreement. These borrowings are unsecured. Interest is charged on
the average borrowings based on the commercial paper rate. At December 31,
1996 and 1995, no amounts were outstanding under the borrowing agreement.
32
<PAGE>
M. PARTICIPATING POLICY CONTRACTS
Participating policy contracts entitle a policyholder to share in earnings
through dividend payments. They represented 5.51% and 5.96% of insurance in
force at December 31, 1996 and 1995, respectively. Dividends of $2,578,903 and
$2,988,344 were paid to policyholders in 1996 and 1995, respectively.
33
<PAGE>
FINANCIAL STATEMENTS - STATUTORY BASIS
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
34
<PAGE>
American General Life Insurance Company of New York
Financial Statements - Statutory Basis (Unaudited)
Nine Months Ended September 30, 1997 and 1996
CONTENTS
Balance Sheets - Statutory Basis (Unaudited) .............................. 36
Statement of Operations - Statutory Basis (Unaudited) ..................... 38
Statement of Changes in Capital and Surplus - Statutory Basis
(Unaudited) ............................................................... 39
Statement of Cash Flows - Statutory Basis (Unaudited) ..................... 40
Notes to Financial Statements - Statutory Basis (Unaudited) ............... 41
35
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
----------------------------------
ADMITTED ASSETS
Cash and investments:
Fixed maturities:
Bonds, at amortized cost (NAIC market value:
$721,697,610 in 1997 and $712,758,917 in 1996):
<S> <C> <C>
United States and Canadian governments $13,411,067 $18,029,835
State, municipal, and political subdivisions 0 4,435,634
Special revenue 175,413,239 179,553,184
Public utility 93,969,683 89,654,128
Industrial and miscellaneous 424,552,349 407,625,728
----------------------------------
Total fixed maturities 707,346,338 699,298,509
Equity securities:
Preferred, at cost (NAIC market value: $1,041,750 in 1997
and $2,382,463 in 1996) 681,726 1,987,826
Common, at market (cost: $5,000 in 1997 and
$5,000 in 1996) 200,329 183,133
----------------------------------
Total equity securities 882,055 2,170,959
Cash on hand and on deposit 4,646,099 2,301,293
Short-term investments 0 1,499,417
Mortgage loans on real estate 9,905,155 10,066,501
Policy loans 98,334,158 93,297,703
Investment in joint ventures 5,482,203 5,200,000
Other invested assets 304,256 178,134
----------------------------------
Total cash and investments 826,900,264 814,012,516
Other assets:
Accrued investment income 12,367,319 11,580,951
Premiums due, deferred and uncollected, less loading
($1,449,021 in 1997 and $1,931,125 in 1996) 10,228,194 8,980,478
Reinsurance receivables and other 12,302,642 8,981,891
----------------------------------
34,898,155 29,543,320
----------------------------------
TOTAL ADMITTED ASSETS $861,798,419 $843,555,836
==================================
</TABLE>
36
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS -- STATUTORY BASIS (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1997 1996
----------------------------------
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
<S> <C> <C>
Reserve for future policy benefits $711,145,047 $706,254,905
Premium and other deposit liabilities 41,476,822 42,426,975
General expenses and other liabilities 21,734,229 17,838,280
Policy and contract claims payable 8,679,079 8,550,225
Dividends payable to policyholders 2,286,947 2,735,248
Note payable to parent 1,935,000 0
Federal income taxes due 1,052,857 1,092,466
Cash overdraft 2,364,698 431,938
Asset valuation reserve 9,107,875 8,680,653
Interest maintenance reserve 457,145 419,836
----------------------------------
Total liabilities 800,239,699 788,430,526
Capital and surplus:
Common stock--par value $200 per share; 15,000
shares authorized, issued, and outstanding 3,000,000 3,000,000
Additional paid-in-surplus 44,210,030 44,210,030
Group contingency life reserve 34,150 28,332
Unassigned surplus 14,314,540 7,886,948
----------------------------------
61,558,720 55,125,310
TOTAL LIABILITIES AND CAPITAL AND SURPLUS $861,798,419 $843,555,836
==================================
</TABLE>
37
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF OPERATIONS -- STATUTORY BASIS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
----------------------------------
PREMIUMS AND OTHER REVENUES:
<S> <C> <C>
Premiums and annuity considerations $71,571,520 $72,256,752
Considerations for supplementary contracts 2,890,505 4,271,083
Investment income, net of investment expenses of
$1,162,492 in 1997 and $1,159,049 in 1996 46,748,932 45,848,601
Amortization of the interest maintenance reserve 42,410 62,594
Allowances and reserve adjustments on reinsurance
ceded, net 1,346,624 4,606,158
Reinsurance experience refunds 158,169 118,674
Other income 3,409,390 172,598
----------------------------------
Total revenues 126,167,550 127,336,460
BENEFITS AND EXPENSES:
Benefits paid or provided 74,390,301 77,121,185
Increase in policy reserves and other deposit funds 3,759,957 4,773,083
Commissions 7,988,047 9,089,911
General insurance expenses and taxes, other than
federal income taxes 18,280,746 17,967,144
----------------------------------
Total benefits and expenses 104,419,051 108,951,323
Net gain from operations before dividends to policyholders
and federal income taxes 21,748,499 18,385,137
Dividends to policyholders 1,580,432 2,085,619
----------------------------------
20,168,067 16,299,518
Federal income taxes (benefit) 7,985,610 5,439,581
----------------------------------
Net gain from operations after dividends to policyholders
and federal income taxes 12,182,457 10,859,937
Net realized capital losses, net of tax expense
(benefit) of $233,839 in 1997 and ($6,000) in 1996
and excluding $79,719 in 1997 and ($641,821) in 1996
transferred to the interest maintenance reserve (79,221) (72,662)
----------------------------------
NET INCOME $12,103,236 $10,787,275
==================================
</TABLE>
SEE ACCOMPANYING NOTES.
38
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF CHANGES IN CAPITAL & SURPLUS -- STATUTORY BASIS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
----------------------------------
Capital and surplus:
<S> <C> <C>
Balance at beginning of period $55,125,310 $54,710,460
Net income 12,103,236 10,787,275
Cash dividend to parent (4,000,000) (13,163,850)
Increase in asset valuation reserve (427,222) (813,506)
(Increase) decrease in nonadmitted assets (1,259,800) (501,790)
Change in net unrealized capital gains 17,196 148,582
----------------------------------
Balance at end of period $61,558,720 $51,167,171
==================================
</TABLE>
SEE ACCOMPANYING NOTES.
39
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
STATEMENT OF CASH FLOWS -- STATUTORY BASIS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
-----------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Premiums and annuity considerations received $70,921,453 $74,375,233
Considerations for supplementary contracts received 2,901,934 4,323,095
Allowances and reserve adjustments received on
reinsurance ceded, net 4,228,137 5,105,929
Net investment income received 46,138,871 44,212,748
Other income received 5,103,009 2,841,365
Benefits paid (80,146,581) (80,180,076)
Commissions, general insurance expenses, and taxes
paid, other than federal income taxes (26,354,429) (28,001,906)
Federal income taxes paid (8,025,219) (4,042,581)
Dividends to policyholders paid (1,931,895) (2,408,100)
-----------------------------------
Net cash provided by operations 12,835,280 16,225,707
INVESTING ACTIVITIES
Proceeds from investments sold, matured, or repaid,
net of federal income taxes paid on capital gains 114,228,407 137,132,628
Cost of investments acquired (119,846,008) (152,617,159)
Net increase in policy loans (5,036,456) (4,193,199)
-----------------------------------
Net cash used in investing activities (10,654,057) (19,677,730)
FINANCING ACTIVITIES
Dividend to parent (4,000,000) 0
Proceeds from short-term note 61,683,000 46,603,000
Repayment of short-term notes (59,748,000) (46,603,000)
Other 729,166 (2,451,485)
------------------------------------
Net cash used in financing activities (1,335,834) (2,451,485)
------------------------------------
Net increase (decrease) in cash and short-term investments 845,389 (5,903,508)
Cash and short-term investments at beginning of period 3,800,710 12,641,389
------------------------------------
Cash and short-term investments at end of period $4,646,099 $6,737,881
====================================
</TABLE>
SEE ACCOMPANYING NOTES.
40
<PAGE>
American General Life Insurance Company of New York
Notes to Financial Statements -- Statutory Basis (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements of the American General Life
Insurance Company of New York ("the Company") have been prepared in
conformity with accounting practices prescribed or permitted by the
National Association of Insurance Commissioners ("NAIC") and the
Insurance Department of the State of New York. Such practices vary from
generally accepted accounting principles ("GAAP"). The preparation of
financial statements required management to make estimates and
assumptions that affect (1) the reported amounts of assets and
liabilities, (2) disclosures of contingent assets and liabilities, and
(3) the reported amounts of revenues and expenses during the reporting
periods. Such estimates and assumptions could change in the future as
more information becomes known, which could impact the amounts reported
herein.
2. CAPITAL RESOURCES
Management has been engaged in a program to render the Company's
computer systems (hardware and mainframe and personal applications
software) Year 2000 compliant. The Company will incur internal staff
costs as well as third-party vendor and other expenses to prepare the
systems for Year 2000. The cost of testing and conversion of systems
applications has not had, and is not expected to have, a material
adverse effect on the Company's results of operations or financial
condition. However, risks and uncertainties exist in most significant
systems development projects. If conversion of the Company's systems is
not completed on a timely basis, due to nonperformance by third-party
vendors or other unforeseen circumstances, the Year 2000 problem could
have a material adverse impact on the operations of the Company.
3. LEGAL CONTINGENCIES
The Company is a defendant in purported lawsuits, asserting claims
related to pricing and sales practices. These claims are being defended
vigorously by the Company. Given the uncertain nature of litigation and
the early stages of this litigation, the outcome of these actions cannot
be predicted at this time. Company management nevertheless believes that
the ultimate outcome of all such pending litigation should not have a
material adverse effect on the Company's capital and surplus; however,
it is possible that settlements or adverse determinations in one or more
of these actions or other future proceedings could have a material
adverse effect on the Company's results of operations for a given
period. No provision has been made in the financial statements related
to this pending litigation because the amount of loss, if any, from
these actions cannot be reasonably estimated at this time.
41
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B: Financial Statements of American General Life
Insurance Company of New York ("AGNY")
Report of Ernst & Young LLP, Independent
Auditors
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the years ended
December 31, 1996 and 1995
Statements of Changes in Capital and
Surplus for the years ended December 31, 1996
and 1995
Statements of Cash Flows for the years ended
December 31, 1996 and 1995
Notes to Financial Statements
Financial Statements - Statutory Basis
(Unaudited) American General Life Insurance
Company of New York Nine Months Ended September
30, 1997 and 1996
PART C: None
(b) Exhibits
(1)(a) American General Life Insurance Company of New
York Board of Directors resolution authorizing
the establishment of Separate Account E.(1)
(b) Resolution of the Board of Directors of American
General Life Insurance Company of New York
providing for, among other things (i) the
reactivation of Separate Account E of American
General Life Insurance Company of New York; and
(ii) the marketing of variable annuity products
in New York.(4)
(2) None
(3)(a) Master Marketing and Distribution Agreement By
and Among American General Life Insurance
Company of New York, American General Securities
Incorporated and Van Kampen
C-1
<PAGE>
American Capital Distributors, Inc.
(b)(i) Form of Participation Agreement by and among
American General Life Insurance Company of New
York, American General Securities Incorporated,
Van Kampen American Capital Life Investment
Trust, Van Kampen American Capital Asset
Management, Inc., and Van Kampen American
Capital Distributors, Inc.
(ii) Form of Participation Agreement by and among
American General Life Insurance Company of New
York, Morgan Stanley Universal Funds, Inc.,
Morgan Stanley Asset Management, Inc. And Miller
Anderson & Sherrerd LLP.
(c) Specimen form of Selling Group Agreement by and
among American General Life Insurance Company of
New York, American General Securities
Incorporated, and Van Kampen American Capital
Distributors, Inc.
(4)(a) Specimen form of Master Group Annuity Contract
(Form No. 96034N).
(b) Specimen form of Group Annuity Certificate (Form
No. 96033N).
(5)(a) Specimen form of Application for Certificate
Form No. 96033N.
(b) Specimen form of Generations Service Request.(4)
(c) Specimen form of Special Request for Surrender
Charge Waiver under Certificate Form No.
96033N.(4)
(6)(a) Copy of the Charter and all amendments thereto
of American General Life Insurance Company of
New York.(2)
(b) Copy of the Bylaws, as amended, of American
General Life Insurance Company of New York.(3)
(7) None
(8) Form of Administrative Services Agreement,
Section 1.(f), between American General Life
Insurance Company of New York and American
General Life Insurance Company.
(9) Opinion and Consent of Counsel.(4)
(10) Consent of Independent Auditors.
C-2
<PAGE>
(11) None
(12) None
(13)(a)(i) Computations of hypothetical historical
standardized average annual total returns for
the Emerging Growth, Enterprise, Domestic
Income, Government, and Money Market Divisions,
available under Certificate Form No 96033N for
the one and five year periods ended December 31,
1996, and since inception.(4)
(ii) Computation of hypothetical historical
standardized average annual total returns for
the Real Estate Securities Division, available
under Certificate Form No. 96033N for the one
and five year periods ended December 31, 1996,
and since inception.(4)
(b)(i) Computations of hypothetical historical
non-standardized total returns for the Emerging
Growth, Enterprise, Domestic Income, Government,
and Money Market Divisions, available under
Certificate Form No. 96033N for the one and five
year periods ended December 31, 1996, and since
inception.(4)
(ii) Computation of hypothetical historical
non-standardized total returns for the Real
Estate Securities Division, available under
Certificate Form No. 96033N for the one and five
year periods ended December 31, 1996, and since
inception.(4)
(c)(i) Computations of hypothetical historical
non-standardized cumulative total returns for
the Emerging Growth, Enterprise, Domestic
Income, Government, and Money Market Divisions,
available under Certificate Form No. 96033N for
the one and five year periods ended December
31,1996, and since inception.(4)
(ii) Computation of hypothetical historical
non-standardized cumulative total returns for
the Real Estate Securities Division, available
under Certificate Form No. 96033N for the one
and five year periods ended December 31,1996,
and since inception.(4)
(d) Computations of hypothetical historical 30 day
yield for the Domestic Income Division and the
Government Division, available under Certificate
Form No. 96033N for the one month period ended
December 31, 1996.(4)
(e) Computations of hypothetical historical seven
day yield and effective yield for the Money
Market Division, available under Certificate
Form No. 96033N for the seven day period ended
C-3
<PAGE>
December 31, 1996.(4)
(14) Financial Data Schedule. (See Exhibit 27 below.)
(15)(a) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by the
following persons in their capacities as
directors and, where applicable, officers of
American General Life Insurance Company of New
York: Ms. Baetz and Ms. Ewers, and Messrs.
Martin, Newton, D'Agostino, Slepicka, Herbert,
Atnip, Bacas, Corcoran, Fox, Gibbons, O'Hara,
and Trotta.(4)
(b) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by the
following person in his capacity as director
and, where applicable, officer of American
General Life Insurance Company of New York: Mr.
Christopher Ruisi.
(27) (Inapplicable, because, notwithstanding Item
24.(b) as to Exhibits, the Commission staff has
advised that no such Schedule is required.)
______________________
(1) Incorporated herein by reference to the initial filing of
Registrant's Form S-6 Registration Statement (File No. 2-67441 and
No. 811-3050).
(2) Incorporated herein by reference to Post-Effective Amendment No. 2
to initial filing of Registrant's Form S-6 Registration Statement
(File No. 2-67441 and No. 811-3050).
(3) Incorporated herein by reference to Post-Effective Amendment No. 3
to initial filing of Registrant's Form S-6 Registration Statement
(File No. 2-67441 and 811-3050).
(4) Previously filed in Registrant's Form N-4 Registration Statement
(File No. 333-32387 and No. 811-3050).
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.
<TABLE>
<CAPTION>
Positions and Offices
Name and Principal with the
Business Address Depositor
------------------ ---------------------
<S> <C> <C>
Robert M. Devlin Director, Senior Chairman
2929 Allen Parkway of the Board
Houston, TX 77019
Rodney O. Martin, Jr. Director, Chairman of the Board
2727-A Allen Parkway & Chief Executive Officer
Houston, TX 77019
C-4
<PAGE>
Jon P. Newton Director, Vice Chairman of the Board
2929 Allen Parkway
Houston, TX 77019
James S. D'Agostino, Jr. Director, Vice Chairman of the Board
2929 Allen Parkway
Houston, TX 77019
Christopher Ruisi Director, President & Chief Marketing
3600 Route 66 Officer
Neptune, NJ 07754-1580
Robert F. Herbert, Jr. Director, Vice President & Controller
2727-A Allen Parkway
Houston, TX 77019
Michael G. Atnip Director
2929 Allen Parkway
Houston, TX 77019
William A. Bacas Director
182 Ridge Street
Glens Falls, NY 12801
B. Shelby Baetz Director
2929 Allen Parkway
Houston, TX 77019
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
112 Northport Point
Northport, MI 49670
Robert J. Gibbons Director
One Franklin Square
Springfield, IL 62713
William J. O'Hara, Jr. Director
AJ Tech
2590 Pioneer Avenue
Vista, CA 92083
C-5
<PAGE>
George B. Trotta Director
541 East 20th Street
Apartment 14F
New York, NY 10010
Wayne A. Barnard Vice President & Chief Actuary
2727-A Allen Parkway
Houston, TX 77019
Peter V. Tuters Vice President & Chief Investment
2929 Allen Parkway Officer
Houston, TX 77019
R. Stephen Watson Vice President, Chief Administrative
300 South State Street Officer & Chief Compliance Officer
Syracuse, NY 13202
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
Sandra M. Smith Associate General Counsel & Secretary
300 South State Street
Syracuse, NY 13202
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
SUBSIDIARIES OF AMERICAN GENERAL CORPORATION(1,2)
The following is a list of American General Corporation's
subsidiaries as of December 31, 1997. 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 (*).
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporation
---------------------- ---------------
<S> <C>
AGC Life Insurance Company(5).................................................... Missouri
C-6
<PAGE>
American General Life and Accident Insurance Company(6)........................ Tennessee
American General Exchange, Inc. ............................................. Tennessee
Independent Fire Insurance Company........................................... Florida
American General Property Insurance Company of Florida..................... Florida
Old Faithful General Agency, Inc........................................... Texas
Independent Life Insurance Company........................................... Georgia
American General Life Insurance Company(7)..................................... Texas
American General Annuity Service Corporation ................................ Texas
American General Life Insurance Company of New York ......................... New York
(REGISTRANT IS A SEPARATE ACCOUNT OF AMERICAN GENERAL LIFE
INSURANCE COMPANY OF NEW YORK, DEPOSITOR)
The Winchester Agency Ltd. ................................................ New York
The Variable Annuity Life Insurance Company ................................. Texas
The Variable Annuity Marketing Company .................................... Texas
VALIC Investment Services Company ......................................... Texas
VALIC Retirement Services Company ......................................... Texas
VALIC Trust Company ....................................................... Texas
Astro Acquisition Corp....................................................... Delaware
The Franklin Life Insurance Company ......................................... Illinois
The American Franklin Life Insurance Company .............................. Illinois
Franklin Financial Services Corporation ................................... Delaware
HBC Development Corporation ................................................. Virginia
Allen Property Company ........................................................ Delaware
Florida Westchase Corporation................................................ Delaware
Hunter's Creek Communications Corporation ................................... Florida
Westchase Development Corporation............................................ Delaware
American General Capital Services, Inc. ....................................... Delaware
American General Corporation* ................................................. Delaware
American General Delaware Management Corporation1 ............................. Delaware
American General Finance, Inc. ................................................ Indiana
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 ................................................ California
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 Independent Producer Division Co.............................. Delaware
American General Investment Advisory Services, Inc.*........................... Texas
American General Investment Holding Corporation(10)............................ Delaware
C-7
<PAGE>
American General Investment Management Corporation(10)......................... Delaware
American General Realty Advisors, Inc. ........................................ Delaware
American General Realty Investment Corporation ................................ Texas
American General Mortgage Company............................................ Delaware
GDI Holding, Inc.*(11)....................................................... California
Ontario Vineyard Corporation ................................................ Delaware
Pebble Creek Country Club Corporation ....................................... Florida
Pebble Creek Service Corporation ............................................ Florida
SR/HP/CM Corporation ........................................................ Texas
American General Property Insurance Company ................................... Tennessee
Bayou Property Company......................................................... Delaware
AGLL Corporation(12)......................................................... Delaware
American General Land Holding Company ....................................... Delaware
AG Land Associates, LLC(12)................................................ California
Hunter's Creek Realty, Inc.* .............................................. Florida
Summit Realty Company, Inc. ............................................... So. Carolina
Florida GL Corporation ........................................................ Delaware
GPC Property Company .......................................................... Delaware
Cinco Ranch East Development, Inc. .......................................... Delaware
Cinco Ranch West Development, Inc. .......................................... Delaware
Hickory Downs Development, Inc. ............................................. Delaware
Lake Houston Development, Inc. .............................................. Delaware
South Padre Development, Inc. ............................................... Delaware
Green Hills Corporation ....................................................... Delaware
Knickerbocker Corporation ..................................................... Texas
American Athletic Club, Inc. ................................................ Texas
Pavilions Corporation.......................................................... Delaware
USLIFE Corporation............................................................. New York
All American Life Insurance Company.......................................... Illinois
1149 Investment Corp....................................................... Delaware
American General Life Insurance Company of Pennsylvania...................... Pennsylvania
New D Corporation*........................................................... Iowa
The Old Line Life Insurance Company of America............................... Wisconsin
The United States Life Insurance Company in the City of New York............. New York
USLIFE Advisers, Inc......................................................... New York
USLIFE Agency Services, Inc.................................................. Illinois
USLIFE Credit Life Insurance Company......................................... Illinois
USLIFE Credit Life Insurance Company of Arizona............................ Arizona
USLIFE Indemnity Company................................................... Nebraska
USLIFE Financial Corporation of Delaware*.................................... Delaware
Midwest Holding Corporation................................................ Delaware
I.C. Cal*................................................................ Nebraska
Midwest Property Management Co........................................... Nebraska
USLIFE Financial Institution Marketing Group, Inc............................ California
USLIFE Insurance Services Corporation........................................ Texas
USLIFE Realty Corporation.................................................... Texas
405 Leasehold Operating Corporation........................................ New York
C-8
<PAGE>
405 Properties Corporation*................................................ New York
USLIFE Real Estate Services Corporation.................................... Texas
USLIFE Realty Corporation of Florida....................................... Florida
USLIFE Systems Corporation................................................... Delaware
American General Finance Foundation, Inc. is not included on this
list. It is a non-profit corporation.
C-9
<PAGE>
NOTES
<FN>
(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 American General Corporation ("AGC") and
American General Delaware Management Corporation ("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 December 23, 1994, AGC Life Insurance Company ("AGCL") became
the owner of approximately 40% of the shares of common stock of
Western National Corporation ("WNC") (the percentage of ownership
by the American General insurance holding company system will
increase to approximately 46% upon conversion of WNC's Series A
Convertible Preferred Stock which AGCL also owns). WNC, a Delaware
corporation, owns the following companies:
WNL Holding Corporation
Western National Life Insurance Company (TX)
WesternSave (401K Plan)
Independent Advantage Financial & Insurance Services, Inc.
WNL Investment Advisory Services, Inc.
Conseco Annuity Guarantee Corp.
WNL Brokerage Services, Inc.
WNL Insurance Services, Inc.
However, AGCL (1) holds the direct interest in WNC and the
indirect interests in WNC's subsidiaries for investment purposes;
(2) does not direct the operations of WNC or WNL; (3) has no
representatives on the Board of Directors of WNC; and (4) is
restricted, pursuant to a Shareholder's Agreement between WNC and
AGCL, in its right to vote its shares against the slate of
directors proposed by WNC's Board of Directors. Accordingly,
although WNC and its subsidiaries technically are members of the
American General insurance holding company system under insurance
holding company laws, AGCL does not direct and control WNC or its
subsidiaries.
(4) American General Life and Accident Insurance Company ("AGLA") owns
approximately 20% of Mosher, Inc. ("Mosher") on a fully diluted
basis. AGLA owns approximately 11% of Whirlpool Financial Corp.
("Whirlpool") on a fully diluted basis. The total investment of
AGLA in Whirlpool represents approximately 3% of the voting power
of the capital stock of Whirlpool, but approximately 11% of the
Whirlpool stock which has voting rights. The interests in Mosher
C-10
<PAGE>
and Whirlpool (each of which are corporations that are not
associated with AGC) are held for investment purposes only.
(5) 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.
(6) 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 7 below.
(7) 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.
(8) American General Realty Investment Corporation owns only a 75%
interest in GDI Holding, Inc.
(9) AG Land Associates, LLC is jointly owned by American General Land
Holding Company ("AGLH") and AGLL Corporation ("AGLL"). AGLH holds
a 98.75% managing interest and AGLL owns a 1.25% managing
interest.
</FN>
</TABLE>
All of the subsidiaries of AGNY are included in its consolidated financial
statements, which are filed in Part B of this Registration Statement.
ITEM 27. NUMBER OF CERTIFICATE OWNERS
As of December 31, 1997, there were no owners of Certificates
offered by this Registration Statement.
C-11
<PAGE>
28. INDEMNIFICATION
AGNY'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 X, section 1, of AGNY's By-Laws provide, in part,
that AGNY shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of AGNY)
by reason of the fact that such person is or was serving at
the request of AGNY, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably
incurred in connection with such proceeding if such person
acted in good faith and in a manner such person reasonably
believed to be in the best interests of AGNY and, in the case
of a criminal proceeding, had no reasonable cause to believe
the conduct of such person was unlawful.
Article X, section 2, provides that AGNY shall have the power
to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or
completed action by or in the right of AGNY to procure a
judgement in its favor by reason of the fact that such person
is or was acting in behalf of AGNY, against expenses actually
and reasonably incurred by such person in connection with the
defense or settlement of such action if such person acted in
good faith, in a manner such person believed to be in the
best interests of AGNY, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances. No
indemnification shall be made under section 2: (1) of amounts
paid in settling or otherwise disposing of a threatened or
pending action; (2) in respect of any claim, issue, or matter
as to which such person shall have been adjudged to be liable
to AGNY, unless and only to the extent that the court in
which such action was brought shall determine upon
application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to
indemnity for the expenses which such court shall determine;
Article X, section 4, provides that, with certain exceptions,
any indemnification under Article X shall be made by AGNY
only if authorized in the specific case, upon a determination
that indemnification of the person is proper in the
circumstances because the person has met the applicable
standard of conduct set forth in section 1 of Article X:
(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 has met the standard of conduct set forth
in Section 1 or 2 of this Article respectively or
established pursuant to Sec. 721 of the Business
Corporation Law, as the case may be; or,
C-12
<PAGE>
(2) If a quorum under sub-paragraph (1) is not
obtainable, or even if obtainable, a quorum of
disinterested Directors so directs:
(a) By the Board of Directors under the opinion in
writing of independent legal counsel that
indemnification is proper in the circumstances
because the applicable standard of conduct set
forth in Sections 1 or 2 of this Article or
established pursuant to Sec. 721 of the
Business Corporation Law has been met by such
officer or Director, or
(b) By the shareholders upon a finding that the
Director or officer has met the applicable
standard of conduct set forth in such
Sections.
(c) Expenses incurred in defending a civil or
criminal action or proceeding may be paid by
AGNY in advance of the final disposition of
such action or proceeding upon receipt of an
undertaking by or on behalf of such Director
or officer to repay such amount as, and to the
extent required to be repaid in case the
person receiving such advancement or allowance
is ultimately found, under the procedure set
forth in Article X, not to be entitled to
indemnification or, where indemnification is
granted, to the extent the expenses so
advanced by the corporation or allowed by the
court exceed the indemnification to which such
officer or Director is entitled.
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.
C-13
<PAGE>
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
and American General Life Insurance Company Separate Account
VL-R.
(b) The directors and principal officers of the principal
underwriter are:
<TABLE>
<CAPTION>
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
------------------ -----------------------
<S> <C>
F. Paul Kovach, Jr. Director & President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director
American General Life
2727-A Allen Parkway
Houston, TX 77019
Robert F. Herbert Associate Tax Officer
American General Life
2727-A Allen Parkway
Houston, Texas 77019
John V. LaGrasse Vice President
American General Life
2727-A Allen Parkway
Houston, TX 77019
Fred G. Fram Vice President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
C-14
<PAGE>
Steven A. Glover Assistant Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
Carole D. Hlozek Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
J. Andrew Kalbaugh Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
(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 AGNY at its principal executive office located at 300
South State Street, P. O. Box 1456, Syracuse, NY 13201.
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.
C-15
<PAGE>
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND
CHARGES DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION
26(C)(2)(A) OF THE INVESTMENT COMPANY ACT OF 1940
AGNY represents that the fees and charges deducted under the
Contract that is identified as Contract Form No. 96034N and the
Certificates that are identified as Certificate Form No. 96033N
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 AGNY under the
Contract and Certificates. AGNY bases its representation on its
assessment of all of the facts and circumstances, including such
relevant factors, as: the nature and extent of such services,
expenses and risks; the need for AGNY to earn a profit; the degree
to which the Contract and Certificates include innovative
features; and the regulatory standards for exemptive relief under
the Investment Company Act of 1940 used prior to October 1996,
including the range of industry practice.
C-16
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, American General Life Insurance Company of New York
Separate Account E, has duly caused this Amendment to the Registration
Statement to be signed on its behalf, in the City of Syracuse and State of New
York on this 3rd day of February, 1998.
AMERICAN GENERAL LIFE INSURANCE
COMPANY OF NEW YORK
SEPARATE ACCOUNT E
(Registrant)
BY: AMERICAN GENERAL LIFE
INSURANCE COMPANY OF NEW YORK
(On behalf of the Registrant and itself)
BY: /s/ROBERT F. HERBERT, JR.
--------------------------
Robert F. Herbert, Jr.
Vice President & Controller
ATTEST: /s/SANDRA M. SMITH
-------------------
Sandra M. Smith
Associate General Counsel
and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/CHRISTOPHER S. RUISI *
--------------------------- Principal Executive Officer
(Christopher S. Ruisi)
/s/ROBERT F. HERBERT, JR.*
--------------------------- Principal Financial and Accounting Officer
(Robert F. Herbert, Jr.)
</TABLE>
DIRECTORS
<TABLE>
<S> <C>
/s/WILLIAM A. BACUS*
--------------------------- -----------------------------
(Robert M. Devlin) (William A. Bacus)
/s/RODNEY O. MARTIN, JR* /s/JOHN R. CORCORAN*
--------------------------- -----------------------------
(Rodney O. Martin, Jr.) (John R. Corcoran)
/s/JON P. NEWTON*
--------------------------- -----------------------------
(Jon P. Newton) (David N. Dunn)
<PAGE>
/s/JAMES S. D'AGOSTINO, JR.* /s/DR. PATRICIA O. EWERS*
--------------------------- -----------------------------
(James S. D'Agostino) (Dr. Patricia O. Ewers)
/s/CHRISTOPHER S. RUISI* /s/THOMAS H. FOX*
--------------------------- -----------------------------
(Christopher S. Ruisi) (Thomas H. Fox)
/s/ROBERT F. HERBERT, JR.* /s/WILLIAM J. O'HARA, JR.*
--------------------------- -----------------------------
(Robert F. Herbert, Jr.) (William J. O'Hara, Jr.)
/s/GEORGE B. TROTTA*
---------------------------
(George B. Trotta)
</TABLE>
/s/SANDRA M. SMITH February 3, 1998
-------------------------------------
*By Sandra M. Smith, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
3. (a) Master Marketing and Distribution Agreement By and Among American
General Life Insurance Company of New York, American General
Securities Incorporated and Van Kampen American Capital
Distributors, Inc.
(b)(i) Form of Participation Agreement by and among American General Life
Insurance Company of New York, American General Securities
Incorporated, Van Kampen American Capital Life Investment Trust,
Van Kampen American Capital Asset Management, Inc., and Van Kampen
American Capital Distributors, Inc.
(ii) Form of Participation Agreement by and among American General Life
Insurance Company of New York, Morgan Stanley Universal Funds,
Inc., Morgan Stanley Asset Management, Inc. And Miller Anderson &
Sherrerd LLP.
(c) Specimen form of Selling Group Agreement by and among American
General Life Insurance Company of New York, American General
Securities Incorporated, and Van Kampen American Capital
Distributors, Inc.
4. (a) Specimen form of Master Group Annuity Contract (Form No. 96034N).
(b) Specimen form of Group Annuity Certificate (Form No. 96033N).
5. (a) Specimen form of Application for Certificate Form No. 96033N.
8. Form of Administrative Services Agreement, Section 1.(f), between
American General Life Insurance Company of New York and American
General Life Insurance Company.
10. Consent of Independent Auditors.
15. (b) Power of Attorney with respect to Registration Statement and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company of New York: Mr.
Christopher Ruisi.
EXHIBIT 3(a)
MASTER MARKETING AND DISTRIBUTION AGREEMENT
BY AND AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED,
AND VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
SECTION 1. AVAILABLE CONTRACTS......................................... 1
1.1 AVAILABILITY............................................. 1
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 .......................................... 3
2.4 SUITABILITY DETERMINATIONS............................... 3
2.5 SALES PERSONS/ASSOCIATED AGENCIES........................ 4
2.6 INSURANCE AGENT LICENSING................................ 4
2.7 COMPLIANCE, TRAINING, AND SUPERVISION.................... 5
2.8 MARKETING MATERIALS...................................... 5
2.9 MARKETING SERVICES....................................... 6
2.10 NON-MARKETING MATERIALS.................................. 7
2.11 INFORMATION ABOUT AGNY AND DISTRIBUTOR.................. 8
2.12 COMPLAINTS............................................... 9
2.13 PREMIUM PAYMENTS......................................... 9
2.14 LIMITATIONS ON AUTHORITY................................. 9
2.15 INDEPENDENT CONTRACTOR................................... 10
SECTION 3. ADMINISTRATION AND RECORDKEEPING............................ 10
3.1 CONTRACT ADMINISTRATION.................................. 10
3.2 PERFORMANCE STANDARDS.................................... 10
3.3 RECORDKEEPING............................................ 10
SECTION 4. REPRESENTATIONS AND WARRANTIES.............................. 11
4.1 BY AGNY.................................................. 11
4.2 BY AGSI.................................................. 12
4.3 BY DISTRIBUTOR .......................................... 13
SECTION 5. COMPENSATION; COSTS AND EXPENSES............................ 14
5.1 COMPENSATION............................................. 14
5.2 REGISTRATION FEES........................................ 14
5.3 EACH PARTY TO BEAR OWN COSTS............................. 14
SECTION 6. INDEMNIFICATION............................................. 14
6.1 INDEMNIFICATION BY AGNY AND AGSI......................... 14
6.2 INDEMNIFICATION BY DISTRIBUTOR........................... 16
6.3 LIMITATION ON LIABILITY.................................. 17
6.4 INJUNCTIVE RELIEF........................................ 17
i
<PAGE>
SECTION 7. TERM AND TERMINATION........................................ 18
7.1 TERM..................................................... 18
7.2 EVENTS OF TERMINATION.................................... 18
7.3 REMEDY OF EVENTS OF DEFAULT.............................. 19
7.4 PARTIES TO COOPERATE RESPECTING TERMINATION.............. 20
SECTION 8. ASSIGNMENT BY DISTRIBUTOR................................... 20
SECTION 9. CONTRACT LAPSE, TERMINATION, SURRENDER, ETC................. 20
SECTION 10. CONFIDENTIALITY............................................. 20
SECTION 11. ARBITRATION OF DISPUTES..................................... 20
11.1 ARBITRATION BINDING...................................... 21
11.2 INITIATION OF ARBITRATION................................ 21
11.3 SELECTION OF ARBITRATORS................................. 21
11.4 IMPARTIALITY............................................. 21
11.5 HEARING DATE AND TIME.................................... 22
SECTION 12. TRADEMARKS.................................................. 22
12.1 DISTRIBUTOR TRADEMARKS................................... 22
12.2 AGNY TRADEMARKS.......................................... 22
12.3 GRANT OF LICENSE......................................... 22
12.4 PRIOR APPROVAL........................................... 23
12.5 SAMPLE MATERIALS......................................... 23
12.6 TRADEMARKS VALID AND ENFORCEABLE......................... 23
SECTION 13. BONDING AND INSURANCE....................................... 23
SECTION 14. NOTICES..................................................... 24
14.1 MANNER OF NOTICES........................................ 24
14.2 NOTICE OF REGULATORY PROCEEDINGS......................... 24
SECTION 15. MISCELLANEOUS............................................... 25
15.1 AMENDMENT................................................ 25
15.2 GOVERNING LAW............................................ 25
15.3 SURVIVAL OF PROVISIONS................................... 25
15.4 SEVERABILITY............................................. 25
15.5 WAIVER................................................... 25
15.6 FORCE MAJEURE............................................ 25
15.7 PARTIES TO COOPERATE..................................... 25
15.8 ENTIRE AGREEMENT......................................... 26
ii
<PAGE>
MASTER MARKETING AND DISTRIBUTION AGREEMENT
This Master Marketing and Distribution Agreement (the "Agreement") is
made on this 5th day of January, 1998, by and among AMERICAN GENERAL LIFE
INSURANCE COMPANY OF NEW YORK, a New York insurance company ("AGNY"), 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 AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware corporation
("DISTRIBUTOR") (each, a "Party," collectively, the "Parties").
RECITALS
WHEREAS, AGNY 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 AGNY's Separate Account E ("Separate Account E");
WHEREAS, AGNY 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 AGNY for such
purposes (collectively referred to, together with Separate Account E, as the
"Accounts");
WHEREAS, AGNY hereby appoints AGSI the principal underwriter of the New
Contract and currently intends to appoint AGSI the principal underwriter of
all other Contracts;
WHEREAS, AGNY 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 "VKAC
Associated Agency")), on an exclusive basis, to market and distribute the
Contracts and DISTRIBUTOR desires to provide such services; and
WHEREAS, AGNY, 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:
SECTION 1. AVAILABLE CONTRACTS
1.1 AVAILABILITY. AGNY shall make available for offer and sale by
DISTRIBUTOR, pursuant to the terms and conditions of this Agreement, the
1
<PAGE>
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. AGNY, 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 AGNY agrees to consider any
such proposed modification in good faith, provided, however, that any
implementation of such proposed modification shall remain in AGNY's sole
discretion.
1.3 SUSPENSION OR RESTRICTION OF SALES. AGNY, 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 AGNY has suspended
or restricted the sale of Contracts. In addition, notwithstanding any
provision herein to the contrary, AGNY may refuse to sell any Contract to any
applicant for any reason.
1.4 REINSURANCE OF CONTRACTS. AGNY 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) AGNY, as the issuer of the Contracts, and AGSI, as the principal
underwriter of the Contracts, hereby appoint DISTRIBUTOR (including any VKAC
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. AGNY shall periodically provide
DISTRIBUTOR with notice pursuant to Section 14 hereof of all states and other
jurisdictions in which the Contracts may lawfully be 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 AGNY; or by (B) referring Contract owners to AGNY as
appropriate; and
2
<PAGE>
(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 AGNY 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 AGNY 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 AGNY 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 AGNY 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 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 AGNY 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 AGNY 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. AGNY, 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
3
<PAGE>
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 VKAC Associated
Agency is and remains properly licensed under the applicable insurance laws
and regulations or each state of jurisdiction in which such VKAC 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.
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 AGNY if the license of any
VKAC Associated Agency is revoked, suspended, or terminated, and shall
immediately notify AGNY at such time DISTRIBUTOR becomes aware that the
license of any Sales Person or Associated Agency has been revoked, suspended,
or terminated.
(c) AGNY agrees to take all actions necessary to effect the
appointment of the Sales Persons as insurance agents of AGNY, and to effect
renewals thereof, all as required for the business of this Agreement.
(d) DISTRIBUTOR shall, from time to time, advise AGNY of the Sales
4
<PAGE>
Persons that DISTRIBUTOR wishes AGNY to appoint as AGNY insurance agents. AGNY
shall forward all approved agent appointment forms that it receives in a
timely manner to the appropriate state insurance departments.
(e) DISTRIBUTOR and AGNY 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, AGNY, in its sole discretion, may
refuse to appoint or renew the appointment of any Sales Person, or may revoke
such appointment for any reason. AGNY shall consult with DISTRIBUTOR prior to
refusing to appoint, renew appointment, or revoking an appointment, as to the
reasons for such decision. Neither AGNY 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 AGNY or AGSI. AGNY 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 AGNY 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 AGNY), 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
5
<PAGE>
("Account Reports"), the preparation of which shall be the sole responsibility
of AGNY. 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 AGNY, 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 AGNY shall promptly forward all such requests that it receives to
DISTRIBUTOR. AGNY shall at all times keep DISTRIBUTOR informed of the dates of
the appropriate current Contract Prospectus and SAI.
(c) AGNY 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.
(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. AGNY 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, AGNY 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 AGNY 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 AGNY has provided its written
approval of such materials prior to their intended first use. The
responsibility of Selling Group Members to obtain AGNY'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:
6
<PAGE>
(a) develop a marketing plan for the introduction and continuing sale
of the Contracts through Selling Group Members;
(b) provide AGNY on an ongoing basis with information concerning the
marketability of the Contracts and the usefulness of the marketing materials
jointly prepared by AGNY and DISTRIBUTOR or any other documents prepared by
AGNY, and advise AGNY with regard to the desirability of revising or
redesigning the same;
(c) provide AGNY 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 AGNY 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 AGNY;
(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
AGNY pursuant to this Agreement;
(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 AGNY may
reasonably request from time to time.
2.10 NON-MARKETING MATERIALS.
(a) AGNY, 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) AGNY, 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
AGNY's prior approval.
(c) The responsibility for printing and distributing Contract
7
<PAGE>
Prospectuses to existing Contract owners shall be set forth in the
Participation Agreement.
(d) AGNY, 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) AGNY 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) AGNY, 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 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 AGNY on behalf of
AGSI and DISTRIBUTOR.
2.11 INFORMATION ABOUT AGNY AND DISTRIBUTOR
(a) Neither AGNY 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 AGNY, 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 AGNY, 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
8
<PAGE>
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 AGNY.
2.12 COMPLAINTS.
In the case of an oral or written consumer or regulatory agency
complaint, AGNY, AGSI, and DISTRIBUTOR shall each promptly notify the others
and shall coordinate and fully cooperate in responding to such complaints.
AGNY, AGSI, and DISTRIBUTOR shall jointly develop procedures to coordinate,
investigate and respond to such complaints. AGNY, 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 AGNY 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.
2.14 LIMITATIONS ON AUTHORITY. DISTRIBUTOR and Sales Persons shall have
no authority to, and shall not:
(a) alter or substitute AGNY'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 AGNY;
(d) make any settlement of any claim or claims or bind AGNY 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 AGNY;
(g) enter into legal proceedings in connection with any matter
pertaining to the business of AGNY without the prior written consent of AGNY,
unless DISTRIBUTOR or any Sales Person, as the case may be, is named in such
proceedings;
9
<PAGE>
(h) give or offer to give, on behalf of AGNY, any tax or legal advice
related to the purchase of a Contract; or
(i) exercise any authority on behalf of AGNY 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 AGNY, 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 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 AGNY, 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.
10
<PAGE>
(d) To the extent that records maintained by AGNY, 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.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1 BY AGNY
AGNY 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,
11
<PAGE>
(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) AGNY 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 AGNY or AGSI by or on behalf of DISTRIBUTOR.
AGNY further represents that:
(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
12
<PAGE>
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,
(f) it shall at all times provide appropriate supervision for those
home office employees of AGNY who are registered representatives of AGSI and
who are required by AGNY to execute duties on behalf of AGNY 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
VKAC 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 VKAC 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,
13
<PAGE>
(e) neither it nor any of its Sales Persons or the VKAC 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 AGNY, 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
DISTRIBUTOR in this Section 4.3 shall be read to apply to each VKAC Associated
Agency where the context so requires.
SECTION 5. COMPENSATION; COSTS AND EXPENSES
5.1 COMPENSATION.
(a) AGNY 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 VKAC 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 AGNY 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 AGNY 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 AGNY AND AGSI
14
<PAGE>
(a) Except as limited by and in accordance with the provisions of
Sections 6.1(c) and 6.1(d) below, AGNY 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:
(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
AGNY or AGSI by or on behalf of DISTRIBUTOR or any VKAC Associated
Agency thereof for use in the foregoing materials; or
(ii) arise out of the failure of AGNY, 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 AGNY'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 AGNY 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 AGNY or AGSI in this Agreement or
arise out of or result from any other material breach of this Agreement
by AGNY 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 VKAC 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) AGNY 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
15
<PAGE>
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 AGNY 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 AGNY 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 such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify AGNY and AGSI of any such claim shall not relieve AGNY 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, AGNY and AGSI
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from AGNY and AGSI to such party
of AGNY'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 AGNY 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 AGNY and AGSI against any loss, claim, damage or liability (including
amounts paid in settlement with the written consent of AGNY and AGSI), or
litigation (including reasonable counsel fees and other costs of investigating
or defending any alleged loss, claim, damage, or liability) to which AGNY 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 AGNY or AGSI by or on behalf of
DISTRIBUTOR or any VKAC Associated Agency thereof for use in the
foregoing materials; or
(ii) arise out of the failure of DISTRIBUTOR or any VKAC
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
16
<PAGE>
(iii) arise out of the negligence or misconduct of DISTRIBUTOR or
any VKAC 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 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 AGNY or AGSI and any person controlling AGNY 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
17
<PAGE>
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.
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 AGNY or AGSI;
(ii) the dissolution or disqualification of AGNY or AGSI to do
business under any applicable state or federal law where AGNY or AGSI's
ability to perform is materiallyimpaired; however, such termination
shall extend only to the jurisdiction(s) where AGNY or AGSI is
prohibited from doing business;
(iii) the suspension or revocation of any material license or
permit held by AGNY or AGSI by the appropriate governmental agency or
authority; however, such termination shall extend only to the
jurisdiction(s) where AGNY or AGSI is prohibited from doing business;
(iv) the sale (without the prior written consent of DISTRIBUTOR,
18
<PAGE>
which consent shall not be unreasonably withheld) of the AGNY or AGSI
business relating to the Contracts, which sale is to an unaffiliated
person or entity, whether by merger, consolidation, or sale of
substantially all of AGNY or AGSI's assets, during the term of, and any
extension of, this Agreement; or
(v) upon the institution of formal proceedings against AGNY or
AGSI by the NASD, SEC, or any other regulatory body regarding AGNY 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 AGNY or AGSI.
(c) This Agreement shall terminate at the option of AGNY 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 AGNY, 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), AGNY 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 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.
19
<PAGE>
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 AGNY and prior
notification to the New York Insurance Department, assign its rights or
obligations under this Agreement to a VKAC 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 VKAC 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 VKAC
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 AGNY, 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. AGNY 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 AGNY 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 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
20
<PAGE>
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 AGNY, 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
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
21
<PAGE>
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 AGNY (including its
affiliates) a non-exclusive license to use the DISTRIBUTOR licensed marks in
connection with AGNY's performance of the services contemplated under this
Agreement, subject to the terms and conditions set forth in this Section 12.
12.2 AGNY TRADEMARKS. AGNY owns all right, title and interest in and to
the tradename, trademarks and service mark "American General Life Insurance
Company 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 "AGNY licensed marks" or the "licensor's licensed marks"). AGNY
hereby grants to DISTRIBUTOR (including its affiliates) a non-exclusive
license to use the AGNY 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 AGNY
(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
22
<PAGE>
cease to use a licensor's licensed marks. Upon AGNY'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 AGNY licensed
marks or that it has any association with AGNY or any affiliate of AGNY in
connection with any such Contracts. Similarly, upon DISTRIBUTOR's elective
termination of this license, AGNY (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 AGNY 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.
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 AGNY at all times during the term of this Agreement.
23
<PAGE>
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:
American General Life Insurance Company of New York
300 South State Street
Syracuse, New York 13201-1456
Attn: Sandra M. Smith, Esq.
Telecopier: (315) 423-2709
American General Securities Incorporated
2727 Allen Parkway, Suite 290
Houston, Texas 77019
Attn: F. Paul Kovach, Jr.
Telecopier: (713) 831-3366
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 601801
Attn: Ronald A. Nyberg
Telecopier: (708) 684-6155
14.2 NOTICE OF REGULATORY PROCEEDINGS.
(a) AGNY 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
AGNY's or AGSI's ability to perform their respective obligations hereunder,
(ii) any request by the 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.
AGNY 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.
AGNY 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.
24
<PAGE>
(b) DISTRIBUTOR shall immediately notify AGNY 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 AGNY if any of its Sales Persons or
any VKAC 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 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) AGNY, 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
25
<PAGE>
proceeding with respect to AGNY, 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 AGNY'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 AGNY 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 AGNY, AGSI, and DISTRIBUTOR regarding the marketing and
distribution of Contracts, and it supersedes all prior and contemporaneous
agreements. The Parties recognize that AGNY 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.
26
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first written above.
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
on behalf of itself and each Account
named in Schedule A hereto,
as amended from time to time
/s/DAVID DIETZ
---------------
BY: David Dietz,
President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
/s/F. PAUL KOVACH
-----------------
BY: F. Paul Kovach,
President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
/s/WILLIAM R. MOLINAR
---------------------
BY: William R. Molinar
27
<PAGE>
SCHEDULE A
NAMES OF SEPARATE ACCOUNTS
American General Life Insurance Company of New York Separate Account E
AVAILABLE CONTRACTS (IDENTIFIED BY FORM NUMBER)
Generations Variable Annuity
Certificate form number: 96033N
A-1
<PAGE>
SCHEDULE B
AGNY 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 AGNY.
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.
(d) Pay compensation based on arrangements of marketing and Selling
Group Agreements.
B-2
<PAGE>
8. REPORTING
(a) Provide sales or other reports as mutually agreed upon by AGNY 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 AGNY 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.
AGNY 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, or 4 below, or .75 percent
(.75%) of Purchase Payments paid pursuant to Schedule 3 below, and received by
AGNY during such period that are attributable to all Contracts issued by AGNY.
All Purchase Payments upon which the Fee may be based must be received by AGNY
in accordance with the Agreement and such other requirements that AGNY and
DISTRIBUTOR may, from time to time, establish. The Fee shall constitute the
sole and exclusive payment by AGNY to DISTRIBUTOR with respect to the
Contracts issued pursuant to the Agreement and all services rendered under or
in contemplation of this Agreement.
2. COMPENSATION TO SELLING GROUP MEMBERS.
AGNY 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 Contracts that AGNY
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.
<TABLE>
SALES COMMISSION SCHEDULES
<S> <C>
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
following receipt of the initial Purchase
Payment.
C-1
<PAGE>
Schedule 4:** 5.5% commission plus a 0.50% trail commission
commencing at the end of the third month of the
eighth year following receipt of the initial
Purchase Payment.
<FN>
* Schedule 1 is available from the effective date of the Agreement until the
Agreement is terminated. ** Schedules 2, 3, and 4 are available beginning
January 1, 1998 until the Agreement is terminated.
</FN>
</TABLE>
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 AGNY during each
semi-monthly period that are attributable to Contracts solicited by Sales
Persons. All Purchase Payments upon which the commission may be based must be
received by AGNY in accordance with the Agreement and such other requirements
that AGNY 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 Contract 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 contract 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 Contract Account Value computed on each quarterly contract
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 Contract 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.
(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
Contract 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
C-2
<PAGE>
Program that are within the 10% Free Withdrawal Privilege):
o 100% for full or partial withdrawal of a Purchase Payment made
during the first six months following its receipt; and
o 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 AGNY hereunder shall either be promptly returned
by check payable to AGNY on request or will be deducted by AGNY from future
payments due under this Schedule C, under each of the following conditions:
(a) if AGNY, in its sole discretion, determines not to issue the
Contract applied for or rescinds the Contract;
(b) if the Contract owner returns the Contract pursuant to the "Free
Look" provision of the Contract;
(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 AGNY refunds all or any portion of the Purchase Payment as a
result of a complaint or grievance;
(e) if the Contract owner, at the time the Contract 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 Contracts, or (ii) is an officer, director, or bona-fide employee of
AGNY, AGSI, or any of their company affiliates, or DISTRIBUTOR; provided,
however, that the owner shall have completed, at the time the Contract is
purchased, appropriate documents supplied by AGNY which provide for a waiver
of all surrender charges; or
(f) if AGNY or AGSI determines that any Sales Person signing an
application or any person or entity receiving compensation for soliciting
purchases of the Contracts is not duly licensed to sell the Contracts 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.
C-3
<PAGE>
In addition, if AGNY determines that any Contract applied for is a
replacement of any insurance or annuity product issued by AGNY or any of its
affiliates, AGNY 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 AGNY will directly pay
Sales Commissions to the appropriate Selling Group Member. AGNY, in its
discretion, may offset against compensation payable by it pursuant to this
paragraph any due and unpaid amounts owed to AGNY by DISTRIBUTOR.
C-4
<PAGE>
SCHEDULE D
(AS OF SEPTEMBER 15, 1997)
DISTRIBUTOR TRADEMARKS
The name "Van Kampen American Capital"
The product name "Generations"
The phrase "A wealth of knowledge, a knowledge of wealth," and its logo
design
AGNY TRADEMARKS
The name "American General Corporation"
The name "American General Life Insurance Company of New York"
The American General logo
D-1
EXHIBIT 3(b)(i)
PARTICIPATION AGREEMENT
AMONG
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
AND
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
JANUARY 20, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
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
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
Among
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST,
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.,
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
and
AMERICAN GENERAL SECURITIES INCORPORATED
THIS AGREEMENT, made and entered into as of the 20th day of January,
1998 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY 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 AMERICAN CAPITAL LIFE INVESTMENT TRUST (hereinafter the "Fund"), a
Delaware business trust, VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
(hereinafter the "Underwriter"), a Delaware corporation, and VAN KAMPEN
AMERICAN CAPITAL 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
<PAGE>
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.
2
<PAGE>
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions 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 Company; provided, however, that notification
3
<PAGE>
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.
4
<PAGE>
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Adviser represent that the Fund is 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
5
<PAGE>
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 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 ombined 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
6
<PAGE>
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.
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.
7
<PAGE>
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Underwriter, the Company or such other person as the Fund
may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the 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
8
<PAGE>
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 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
9
<PAGE>
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 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.
10
<PAGE>
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 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
11
<PAGE>
(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.
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
12
<PAGE>
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 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.
13
<PAGE>
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, 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
14
<PAGE>
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
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
15
<PAGE>
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
(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.
16
<PAGE>
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 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 American Capital Life Investment Trust
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Underwriter:
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
If to Adviser:
Van Kampen American Capital Asset Management, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
Attention: Ronald A. Nyberg
17
<PAGE>
If to the Company:
American General Life Insurance Company of New York
300 South State Street
Syracuse, New York 13201-1456
Attention: Sandra M. Smith
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
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:
(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.
19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK on behalf of itself and
each of its Accounts named in Schedule A hereto, as amended from time to time
By: __________________________
Robert A. Slepicka
President and Chief Marketing Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: __________________________
F. Paul Kovach, Jr.
President
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
By: /s/DENNIS J. MCDONNELL
--------------------------
Dennis J. McDonnell
Executive Vice President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By: /s/JOHN H. ZIMMERMANN, III
--------------------------
John H. Zimmermann, III
President
VAN KAMPEN AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/DENNIS J. MCDONNELL
--------------------------
Dennis J. McDonnell
President
20
<PAGE>
<TABLE>
SCHEDULE A
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Certificates
Date Established by Board of Directors Funded by Separate Account
-------------------------------------- ---------------------------------------
<S> <C>
American General Life Insurance CERTIFICATE FORM NO.:
Company of New York Separate Account E 96033N
Established: February 15, 1979
NAME OF CONTRACT:
Generations Combination Fixed and Variable
Annuity Certificate
</TABLE>
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
Real Estate Securities 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.)
23
<PAGE>
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)
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.
24
<PAGE>
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.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
25
EXHIBIT 3(b)(ii)
PARTICIPATION AGREEMENT
Among
MORGAN STANLEY UNIVERSAL FUNDS, INC.,
MORGAN STANLEY ASSET MANAGEMENT INC.
MILLER ANDERSON & SHERRERD, LLP
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
and
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
AMERICAN GENERAL SECURITIES INCORPORATED
DATED AS OF
SEPTEMBER 15, 1997
<PAGE>
<TABLE>
TABLE OF CONTENTS
<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 6
ARTICLE IV. Sales Material and Information 11
ARTICLE V [Reserved] 13
ARTICLE VI. Diversification 13
ARTICLE VII. Potential Conflicts 13
ARTICLE VIII. Indemnification 15
ARTICLE IX. Applicable Law 19
ARTICLE X. Termination 20
ARTICLE XI. Notices 22
ARTICLE XII. Foreign Tax Credits 23
ARTICLE XIII. Miscellaneous 24
SCHEDULE A Portfolios of Morgan Stanley Universal Funds 27
Available for Purchase by American General
Life Insurance Company of New York
SCHEDULE B Separate Accounts and Contracts 28
SCHEDULE C Proxy Voting Procedures 29
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the 15th day of
September, 1997 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW
YORK (hereinafter the "Company"), a New York insurance company, on its own
behalf and on behalf of each separate account of the Company set forth on
Schedule B hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account") AMERICAN GENERAL SECURITIES
INCORPORATED (("AGSI"),a Texas corporation, and MORGAN STANLEY UNIVERSAL
FUNDS, INC. (hereinafter the "Fund"), a Maryland corporation, and MORGAN
STANLEY ASSET 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
<PAGE>
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
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 the Underwriter agree as follows:
ARTICLE I. Fund Shares
2
<PAGE>
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 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 which afford the Company substantially the same protections
currently provided by Sections 2.4, 2.9, 3.4 and Article VII of this Agreement
is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
3
<PAGE>
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall 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
4
<PAGE>
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 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 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.
5
<PAGE>
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.
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
6
<PAGE>
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
7
<PAGE>
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 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.
8
<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.
9
<PAGE>
3.2(c) EXPENSES BORNE BY VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
FUND PROSPECTUSES
With respect to prospective Participants, Van Kampen American Capital
Distributors, Inc. ("VKAC Distributors"), 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, VKAC Distributors 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,
VKAC Distributors 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 VKAC
Distributors pay for any such costs that exceed by more than five (5) percent
what VKAC Distributors and the Fund would have paid to print such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, VKAC Distributors. 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, VKAC Distributors 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, VKAC Distributors 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 VKAC
Distributors pay for any such costs that exceed by more than five (5) percent
what VKAC Distributors and the Fund would have paid to print such documents.
VKAC Distributors 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.
10
<PAGE>
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the 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.
11
<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.
12
<PAGE>
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. 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
13
<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
(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 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
16
<PAGE>
(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 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
17
<PAGE>
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 the Company) or unlawful conduct of the
18
<PAGE>
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
19
<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.
8.2(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 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
20
<PAGE>
(b) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts. Reasonable advance notice of election
to terminate shall be furnished by the Company, said termination to be
effective ten (10) days after receipt of notice unless the Fund makes
available a sufficient number of shares to reasonably meet the requirements of
the Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of such
shares as the underlying investment medium of the Contracts issued or to be
issued by the Company. The terminating party shall give prompt notice to the
other parties of its decision to terminate; or
(d) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company or AGSI
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that such Portfolio
fails to meet the diversification requirements specified in Article VI hereof;
or
(f) termination by either the Fund or 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
21
<PAGE>
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; 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,
22
<PAGE>
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.
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.
1221 Avenue of the Americas
New York, New York 10020
Attention: Harold J. Schaaff, Jr.
23
<PAGE>
If to Adviser:
Morgan Stanley Asset 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:
American General Life Insurance Company of New York
300 S. State Street
Syracuse, New York 13201-1456
Attention: Sandra M. Smith
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.
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.
25
<PAGE>
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;
(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.
26
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
on behalf of itself and each of its Accounts named in Schedule B hereto,
as amended from time to time.
By: ______________________________
Name: Robert A. Slepicka
Title: President and Cheif Marketing Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: ______________________________
Name: F. Paul Kovach, Jr.
Title: President
MORGAN STANLEY UNIVERSAL FUNDS, INC.
By: /s/MICHAEL KLEIN
--------------------
Name: Michael Klein
Title: President
MORGAN STANLEY ASSET 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 AMERICAN CAPITAL DISTRIBUTORS, INC.
(only as to Section 3.2(c) of the Agreement)
By: /s/WILLIAM R. MOLINARI
--------------------------
Name : William R. Molinari
Title: Presidnet
27
<PAGE>
SCHEDULE A
PORTFOLIOS OF MORGAN STANLEY
UNIVERSAL FUNDS AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY OF NEW YORK UNDER THIS AGREEMENT
Fixed Income
High Yield
Equity Growth
Mid Cap Value
Value
International Magnum
Emerging Markets Equity
Global Equity
28
<PAGE>
<TABLE>
SCHEDULE B
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Certificates
Date Established by Board of Directors Funded by Separate Account
-------------------------------------- ---------------------------------------
<S> <C>
American General Life Insurance CERTIFICATE FORM NO.:
Company of New York Separate Account E 96033N
Established: February 15, 1979
NAME OF CONTRACT:
Generations Combination Fixed and Variable
Annuity Certificate
</TABLE>
29
<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:
30
<PAGE>
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).
(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.
31
<PAGE>
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 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
32
<PAGE>
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.
32
EXHIBIT 3(c)
SELLING GROUP AGREEMENT
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC. AND
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
This Selling Group Agreement ("Agreement") is made among Van Kampen American
Capital Distributors, Inc., a registered broker-dealer and the distributor for
the variable life insurance policies (or certificates) and/or annuity
contracts (or certificates) set forth in Schedule A ("Distributor"),
-----------------------------------------------------------------------
("Selling Group Member")
-----------------------------------------------------------------------
("Associated Agency")
and, as the fourth party, American General Life Insurance Company of New York
("AGNY"). 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 (a)
certain variable life insurance policies and certificates, and (b) certain
variable annuity contracts and 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 AGNY and
distributed through Distributor through representatives who are state
insurance licensed and appointed agents of AGNY and associated with Associated
Agency and are also NASD registered representatives of Selling Group Member
("Sales Persons"). The policies, contracts and/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, AGNY 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 AGNY to solicit
and procure applications for the Contracts. This appointment is not deemed 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 AGNY have
<PAGE>
otherwise agreed, must remit such premiums in full dollar amount to AGNY.
Unless Selling Group Member and AGNY have otherwise agreed, applications shall
be taken only on preprinted application forms supplied by AGNY. All completed
applications and supporting documents are the sole property of AGNY and must
be promptly delivered to AGNY. All applications are subject to acceptance by
AGNY at its sole discretion.
(1) NEW PRODUCTS
AGNY and Distributor may propose, and AGNY 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
AGNY 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,
AGNY will provide Associated Agency and Selling Group Member with information
regarding the jurisdictions in which AGNY 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 AGNY or
Distributor or unless AGNY 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
AGNY 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
AGNY or Distributor. Associated Agency and Selling Group Member jointly and
severally hold AGNY, Distributor and their affiliates harmless from any
liability arising from the use of any material which either
2
<PAGE>
(a) has not been specifically approved in writing by AGNY, or (b) although
previously approved, has been disapproved by AGNY 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. AGNY 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 AGNY 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 AGNY,
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 AGNY, 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 AGNY, 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 AGNY, 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 or the selection of any investment option
thereunder, in compliance with federal and state securities laws.
3
<PAGE>
Associated Agency shall fully cooperate in any insurance or securities
regulatory examination, investigation, or proceeding or any judicial
proceeding with respect to AGNY, 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) AGNY COMPLIANCE
AGNY 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. AGNY 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
AGNY will remit to Associated Agency compensation as set forth in Schedule B
hereto.
(9) CUSTOMER SERVICE, COMPLAINTS, AND INDEMNIFICATION
The parties agree that AGNY 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 AGNY, 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 AGNY against any and all claims,
liabilities and expenses incurred by either Distributor or AGNY, 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.
(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 AGNY 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
4
<PAGE>
transactions. Associated Agency acknowledges that AGNY may require evidence
that such coverage is in force and Associated Agency shall promptly give
notice to AGNY of any notice of cancellation or change of coverage.
Associated Agency assigns any proceeds received from the fidelity bond company
to AGNY to the extent of AGNY's loss due to activities covered by the bond. If
there is any deficiency, Associated Agency will promptly pay AGNY that amount
on demand. Associated Agency indemnifies and holds harmless AGNY from any
deficiency and from the cost of collection.
(11) LIMITATIONS OF AUTHORITY
The Contract forms are the sole property of AGNY. No person other than AGNY
has the authority to make, alter or discharge any policy, Contract,
certificate, supplemental contract or form issued by AGNY. No party has the
right to waive any provision with respect to any Contract or policy; give or
offer to give, on behalf of AGNY, any tax or legal advice related to the
purchase of a Contract or policy; or make any settlement of any claim or bind
AGNY 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 AGNY.
(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 to 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.
(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.
5
<PAGE>
(B) Independent Contractors
Distributor, Selling Group Member and Associated Agency are
independent contractors and not employees or subsidiaries of AGNY;
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 AGNY 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.
(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.
6
<PAGE>
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 AMERICAN CAPITAL DISTRIBUTORS, INC.
Signed By: __________________________________________________
Fred Shepherd, Senior Vice President
American General Life Insurance Company of New York
300 South State Street
Syracuse, NY 13201
Signed By: __________________________________________________
Name and Title
7
<PAGE>
Schedule A
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
CONTRACTS COVERED BY THIS AGREEMENT
<TABLE>
<CAPTION>
REGISTRATION FORMS SEPARATE
CONTRACT NAME AND NUMBERS ACCOUNT
<S> <C> <C>
Generations Variable Annuity Form N-4 E
Nos. 333-32387
811-3050
</TABLE>
<PAGE>
SCHEDULE B - GENERATIONS VARIABLE ANNUITY
CONTROL DATE - January 1, 1998
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., AND
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK ("AGNY")
This Schedule B is attached to and made a part of the Selling Group Agreement
("Agreement") to which it is attached. It is subject to the terms and
conditions of the Agreement. In no event shall AGNY be liable for the payment
of any commission with respect to any solicitation made, in whole or in part,
by any person not appropriately licensed and appointed prior to the
commencement of such solicitation.
A commission will be paid to Associated Agency in the amount of 6% of the
aggregate Purchase Payments received and accepted by AGNY with a properly
completed application or as subsequent Purchase Payments under the Contracts
after the Contract is in force.
Commission Reductions:
(a) FREE LOOK. If a Contract is returned to AGNY pursuant to the "Free Look"
provision of the Contract, the full commission paid by AGNY will be
returned to AGNY or, in the absence of such return, charged back to
Associated Agency.
(b) 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
Contract has a Contingent Annuitant).
(c) 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, as defined in the Contract):
o 100% for full or partial withdrawal of a Purchase Payment made
during the first six months following its receipt; and
o 50% for full or partial withdrawal of a Purchase Payment made
during the next six months following its receipt.
In no event shall any commission adjustment or chargeback be assessed
for termination of a Contract because of the death of the Annuitant or
Owner during the periods specified above.
(d) NO COMPENSATION PAYABLE. No compensation shall be payable:
o if AGNY, in its sole discretion, determines not to issue the
Contract applied for or rescinds the Contract;
<PAGE>
o if AGNY refunds all or any portion of the Purchase Payments as a
result of a complaint or grievance; or
o if AGNY determines that a Purchase Payment made within 60 days
following a prior partial withdrawal, including systematic
withdrawals, is reasonably believed to be a reinvestment of part
or all of the prior partial withdrawal.
o if the Owner, at the time the Contract is purchased, is an
officer, director, or bona-fide employee of AGNY or any of its
company affiliates; provided, however, that the Owner shall have
completed, at the time the Contract is purchased, appropriate
documents supplied by AGNY which provide for a waiver of all
surrender charges.
Associated Agency agrees to promptly deliver Contracts and holds AGNY harmless
from and against any claim arising from market loss to the owner of the
Contract resulting from late delivery by Associated Agency.
Unless otherwise agreed, Associated Agency shall forward to AGNY the first
full payment collected by Associated Agency, without deduction for
compensation.
EXHIBIT (4)(a)
[Border Graphic]
AMERICAN GENERAL LIFE
Insurance Company of New York
Home Office: 300 South State Street, Syracuse, NY 13202
MASTER CONTRACT
Unless otherwise directed by a Participant, We will pay a monthly income with
respect to each Annuitant living on the Annuity Commencement Date. Payment
will be made in accordance with the provisions set forth in each Certificate
and this policy.
All payments and values provided by each certificate, when based on the
investment experience of a Separate Account, are variable, may increase or
decrease, and are not guaranteed as to amount.
SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE.
/s/SANDRA M. SMITH /s/ROBERT A. SLEPICKA
Secretary President
This is a FLEXIBLE PAYMENT VARIABLE and FIXED GROUP DEFERRED ANNUITY CONTRACT.
NONPARTICIPATING -- NOT ELIGIBLE FOR DIVIDENDS.
CANCELLATION RIGHT. The Owner may return this Contract for cancellation to us
or to the sales representative through whom it was purchased, within 10 days
after delivery. Upon surrender of this Contract within the 10 day period, We
will refund the sum of (1) Any Purchase Payments allocated to a Fixed Account;
plus (2) Any Separate Account Values as of the end of the Valuation Period in
which the Cancellation Request is received; plus (3) Any additional amounts
withheld by the Company for premium taxes.
[American General Logo]
Questions Regarding This Contract should be directed to:
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
ADMINISTRATIVE CENTER
2727-A Allen Parkway - P. O. Box 1401 - Houston, TX 77251-1401 - (800) 281-8289
96034N
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Account Value .......................................................... 4
Allocation of Purchase Payments......................................... 7
Annuity Options......................................................... 21
Annuity Tables.......................................................... 23
Annuity Units........................................................... 20
Automatic Rebalancing................................................... 13
Beneficiary............................................................. 8
Certificate Fee......................................................... 17
Change of Investment Advisor or
Investment Policy................................................... 6
Contingent Annuitant.................................................... 4
Death Proceeds.......................................................... 18
Definitions............................................................. 4
Division Accumulation Units............................................. 12
Divisions............................................................... 11
Fixed Account Value..................................................... 10
General Provisions...................................................... 6
Guaranteed Interest Rates............................................... 11
Guarantee Periods....................................................... 10
Net Investment Factor................................................... 12
One-Time Reinvestment Privilege......................................... 17
Ownership Provisions.................................................... 8
Payment of Benefits..................................................... 19
Participant............................................................. 5
Premium Taxes........................................................... 8
Purchase Payments....................................................... 7
Schedule Page........................................................... 3
Separate Account........................................................ 12
Surrenders.............................................................. 14
Full Surrender....................................................... 15
Partial Withdrawals.................................................. 15
Surrender Charge..................................................... 15
Surrender Charge Exceptions.......................................... 15
Ten Percent Free Withdrawal Privilege................................ 16
Tax Charge.............................................................. 17
Transfers............................................................... 13
Variable Annuity Payments............................................... 20
</TABLE>
96034N
Page 2
<PAGE>
American General Life Insurance Company of New York
<TABLE>
SCHEDULE PAGE
<S> <C>
MINIMUM INITIAL PURCHASE PAYMENT: $5,000
MINIMUM ADDITIONAL PURCHASE PAYMENTS: $100
ADDITIONAL BENEFITS: NONE
MAXIMUM ASSET CHARGE FACTORS (Separate Account Only)
ANNUAL RATE: 1.40%
MAXIMUM ANNU7AL CONTRACT FEE (Per Certificate) $ 30
TRANSFER CHARGE (After First 12 in a Certificate Year) $ 25
[DIVISIONS OF THE SEPARATE ACCOUNT
Asian Equity Portfolio
Domestic Income Portfolio
Emerging Growth Portfolio
Emerging Markets Equity Portfolio
Enterprise Portfolio
Equity Growth Portfolio
Global Equity Portfolio
Government and Income Portfolio
High-Yield Portfolio
International Magnum Portfolio
Mid Cap Value Portfolio
Money Market Portfolio
Real Estate Securities Portfolio
Value Portfolio
Fixed Income Portfolio
FIXED ACCOUNT - 1 Year Guarantee Period]
</TABLE>
<TABLE>
<S> <C>
GROUP CONTRACT NUMBER: 0123456789
DATE OF ISSUE: May 1, 1997
CONTRACT JURISDICTION: NEW YORK
CONTRACTORHOLDER AMERICAN GENERAL GROUP VARIABLE ANNUITY TRUST
</TABLE>
96034N
Page 3
<PAGE>
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
A brief description of each Portfolio's investment objective follows. However,
no investment allocation should be made without referring to the appropriate
prospectus which describes each Portfolio in detail.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
U.S. FIXED INCOME PORTFOLIOS
The FIXED INCOME PORTFOLIO seeks above-average total return over a market
cycle of three to five years by investing primarily in a diversified portfolio
of U.S. Governments and Agencies, Corporate Bonds, Mortgage-Backed Securities,
Foreign Bonds and other Fixed Income Securities and Derivatives.
The HIGH YIELD PORTFOLIO seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified portfolio of
High Yield Securities, including Corporate Bonds and other Fixed Income
Securities and Derivatives.
U.S. Equity Portfolios
The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of medium and large capitalization companies
that, in the Investment Advisor's judgment, provide above-average potential
for capital growth.
The MID CAP VALUE PORTFOLIO seeks above-average total return over a market
cycle of three to five years by investing in Common Stocks and other Equity
Securities of issuers with equity capitalizations in the range of the
companies represented in the Standard & Poor's Ratings Group MidCap 400 Index.
The VALUE PORTFOLIO seeks above-average total return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
Common Stocks and other Equity Securities that are deemed by the Investment
Advisor to be relatively undervalued based on various measures such as
price/earnings ratios and price/book ratios.
Global Portfolios
The ASIAN EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of Asian issuers (excluding Japan) through the
selection of individual stocks that the Investment Advisor believes are
undervalued. The Portfolio intends to invest primarily in Equity Securities
that are traded on recognized stock exchanges of countries in Asia and in
Equity Securities of companies organized under the laws of an Asian country
whose business is conducted principally in Asia.
The EMERGING MARKETS EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of emerging market country issuers
with a focus on those in which the Investment Advisor believes the economies
are developing strongly and in which the markets are becoming more
sophisticated.
The GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of issuers throughout the world, including U.S.
issuers, through the selection of individual stocks that the Investment
Advisor believes are undervalued.
96034N
Page 3A
<PAGE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of non-U.S. issuers domiciled in EAFE
countries (Australia, Japan, New Zealand, most nations located in Western
Europe and certain developed countries in Asia, such as Hong Kong and
Singapore.
The DOMESTIC INCOME PORTFOLIO seeks current income as its primary investment
objective by investing in a diversified portfolio of fixed-income securities.
The Portfolio expects that at all times at least 80% of its assets will be
invested in (1) fixed-income securities rated at the time of purchase B or
higher by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
(2) nonrated debt securities believed by the Investment Adviser to be of
comparable quality, and (3) U.S. Government securities.
The EMERGING GROWTH PORTFOLIO seeks capital appreciation by investing in a
portfolio of securities consisting principally of common stock of small and
medium sized companies considered by the Investment Adviser to be emerging
growth companies.
The ENTERPRISE PORTFOLIO seeks capital appreciation through investments in
securities believed by the Investment Adviser to have above average potential
for capital appreciation.
The GOVERNMENT PORTFOLIO seeks high current return consistent with
preservation of capital by investing primarily in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The
Portfolio may sell and purchase call and put options. The Portolio also may
purchase and sell interest rate futures contracts and options on such
contracts since such transactions are entered into for bona fide hedging
purposes. The Portfolio may purchase or sell U.S. Government Securities on a
forward commitment basis.
The GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital and income
by investing primarily in income-producing equity securities including common
stock and convertible securities. Investments may also be made in
non-convertible preferred stocks and debt securities.
The MONEY MARKET PORTFOLIO seeks protection of capital and high current income
by investing in money-market investments. Investments in the Money Market
Portfolio are neither insured nor guaranteed by the U.S. Government. Although
the Money Market Portfolio seeks to maintain a stable net asset value of $1.00
per share, there is no assurance that it will be able to do so.
The REAL ESTATE SECURITIES PORTFOLIO seeks long-term growth of capital as its
primary investment objective by investing principally in companies operating
in the real estate industry. Real Estate Securities include equity secuities,
including common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies.
The STRATEGIC STOCK PORTFOLIO seeks an above average total return through a
combination of potential capital appreciation and dividend income consistent
with the preservation of invested capital by investing primarily in a
portfolio of dividend paying Equity Securities included in the Dow Jones
Industrial Average or in the Morgan Stanley Capital International USA Index.
96034N
Page 3B
<PAGE>
DEFINITIONS
"WE", "OUR", "US", OR "COMPANY". "We", "our", "us", or "Company" means
American General Life Insurance Company of New York.
ACCOUNT. Any of the Divisions of the Separate Account or the Fixed Account.
ACCOUNT VALUE. The sum of the Fixed Account Value and the Separate Account
Value of a Certificate after deduction of any fees.
ACCUMULATION PERIOD. The period during which Net Purchase Payments are
allocated to either the Fixed Account or the Separate Account and held under
the Certificate.
ACCUMULATION UNIT. An accounting unit of measure used to calculate the value
of a Division of a Certificate before annuity payments begin.
ADMINISTRATIVE CENTER. The American General Life of New York (AGNY) Annuity
Service Center, to which all Purchase Payments, requests, directions and other
communications should be directed. The AGNY Annuity Service Center is located
at 2727--A Allen Parkway, Houston, Texas 77019-2191.
AGE. Age of an Annuitant as of his or her last birthday, unless otherwise
stated.
ANNUITANT. The person upon whose date of birth and sex income payments are
based. The Annuitant's name will be found on page 3 of his or her Certificate.
ANNUITY UNIT. A unit of measure used to calculate variable annuity payments.
BENEFICIARY. The person entitled to receive benefits in the event the
Participant or the Annuitant dies. If no named Beneficiary is living at the
time any payment is to be made, the Participant shall be the Beneficiary, or
if the Participant is not living, the Participant's estate shall be the
Beneficiary.
CONTINGENT ANNUITANT. A person named by the Participant of a Non-Qualified
contract to become the Annuitant if (1) the Annuitant dies before the Annuity
Commencement Date; and (2) the Contingent Annuitant is then living.
A Contingent Annuitant may not be named except at the time of application.
Once named, the choice may not be revoked or replaced. If a Contingent
Annuitant dies, a new Contingent Annuitant may not be named. After Annuity
Payments start, a Contingent Annuitant may not become the Annuitant.
CONTINGENT BENEFICIARY. A person named by the Participant to receive benefits
in the event a designated Beneficiary is not living at the time of the
Participant's or Annuitant's death.
CONTRACT OWNER. The Organization named on page 3 as Owner of the Master
Contract.
CONTRACT YEAR. A period of 12 consecutive months beginning on the Date of
Issue or any anniversary thereof.
DATE OF ISSUE. The date on which this Contract becomes effective as shown on
Page 3.
DIVISION. A subdivision of the Separate Account.
FIXED ACCOUNT. An Account which provides interest at a guaranteed fixed rate
for a guaranteed period.
96034N
Page 4
<PAGE>
FIXED ANNUITY OPTION. An Annuity Option with payments which do not vary with
investment performance.
ISSUE AGE. Age last birthday on the Date of Issue. (If the Date of Issue
occurs on the Annuitant's birthday, "last birthday" will mean the birthday
occurring on the Date of Issue).
NET ASSET VALUE PER SHARE. The value of the net assets of a Variable Fund
divided by the number of shares in the Variable Fund.
NET PURCHASE PAYMENT. The gross amount of a Purchase Payment less any Premium
Taxes deducted at the time a Purchase Payment is made.
NON-QUALIFIED CONTRACT. A Certificate that does not qualify for the special
federal income tax treatment applicable in connection with retirement plans.
PARTICIPANT. (Certificate Owner) The person named in the Certificate who is
entitled to exercise all rights and privileges of ownership under the
Certificate.
PARTICIPANT'S ACCOUNT. An account established for each Participant to which
Purchase Payments are credited.
PAYOUT PERIOD. The period, starting with the Annuity Commencement Date, during
which Annuity Payments are made by the Company.
PREMIUM TAX. The amount of tax, if any, charged by a state or municipality on
Purchase Payments or Certificate Values.
PURCHASE PAYMENT. An amount paid to the Company as consideration for the
benefits described herein.
QUALIFIED CONTRACT. A Certificate that is qualified for the special federal
income tax treatment applicable in connection with certain retirement plans.
SEPARATE ACCOUNT. A segregated investment account entitled "Separate Account
E" established by the Company to separate the assets funding variable benefits
from the other assets of the Company. That portion of the assets of the
Separate Account equal to the reserves and other liabilities with respect to
the Separate Account shall not be chargeable with liabilities arising out of
any other business We may conduct. Income, gains and losses, whether or not
realized from assets allocable to the Separate Account, are credited to or
charged against such account without regard to our other income, gains or
losses.
UNIT VALUE. The value of: (1) an Accumulation Unit as described in the
"Division Accumulation Units" provision; or (2) an Annuity Unit as described
in the "Annuity Units" provision.
VALUATION DATE. Any day on which we are open for business except, with respect
to any Division, a day on which the related Variable Fund does not value its
shares.
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 ANNUITY OPTION. An Annuity Option under which we promise to pay the
Annuitant or other properly-designated Payee one or more payments which vary
in amount in accordance with the net investment experience of the applicable
Divisions selected to measure the value of a Certificate.
VARIABLE FUND. An individual investment fund or series in which a Division
invests.
WRITTEN, IN WRITING. A written request or notice in acceptable form and
content, which is signed and dated, and received at our Administrative Center.
96034N
Page 5
<PAGE>
GENERAL PROVISIONS
Entire Contract The Certificate will be attached to and made a part
of this Contract. This Contract including the
Certificate, endorsements if any, and a copy of the
application, if attached, constitute the entire
Contract between the Contract Owner and Us. All
statements made by the Contract Owner, Participant or
the Annuitant will be deemed representations and not
warranties. No statement will be used to reduce a
claim under this Contract unless it is in writing and
made a part of this Contract. Nothing in the group
annuity Contract invalidates or impairs any right
granted to the certificate holder by Chapter 28,
Article 32, Section 3219 of New York Insurance Laws,
or the certificate.
Not Contestable This Contract is not contestable.
Discontinuance of By giving 30 days prior written notice, we may limit
Acceptance of or discontinue the acceptance of new Participants'
New Participants applications and the issuance of new Certificates
under this Contract. Such limitation or
discontinuance shall have no effect on rights or
benefits with respect to any Participant's
Certificate issued prior to the effective date of
such limitation or discontinuance.
Guarantees We guarantee that the dollar amount of Variable
Annuity Payments made during the lifetime of the
Payee(s) will not be adversely affected by our actual
mortality experience or by the actual expenses
incurred by us in excess of the expense deductions
provided for in this Contract.
Settlement All benefits under certificates issued under this
Contract are payable from our Administrative Office
in Houston, Texas.
Nonparticipating This Contract is nonparticipating and does not share
in our surplus or earnings.
Change of Investment Unless otherwise required by law or regulation, the
Advisor or Investment investment advisor or any investment policy may not
Policy be changed without our consent. If required, approval
of or change of any investment objective will be
filed with the Insurance Department of the state
where this Contract and the Certificate are
delivered. You will be notified of any material
investment policy change which has been approved.
Notification of an investment policy change will be
given in advance to those Owners who have the right
to comment on or vote on such change.
Any substitution of the underlying investments of any
Division will comply with all applicable requirements
of the Investment Company Act of 1940 and rules
thereunder.
Rights Reserved Upon notice to the Participant, the Certificate may
by Us be modified by us, but only if such modification is
necessary to:
(1) Operate the Separate Account in any form
permitted under the Investment Company Act of
1940 or in any other form permitted by law;
(2) Transfer any assets in any Division to another
Division, or to one or more other separate
accounts, or to the Fixed Account;
(3) Add, combine or remove Divisions in the
Separate Account, or combine the Separate
Account with another separate account;
(4) Add, restrict or remove Guarantee Periods of
the Fixed Account;
(5) Make any new Division available to you on a
basis to be determined by us;
96034N
Page 6
<PAGE>
(6) Substitute for the shares held in any Division,
the shares of another Variable Fund or the
shares of another investment company or any
other investment permitted by law;
(7) Make any changes as required by the Internal
Revenue Code or by any other applicable law,
regulation or interpretation in order to
continue treatment of each Certificate as an
annuity; or
(8) Make any changes required to comply with rules
of any Variable Fund.
When required by law, we will obtain Your approval of
changes and we will gain approval from any
appropriate regulatory authority.
Changing the Terms Any change in this Contract or a Certificate must be
of This Contract approved by one of our officers. No agent has the
authority to make any changes or waive any of the
terms.
Termination Each Certificate will remain in force until
surrendered for its full value, or all annuity
payments have been made, or the death proceeds have
been paid, except as follows:
If a Participant's Account Value falls below $500,
due to Partial withdrawals, We may cancel the
Certificate upon 60 days' notice to the Participant.
Such cancellation would be considered a full
surrender of the Certificate.
If a Participant's Account Value in any Division
(except the Money Market Division) falls below $500,
we reserve the right to transfer the remaining
balance, without charge, to the Money Market
Division. This Contract will terminate when all funds
from the Certificates are withdrawn.
PURCHASE PAYMENTS
Minimum Payments The minimum amounts acceptable as Purchase Payments
are shown on Page 3. We reserve the right to modify
these minimums or to refuse a Purchase Payment for
any reason.
Maximum Payments The maximum amount We will accept during the life of
a Certificate without approval of an officer of the
Company is $1,000,000.
Allocation of Net The initial allocation of Net Purchase Payments is
Purchase Payments shown on page 3 of each Certificate, and will remain
in effect until changed by Written notice.
Changes in the allocation will be effective on the
date we receive the Participant's notice. The
allocation may be 100% to any available Division or
Guarantee Period, or may be divided among the options
in whole percentage points totaling 100%.
An initial Purchase Payment will be credited to the
Participant's Account not more than two Valuation
Periods after we receive it, together with all other
required documentation, in good order at the office
designated by the Company for the processing of
initial Purchase Payments. Subsequent Purchase
Payments will be credited as of the end of the
Valuation Period in which they are so received. We
reserve the right to limit the total number of Fixed
Account Guarantee Periods and Separate Account
Divisions that may be chosen by the Participant while
the Certificate remains in force.
96034N
Page 7
<PAGE>
Premium Taxes When applicable, we will deduct an amount to cover
premium taxes. Such deduction will be made:
(1) From Purchase Payment(s) when received; or
(2) From the Participant's Account Value at the
time annuity payments are to commence; or
(3) From the amount of any partial withdrawal; or
(4) From proceeds payable upon termination of the
Certificate for any other reason, including
death of the Annuitant or Participant, or
surrender of the Certificate.
If premium tax is paid, the Company may reimburse
itself for such tax when deduction is being made
under paragraphs 2, 3, or 4 above calculated by
multiplying the sum of Purchase Payments being
withdrawn by the applicable premium tax percentage.
OWNERSHIP PROVISIONS
Exercise of Contract This Master Contract is owned by the Organization
Rights named on page 3 of this Contract.
The Participant will have the right to exercise all
rights and privileges in connection with such
Participant's Certificate. If a Certificate is
jointly owned by more than one Participant, all
Participants must join in any request to exercise the
rights or privileges of a Participant.
In any case, such rights and privileges may be
exercised without the consent of the Beneficiary
(other than an irrevocably designated Beneficiary) or
any other person. Such rights and privileges may be
exercised only during the lifetime of the Annuitant
and prior to the Annuity Commencement Date, except as
otherwise provided in this Contract and the
Certificate.
A Payee entitled to benefits upon the death of the
Participant or the Annuitant may thereafter exercise
such rights and privileges, if any, of ownership
which continue.
Beneficiary The term "Beneficiary" means the Beneficiary
designated by the Participant in the application for
the certificate, or as later changed by the
Participant. The Beneficiary will receive any
proceeds that may become payable:
(1) Upon the death of the Annuitant, provided no
Contingent Annuitant survives; or
(2) Upon the death of the Participant (other than a
Joint Participant) of a Non-Qualified contract
during the Accumulation Period. (See "Death of
the Participant Prior to the Annuity Date -
Non-qualified Contracts Only").
Unless otherwise provided in the Beneficiary
designation:
(1) If any Beneficiary dies, that Beneficiary's
interest will pass to any other Beneficiary
according to the surviving Beneficiary's
respective interest.
(2) If no Beneficiary survives to receive proceeds,
such proceeds will be paid in one sum to the
Participant, if living; otherwise such proceeds
will be paid to the Participant's estate. If
payment is made to the Participant's estate,
the estate will be required to accept payment
within 5 years of the date of death.
96034N
Page 8
<PAGE>
Provisions in this contract regarding the payments to
a Beneficiary upon the death of the Annuitant will
also apply to any proceeds payable to a Beneficiary
upon the death of the Participant (other than a Joint
Participant - See "Death of the Participant Prior to
the Annuity Date - Non-Qualified Contracts Only").
Payment in the event of the Participant's death will
be made upon receipt in our Home Office of a written
request for proceeds and due proof of the
Participant's death.
Change of Ownership Ownership of a Qualified Contract may not be
transferred except to: (1) the Annuitant; (2) a
trustee or successor trustee of a pension or profit
sharing trust which is qualified under Section 401 of
the Internal Revenue Code; (3) the employer of the
Annuitant, provided that the Qualified Contract after
transfer is maintained under the terms of a
retirement plan qualified under Section 403(a) of the
Internal Revenue Code for the benefit of the
Annuitant; (4) the trustee of an individual
retirement account plan qualified under Section 408
of the Internal Revenue Code; or (5) as otherwise
permitted from time to time by laws and regulations
governing the retirement or deferred compensation
plans for which a Qualified Contract may be issued.
In no other case may a Qualified Contract be sold,
assigned, transferred, discounted or pledged as
collateral.
The Owner of a Non-Qualified Contract may change the
ownership of such Contract. During the lifetime of
the Annuitant and prior to the Annuity Commencement
Date, the Participant may change the ownership
interest in the Non-Qualified Contract as evidenced
by the Certificate.
A change of ownership will not be binding upon Us
until we receive Written notification at our
Administrative Center. When such notification is so
received, the change will be effective as of the date
of the signed request for change, but the change will
be without prejudice to Us on account of any payment
made, or any action taken by Us prior to receiving
the change, or on account of any tax consequence.
Death of the Participant As used in the Certificate, the term "Non-Qualified
Prior to the Annuity Contract" means a Certificate that does not qualify
Date - Non-Qualified for the special federal income tax treatment
Contracts Only applicable in connection with retirement plans.
If a Participant (including the first to die in the
case of Joint Participants) under a Non-Qualified
Contract dies prior to the Annuitant and before the
Annuity Commencement Date, the death proceeds must be
distributed to the Beneficiary either (1) within five
years after the date of death of the Participant, or
(2) over the life of or a period not greater than the
life or expected life of the Beneficiary, with
annuity payments beginning within one year after the
date of death of the Participant.
The Beneficiary of a Participant (other than a Joint
Participant) will be the person or persons designated
as Beneficiary in the application for the
Certificate, or as later changed prior to the death
of such Participant. If a Joint Participant dies,
death proceeds will be paid to the surviving Joint
Participant, if living; otherwise death proceeds will
be paid to the person designated as Beneficiary.
These mandatory distribution requirements will not
apply upon the death of a Participant if the spouse
of a deceased Participant elects to continue the
Certificate in the spouse's own name, as Participant.
The spouse may make such election if: (1) the spouse
is the designated Beneficiary of a deceased
Participant (other than a Joint Participant); or (2)
the spouse is the sole surviving Joint Participant.
96034N
Page 9
<PAGE>
The Beneficiary (including a Joint Participant
receiving death proceeds) will be considered the
designated beneficiary for the purposes of Section
72(s) of the Internal Revenue Code. In all cases, any
such designated beneficiary will not be entitled to
exercise any rights prohibited by applicable federal
income tax law.
If the Payee under a Non-Qualified Contract dies
after the Annuity Commencement Date and before all of
the payments under the Annuity Option have been
distributed, the remaining amount payable must be
distributed at least as rapidly as under the method
of distribution then in effect.
If the Participant prior to the Annuity Commencement
Date, or the Payee thereafter, is not a natural
person, then the foregoing distribution requirements
shall apply upon the death of the primary Annuitant
within the meaning of the Internal Revenue Code.
Periodic Reports We will send to each Participant, at least once
during each Certificate Year, a statement showing the
following amounts as of a date not more than two
months prior to the date of mailing:
(1) The number of Accumulation Units credited to
the Participant's Account; and
(2) The dollar value of each Accumulation Unit;
(3) The total value of the Participant's Account;
(4) The Cash Surrender Value of the Participant's
Account; and
(5) The Death Benefit.
We will also send such statements as may be required
by applicable state and federal laws, rules and
regulations.
Participant's Account We will establish a Participant's Account for the
Participant under a Certificate, and will maintain
such account during the Accumulation Period. The
Participant's Account Value for any Valuation Period
will be equal to the Participant's Separate Account
Value, if any, plus the Participant's Fixed Account
Value, if any, for that Valuation Period.
FIXED ACCOUNT
Fixed Account Value We will credit to the Guarantee Period(s) selected
that portion of each Net Purchase Payment allocated
to the Fixed Account. The value in any one Guarantee
Period on a Valuation Date is:
(1) The Accumulated Value of the Net Purchase
Payments, renewals or transfers allocated to
the Guarantee Period at the Guaranteed Interest
Rate; less
(2) The Accumulated Value of surrenders and
transfers out of that Guarantee Period; less
(3) The Certificate Fee allocated to that Guarantee
Period.
Guarantee Periods A One Year Guarantee Period will always be available,
and additional Guarantee Periods may be added from
time to time. If more than one Guarantee Period is
available, more than one may be selected. The
Guarantee Period(s) selected will determine the
Guaranteed Interest Rate(s). The Net Purchase Payment
or the portion thereof (or amount transferred in
accordance with the transfer privilege provision
described below) allocated to a particular Guarantee
Period will earn interest at the Guaranteed Interest
Rate during the Guarantee Period. Guarantee Periods
begin on the date as of which We credit the
Participant's Account Value to that Guarantee Period
or, in the case of a transfer, on the effective date
96034N
Page 10
<PAGE>
of the transfer. The Guarantee Period is the number
of years We credit the Guaranteed Interest Rate. The
expiration date of any Guarantee Period is the last
day of the Guarantee Period. Subsequent Guarantee
Periods begin on the first day following the
expiration date. As a result of Guarantee Period
renewals, additional Purchase Payments and transfers
of portions of the Participant's Account Value,
Guarantee Periods of the same duration may have
different expiration dates and Guaranteed Interest
Rates.
We will notify the Participant in writing at least 15
and not more than 45 days prior to the expiration
date of any Guarantee Period. A new Guarantee Period
of the same duration as the previous Guarantee Period
will begin automatically unless we receive Written
notice to the contrary from the Participant at least
3 Valuation Dates prior to the end of such Guarantee
Period. The Participant may elect to change to
another Guarantee Period or Division which we offer
at such time.
If the amount of a Participant's Account Value in a
Guarantee Period is less than $500 at the end of such
Guarantee Period, we reserve the right to transfer
such amount, without charge, to the Money Market
Division of the Separate Account. However, we will
transfer such amount to another available Division at
the Participant's request.
Guaranteed Interest We will periodically establish an applicable
Guaranteed Interest Rate for each Guarantee Period we
offer. These rates will be guaranteed for the
duration of the respective Guarantee Periods. The
Guarantee Periods that We make available at any time
will be determined at Our discretion.
No Guaranteed Interest Rate shall be less than an
effective annual rate of 3.0%.
Interest Rate Lock This provision will apply if:
on 1035 Exchanges
or Other Qualified (1) Proceeds are being transferred to us under
Rollovers and Transfers Internal Revenue Code (IRC) Section 1035 (a
1035 Exchange), or under another rollover of
values qualified for special tax treatment
under the IRC; and
(2) All, or a part of the resulting Net Purchase
Payments are to be allocated to the Fixed
Account.
If proceeds from such Exchange, Rollover or Transfer
are received by the Company within 60 days following
the date of application for a Certificate, interest
to be credited to the Fixed Account during the
Guarantee Period will be calculated at a rate which
is the higher of: (1) the current interest rate being
used by the Company for the Guarantee Period selected
on the date of the application; or (2) the current
interest rate being used by the Company on the date
of receipt of such proceeds. Proceeds received more
than 60 days after the date the application is signed
will receive interest at the rate in effect on the
date of receipt of such proceeds.
Interest will be credited to the Fixed Account as of
the date of receipt of such proceeds, and the
interest rate used to calculate such interest will
remain in effect for the duration of the Guarantee
Period.
SEPARATE ACCOUNT
Divisions The Separate Account has several Divisions, each
investing in a corresponding Variable Fund. Net
Purchase Payments will be allocated to the Divisions
and the Fixed Account as shown in the Certificate,
96034N
Page 11
<PAGE>
unless the Participant changes the allocation. A list
of the Divisions of the Separate Account appear on
page 3. A brief description of each Division will be
found on pages 3A and 3B.
We will use the Net Purchase Payments and any
transferred amounts to purchase Variable Fund shares
applicable to the Divisions at their net asset value.
We will be the owner of all Variable Fund shares
purchased with the Net Purchase Payments or
transferred amounts.
Division Net Purchase Payments and transferred amounts
Accumulation allocated to the Separate Account will be credited to
Units the Participant's Account in the form of Division
Accumulation Units. The number of Division
Accumulation Units will be determined by dividing the
amount allocated to a Division by the Division
Accumulation Unit value as of the end of the
Valuation Period as of which the transaction is
credited. The value of each Division Accumulation
Unit was arbitrarily set as of the date the Division
first purchased Variable Fund shares. Subsequent
values on any Valuation Date are equal to the
previous Division Accumulation Unit value times the
Net Investment Factor for the Valuation Period ending
on that Valuation Date.
Net Investment The Net Investment Factor is an index applied to
Factor measure the investment performance of a Division from
one Valuation Period to the next. The Net Investment
Factor may be greater or less than or equal to one;
therefore, the value of an Accumulation Unit may
increase, decrease or remain the same.
The Net Investment Factor for a Division is
determined by dividing (1) by (2), and then
subtracting (3) from the result, where:
(1) Is the sum of:
(a) The Net Asset Value Per Share of the
Variable Fund shares held in the
Division, determined at the end of the
current Valuation Period; plus
(b) The per share amount of any dividend or
capital gain distributions made on the
Variable Fund shares held in the Division
during the current Valuation Period;
(2) Is the Net Asset Value Per Share of the
Variable Fund shares held in the Division,
determined at the beginning of the current
Valuation Period; and
(3) Is a factor representing the mortality risk,
expense risk, and administrative expense
charge. We will determine the daily asset
charge factor annually, but in no event may it
exceed the Maximum Asset Charge Factor as
specified on Page 3.
Separate Account The Separate Account Value for any Valuation Period
Value is the total of the values in each Division credited
to the Participant's Account for such Valuation
Period. The value for each Division will be equal to:
(1) The number of Division Accumulation Units;
multiplied by
(2) The Division Accumulation Unit value for the
Valuation Period.
The Separate Account value will vary from Valuation
Date to Valuation Date reflecting the total value in
the Divisions.
96034N
Page 12
<PAGE>
TRANSFERS
Transfers Transfers may be made at any time during the
Accumulation Period after the first 30 days following
the Date of Issue. A transfer will be effective at
the end of the Valuation Period in which we receive
the Participant's Written request for a transfer.
Transfers will be subject to the following
restrictions:
(1) Prior to the Annuity Commencement Date, the
Participant may make up to 12 transfers each
Certificate Year without charge.
(2) There will be a charge of $25.00 for each
transfer in excess of 12 in a Certificate Year.
(3) Transfers under the Automatic Rebalancing
program will not count towards the 12 free
transfers each Certificate Year. The $25.00
charge will not apply to transfers made through
Automatic Rebalancing. Transfers under any
other asset management arrangement approved by
the Company may be subject to the $25.00 charge
and may count towards the 12 free transfers.
(4) The amount of Account Value that may be
transferred each year from a Fixed Account
Guarantee Period to a Separate Account Division
is limited. The limit will be based on the
Guarantee Period account balance at the
beginning of the Guarantee Period. Not more
than 25% of such account balance may be
transferred to a Separate Account Division
during each Certificate year. The 25% limit
does not apply to:
(a) Funds transferred from a Guarantee period
as a result of Dollar Cost Averaging; or
(b) Transfers within 15 days before or after
the end of the applicable Guarantee
Period; or
(c) A renewal at the end of a Guarantee
Period to the same Guarantee Period.
(5) If a transfer would cause the Account Value in
any Division or Guarantee Period to fall below
$500, We reserve the right to also transfer the
remaining balance in that Division or Guarantee
Period in the same proportions as the transfer
request.
(6) We reserve the right to defer any transfer from
the Fixed Account to the Variable Divisions for
up to 6 months.
After the Annuity Commencement Date, the Participant
may make one transfer during any 180 day period; such
transfer is without charge. The Participant may not
make transfers from the fixed annuity account.
Automatic "Automatic Rebalancing" occurs when funds are
Rebalancing transferred by the Company between the Separate
Account Divisions so that the values in each Division
match the percentage allocation then in effect.
Automatic Rebalancing of the Separate Account
Divisions will occur periodically:
(1) If the Participant's Account Value is equal to
or greater than $25,000; and
96034N
Page 13
<PAGE>
(2) If selected by the Participant.
The Participant may select Automatic Rebalancing when
applying for the Certificate, or it may be selected
at a later date. The Company reserves the right to
increase or lower the Minimum Account Value required
for Automatic Rebalancing.
Dollar Cost Averaging "Dollar Cost Averaging" is an automatic periodic
transfer of funds in accordance with the "Transfers"
provision and instructions from the Participant.
SURRENDERS
General Surrender The amount surrendered will normally be paid to the
Provisions Participant within 5 Valuation Dates following our
receipt of:
(1) The Participant's Written request on a form
acceptable to us; and
(2) The Certificate, if required.
We reserve the right to defer payment of surrenders
from the Fixed Account for up to 6 months from the
date we receive the request.
Full Surrender At any time prior to the Annuity Commencement Date
and during the lifetime of the Annuitant, the
Participant may surrender his or her Certificate by
sending us a Written request. The amount payable on
surrender is:
(1) The Participant's Account Value at the end of
the Valuation Period in which we receive the
Participant's request on a form acceptable to
us;
(2) Minus any applicable Surrender Charge;
(3) Minus any applicable Certificate Fee; and
(4) Minus any applicable premium tax.
The amount payable upon surrender will not be less
than the amount required by state law.
Upon payment of the surrender amount, the Certificate
will be terminated and We will have no further
obligation to the Participant.
All collateral assignees must consent to any
surrender or partial withdrawal. We may require that
the Certificate be returned to our Administrative
Center prior to making payment.
Partial Withdrawals A portion of the Participant's Account Value may be
withdrawn at any time prior to the Annuity
Commencement Date. The Participant must send us a
Written request specifying the Divisions or Guarantee
Periods from which the Partial Withdrawal is to be
made. However, in cases where the Participant does
not so specify, or the withdrawal cannot be made in
accordance with the Participant's specifications, We
reserve the right to implement the withdrawal pro
rata from each Division and Guarantee Period based on
the Account Value in each. Partial Withdrawals will
be made effective at the end of the Valuation Period
in which We receive the Written request. Partial
Withdrawals will be subject to the following
guidelines:
96034N
Page 14
<PAGE>
(1) The Partial Withdrawal amount must be at least
$100 or, if less, the Participant's entire
Account Value;
(2) We will surrender Division Accumulation Units
from the Separate Account or interests in a
Guarantee Period so that the total amount
withdrawn will be the sum of:
(a) The amount payable to the Participant;
(b) Plus any Surrender Charge and any
applicable premium tax;
(3) If the Participant's Account Value in any
Division or Guarantee Period (except the Money
Market Division) falls below $500, We reserve
the right to transfer the remaining balance
without charge to the Money Market Division.
(4) If a Partial Withdrawal would cause the
Participant's Account Value to fall below $500,
We may cancel the Certificate upon 60 days'
notice to the Participant. Such cancellation
would be considered a full surrender of the
Certificate.
Surrender Charge Except as noted under "Surrender Charge Exceptions",
for Partial a Surrender for Partial Charge will be applied to the
Withdrawals and amount of any Purchase Payment withdrawn during the
Full Surrenders first 7 years after it was first credited, as
follows:
<TABLE>
<CAPTION>
Surrender Charge
Year of as a Percentage
Purchase Payment of Purchase
Withdrawal Payment Withdrawn
---------------- -----------------
<S> <C>
1st and 2nd 6%
3rd and 4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
</TABLE>
For purposes of computing the Surrender Charge, the
oldest Purchase Payments are deemed to be withdrawn
first, and before any amounts in excess of Purchase
Payments are withdrawn from a Participant's Account.
The following transactions will be considered as
withdrawals for purposes of computing the Surrender
Charge: total surrender, partial withdrawal,
commencement of an annuity payment option and
termination due to insufficient Participant Account
Value
Surrender Charge The Surrender Charge will not apply:
Exceptions
(1) To any amounts in excess of Purchase Payments
that are withdrawn from a Participant's
Account; or
(2) To any amounts in excess of the amount
permitted by the 10% Free Withdrawal Privilege
if such amounts are required to be withdrawn to
obtain or retain favorable federal tax
treatment; (The granting of this exception is
subject to Our approval);
(3) Upon the death of the Annuitant at any age
during the Payout Period;
96034N
Page 15
<PAGE>
(4) Upon the death of the Annuitant at any age
during the Accumulation Period if no Contingent
Annuitant survives;
(5) Upon the death of the Participant of a
Non-Qualified Contract unless the Certificate
is being continued under the special rule for a
surviving spouse as defined under Internal
Revenue Code Section (72)(s);
(6) Upon selection of an annuity payment option
over a period of at least 5 years;
(7) Upon selection of an annuity payment option
based on life contingencies if life expectancy
is at least 5 years.
Upon selection of an annuity payment option that does
not qualify for a Surrender Charge Exception, the
amount applied will be the greater of the cash
surrender benefit, or 95 percent of what the cash
surrender benefit would be if there were no Surrender
Charge.
10% Free Withdrawal The Surrender Charge in any Certificate year will not
Privilege apply to that portion of each withdrawal or a total
surrender that is equal to or less than:
(1) Ten Percent (10%) of the amount of Purchase
Payments not previously withdrawn that have
been credited to the Certificate for at least
one year, but not more than 7 years; less
(2) The amount of any previous withdrawals made
during such Certificate Year.
For withdrawals under a systematic withdrawal plan,
Purchase Payments credited for 30 days or more are
eligible for the 10% Free Withdrawal Privilege.
If multiple withdrawals are made during a Certificate
Year, the amount eligible for the free withdrawal
will be recalculated at the time of each Partial
Withdrawal. After the first Certificate Year,
non-automatic and automatic withdrawals may be made
in the same Certificate Year subject to the 10%
limitation.
A free withdrawal pursuant to any of the foregoing
Surrender Charge Exceptions is not deemed a
withdrawal of Purchase Payments except for purposes
of computing the 10% free withdrawal privilege.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan (the "Plan") allows
Partial Withdrawals to be made at periodic intervals
while the Certificate remains in force. The Plan is
available immediately after the Date of Issue of the
Certificate with withdrawals beginning as early as 30
days after the Date of Issue. Additional Purchase
Payments will be accepted by the Company while
withdrawals are being made under the Plan.
Withdrawals are automatic. Once Withdrawals have been
started under the Plan, the Company will continue
distributions unless the Participant has provided
otherwise. The Participant under a Certificate may
stop withdrawals under the Plan at any time.
96034N
Page 16
<PAGE>
The Plan is subject to the following guidelines:
(1) The Annuity Date of a Certificate must be at
least one year later than the date of the first
withdrawal;
(2) Each withdrawal must be $100.00 or more;
(3) The Participant may request distributions to be
made on an annual, semi-annual, quarterly or
monthly basis;
(4) We will waive surrender charges on multiple
installments, the total of which does not
exceed the amount eligible for free withdrawal
under the 10% Free Withdrawal Privilege in a
Certificate Year;
(5) After withdrawals are stopped under the Plan,
withdrawals may be started again at a later
date subject to the same guidelines that
applied to the initial series of withdrawals.
The Systematic Withdrawal Plan will terminate at the
Annuity Date at which time the Certificate must
annuitize.
CERTIFICATE FEE
Manner of An annual Certificate Fee not to exceed $30.00 will
Deducting be deducted at the end of each Certificate Year prior
to the Annuity Commencement Date. Unless paid
directly, the fee will be allocated among the
Guarantee Periods and Divisions in proportion to the
Participant's Account Value in each. The entire fee
for the year will be deducted from the proceeds of
any full surrender of the Certificate.
TAX CHARGE
Right to We reserve the right to impose additional charges or
Impose establish reserves for any federal or local taxes
incurred or that may be incurred by us, and that may
be deemed attributable to Certificates.
ONE-TIME REINVESTMENT PRIVILEGE
Reinvestment of If the Participant has made a full surrender of the
Account Value Account Value, the Participant may reinvest the
Account Value if We receive the Written reinvestment
request and the net surrender proceeds not more than
30 days after the date of surrender. In such a case,
the Participant's Account Value will be restored to
what it was at the time of the surrender (less any
annual Certificate maintenance charge that has since
become payable). Any subsequent Surrender Charge will
be computed as if the Certificate had been issued at
the date of reinvestment in consideration of a
Purchase Payment in the amount of such net surrender
proceeds. This one-time reinvestment privilege is
available only if the Participant's Account Value
following the reinvestment would be at least $500.
Unless the Participant requests otherwise in Writing,
the Account Value following the reinvestment will be
allocated among the Divisions and Guarantee Periods
in the same proportions as those prior to surrender.
96034N
Page 17
<PAGE>
DEATH PROCEEDS
Death Proceeds If the Annuitant dies before the Annuity Commencement
Date, and is survived by a Contingent Annuitant, the
Certificate will be continued with the Contingent
Annuitant being named the Annuitant. If the
Certificate is a Non-Qualified Contract, the
Certificate may qualify for continuation under the
"Death of the Participant Prior to the Annuity Date -
Non-qualified Contracts Only" provision. Otherwise,
death proceeds will be paid as follows :
(1) If the Annuitant dies, and no Contingent
Annuitant survives, death proceeds will be paid
to the Beneficiary designated by the
Participant to receive proceeds.
(2) If a Participant (other than a Joint
Participant) dies, and this Certificate is not
being continued under the "Death of the
Participant Prior to the Annuity Date -
Non-Qualified Contracts Only" provision, death
proceeds will be paid to the Beneficiary
designated by the Participant to receive
proceeds.
(3) If a Joint Participant dies, death proceeds
will be paid to the surviving Joint
Participant, if living. If the surviving Joint
Participant is the spouse of the deceased
Joint Participant, then the surviving Joint
Participant may continue the Certificate under
the "Death of the Participant Prior to the
Annuity Date - Non-Qualified Contracts Only"
provision as if he or she had been designated
as Beneficiary. Otherwise death proceeds will
be paid to the person designated as Beneficiary
unless Joint Participants have specified in
writing that death proceeds are to be paid in a
different manner;
If the Annuitant or such Participant dies, the amount
of the death proceeds will be the greatest of the
following amounts, less any applicable Premium Tax:
(1) The sum of all Net Purchase Payments less any
prior Partial Withdrawals;
(2) The Participant's Account Value as of the end
of the Valuation Period in which We receive
proof of the Annuitant's or such Participant's
death and a Written request from the
Beneficiary as to the form of payment; or
(3) The Highest Anniversary Value prior to the date
of death, determined as follows:
(a) We will calculate the Account Values at
the end of each of the past Certificate
Anniversaries that occurred prior to the
deceased's 81st birthday;
(b) Each of the Account Values will be
increased by the amount of Net Purchase
Payments made since the end of such Cer-
tificate Years;
(c) The result will be reduced by the amount
of any withdrawals made since the end of
such Certificate Years;
(d) The Highest Anniversary Value will be an
amount equal to the highest of such
values.
96034N
Page 18
<PAGE>
NOTE: IN DETERMINING THE "HIGHEST ANNIVERSARY VALUE",
WE ARE COMPARING THE TOTAL OF THE ACCOUNT VALUES -
THE SUM OF THE FIXED ACCOUNT VALUES AND SEPARATE
ACCOUNT VALUES. THEREFORE, THE HIGHEST ANNIVERSARY
VALUE WILL NOT NECESSARILY INCLUDE EITHER THE HIGHEST
SEPARATE ACCOUNT VALUE OR THE HIGHEST FIXED ACCOUNT
VALUE.
The death proceeds will not be less than the amount
payable on a full surrender at the date used to value
the death benefit. The death proceeds will become
payable when we receive:
(1) Proof of the Participant's or Annuitant's
Death; and
(2) A Written request from the Beneficiary for
either a single sum or payment under an Annuity
Option.
If the Annuitant dies, and a Contingent Annuitant was
named but predeceased the Annuitant, we will require
proof of the Contingent Annuitant's death in addition
to proof of the death of the Annuitant.
We will pay a single sum to the Beneficiary unless an
Annuity Option is chosen.
Death Proceeds on If the Annuitant dies on or after the Annuity
or After the Commencement Date, the Beneficiary will receive the
Annuity death proceeds, if any, as provided by the annuity
Commencement Date form in effect.
Proof of Death We accept any of the following as proof of the
Annuitant's or Participant's death:
(1) A copy of a certified death certificate;
(2) A copy of a certified decree of a court of
competent jurisdiction as to the finding of
death;
(3) A Written statement by a medical doctor who
attended the deceased at the time of death; or
(4) Any other proof satisfactory to us.
PAYMENT OF BENEFITS
Application of Unless directed otherwise, We will apply the Fixed
Account Value Account Value to provide a Fixed Annuity, and the
Separate Account Value to provide a Variable Annuity.
The Participant must tell us in writing at least 30
days prior to the Annuity Commencement Date if Fixed
and Separate Account values are to be applied in
different proportions. Transfers and partial
withdrawals will be permitted within the 30-day
period.
Annuity The Annuity Commencement Date (Annuity Date) is shown
Commencement Date on page 3. The Participant of a qualified Contract
may be required to receive distributions after the
Annuitant's 70th birthday to comply with certain
federal tax requirements. The Annuity Date may be
changed by Written notice from the Participant,
subject to our approval.
Options Available The Participant may elect to have annuity payments
to a Participant made begining on the Annuity Commencement Date under
any one of the Annuity Options described in the
Certificate. We will notify the Participant 60 to 90
days prior to the scheduled Annuity Date that the
Certificate is scheduled to mature, and request that
96034N
Page 19
<PAGE>
an Annuity Option be selected. If the Participant has
not selected an Annuity Option ten days prior to the
Annuity Commencement Date, we will proceed as
follows:
If the scheduled Annuity Commencement Date is any
date prior to the Annuitant's 90th birthday, we will
extend the Annuity Commencement Date to the
Annuitant's 90th birthday.
If the scheduled Annuity Commencement Date is the
Annuitant's 90th birthday, the Account Value less any
applicable charges and premium taxes will be paid in
one sum to the Participant.
Options Available The Participant may elect, in lieu of payment in one
to Beneficiary sum, that any amount or part thereof due under the
Certificate be applied under any of the options
described in the Certificate. Within 60 days after
the death of the Annuitant or Participant, the
Beneficiary may make such election if the Participant
has not done so. In such case, the Beneficiary
thereafter shall have all the rights and options of
the Participant.
The first annuity payment under any option shall be
made on the first day of the second month after
approval of the claim for settlement. Subsequent
payments shall be made periodically in accordance
with the manner of payment elected.
Payment Contract At such time as one of these options becomes
effective, the Certificate shall be surrendered to
the Company in exchange for a payment contract
providing for the option elected.
Fixed Annuity Fixed Annuity Payments start on the Annuity
Payments Commencement Date. The amount of the first monthly
payment for the annuity selected will be at least as
favorable as that produced by the applicable annuity
table of the Certificate.
The dollar amount of any payments after the first
payment is specified during the entire period of
annuity payments, according to the provisions of the
Annuity Option selected.
VARIABLE ANNUITY PAYMENTS
Annuity Units We convert the Division Accumulation Units into
Division Annuity Units at the values determined at
the end of the Valuation Period which contains the
tenth day prior to the Annuity Commencement Date. The
number of Division Annuity Units is obtained by
dividing the first monthly payment by the Division
Annuity Unit Value determined at the end of the
Valuation Period described above. (see following
paragraph). The first monthly payment is determined
by applying the dollar value of the Division
Accumulation Units to the applicable Annuity Table.
The number of Division Annuity Units remains constant
as long as an annuity remains in force and allocation
among the Divisions has not changed.
Each Division Annuity Unit Value was arbitrarily set
when the Division first converted Division
Accumulation Units into Division Annuity Units.
Subsequent values on any Valuation Date are equal to
the previous Division Annuity Unit Value times the
Net Investment Factor for that Division for the
Valuation Period ending on that Valuation Date, with
an offset for the 3 1/2% assumed interest rate used
in the annuity tables of the Certificate.
96034N
Page 20
<PAGE>
Variable Annuity Payments start on the Annuity
Commencement Date. Payments will vary in amount and
are determined at the end of the Valuation Period
that contains the tenth day prior to each payment. If
the monthly payment under the annuity form selected
is based on a single Division, the monthly payment is
found by multiplying the Division Annuity Unit Value
on said date by the number of Division Annuity Units.
If the monthly payment under the annuity form
selected is based upon more than one Division, the
above procedure is repeated for each applicable
Division. The sum of these payments is the Variable
Annuity Payment.
We guarantee that the amount of each payment will not
be affected by variations in expense or mortality
experience.
ANNUITY OPTIONS
FIRST OPTION - LIFE ANNUITY - An annuity payable
monthly during the lifetime of the Annuitant.
SECOND OPTION - LIFE ANNUITY WITH 120, 180 OR 240
MONTHLY PAYMENTS GUARANTEED - An annuity payable
monthly during the lifetime of the Annuitant,
including the guarantee that if, at the death of the
Annuitant, payments have been made for less than 120
months, 180 months or 240 months (as selected),
payments shall be continued during the remainder of
the selected period.
THIRD OPTION - JOINT AND LAST SURVIVOR LIFE ANNUITY -
An annuity payable monthly during the joint lifetime
of the Annuitant, and a secondary Annuitant, and
thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the
death of the survivor. This option is available only
if one person is Adjusted Age 70 or less.
FOURTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD - An
amount payable monthly for the number of years
selected which may be from 5 to 40 years. If this
option is selected on a variable basis, the number of
years may not exceed the life expectancy of the
Annuitant or other properly-designated Payee.
FIFTH OPTION - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT -
The amount due may be paid in equal monthly
installments of a designated dollar amount until the
remaining balance is less than the amount of one
installment. Payments under this option are available
on a fixed basis only. To determine the remaining
balance at the end of any month, such balance at the
end of the previous month is decreased by the amount
of any installment paid during the month and the
result will be accumulated at an interest rate not
less than 3.5% compounded annually. If the remaining
balance at any time is less than the amount of one
installment, such balance will be paid and will be
the final payment under the option.
In lieu of monthly payments, payments may be elected
on a quarterly, semi-annual or annual basis, in which
cases the amount of each annuity payment will be
determined on a basis consistent with that described
in the Certificate for monthly payments.
96034N
Page 21
<PAGE>
No election of any Annuity Option may be made if the
accumulated value is less than $2,000, or if the
initial annuity payment will be less than $20 per
month. If the minimum is not met, the Company will
make a lump-sum payment of the Account Value (less
any Surrender Charge, uncollected annual Maintenance
Charge and applicable premium tax) to the Annuitant
or other properly-designated Payee.
In the event the age or sex of the Annuitant has been
misstated, (age of the Annuitant if issued on a
unisex basis), any amount payable will be that which
would have been payable had the misstatement not
occurred. We will deduct any overpayment from the
next payment or payments due and add any
underpayments to the next payment due. Interest at an
effective annual rate of 3.5% will be added to any
such adjustment.
Annuity Tables The tables that follow show the dollar amount of the
first monthly payment for each $1,000 applied under
the options. The first two pages are based on the
1983a Male or Female Tables adjusted by projection
scale G for 9 years. The table on the last page is
based on the 1983a Male or Female Tables adjusted by
projection scale G for 9 years with unisex rates
based on 60% female and 40% male and interest at the
rate of 3 1/2% per year. Under the First or Second
Options, the amount of each payment will depend upon
the sex of the Annuitant (unless issued on a unisex
basis) and the Annuitant's adjusted age at the time
the first payment is due. Under the Third Option, the
amount of each payment will depend upon the sex of
both Annuitants (unless issued on a unisex basis) and
their adjusted ages at the time the first payment is
due.
In using the table of annuity payment rates, the ages
of the Annuitants must be reduced by one year for
Annuity Commencement Dates occurring during the
decade 2000-2009, reduced two years for Annuity
Commencement Dates occurring during the decade 2010-
2019, and reduced an additional year for each decade
that follows. The age 85 life Annuity Option 2 rates
are also used for ages above 85.
Alternate Amount When annuity payments are to begin, the Company will
of Installments provide life income payments based on fixed single
Under Fixed Life premium immediate annuity rates then offered by the
Income Options Company to the same class of annuitants if:
(1) A fixed life income option is elected; and
(2) Such rates are more favorable than those
guaranteed in the Certificate.
96034N
Page 22
<PAGE>
ANNUITY TABLES
AMOUNT OF MONTHLY PAYMENT
FOR EACH $1,000 OF ANNUITY VALUE
<TABLE>
Options 1 and 2 - Life Annuities
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Male Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.37 4.33 4.28 4.21
51 4.44 4.40 4.34 4.26
52 4.52 4.47 4.40 4.32
53 4.59 4.54 4.47 4.37
54 4.68 4.62 4.54 4.43
55 4.77 4.70 4.61 4.49
56 4.86 4.78 4.69 4.55
57 4.96 4.87 4.76 4.61
58 5.06 4.97 4.84 4.67
59 5.18 5.07 4.93 4.73
60 5.30 5.17 5.01 4.79
61 5.42 5.28 5.10 4.86
62 5.56 5.40 5.20 4.92
63 5.71 5.52 5.29 4.98
64 5.87 5.65 5.38 5.04
65 6.04 5.79 5.48 5.10
66 6.22 5.92 5.58 5.15
67 6.41 6.07 5.68 5.21
68 6.62 6.22 5.77 5.26
69 6.84 6.37 5.87 5.30
70 7.07 6.53 5.96 5.35
71 N/A 6.70 6.07 5.40
72 N/A 6.87 6.16 5.44
73 N/A 7.04 6.24 5.47
74 N/A 7.21 6.32 5.50
75 N/A 7.38 6.40 5.52
76 N/A 7.55 6.47 5.55
77 N/A 7.72 6.54 5.57
78 N/A 7.89 6.60 5.58
79 N/A 8.05 6.66 5.60
80 N/A 8.21 6.71 5.61
81 N/A 8.36 6.75 5.62
82 N/A 8.50 6.79 5.62
83 N/A 8.64 6.82 5.63
84 N/A 8.76 6.85 5.63
85 N/A 8.88 6.88 5.64
</TABLE>
<TABLE>
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Female Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.05 4.03 4.01 3.97
51 4.10 4.09 4.06 4.02
52 4.17 4.14 4.12 4.07
53 4.23 4.21 4.17 4.12
54 4.30 4.27 4.23 4.18
55 4.37 4.34 4.30 4.23
56 4.44 4.41 4.36 4.29
57 4.52 4.48 4.43 4.35
58 4.61 4.56 4.50 4.41
59 4.70 4.65 4.58 4.48
60 4.79 4.74 4.66 4.54
61 4.89 4.83 4.74 4.61
62 5.00 4.93 4.83 4.67
63 5.12 5.03 4.92 4.74
64 5.24 5.14 5.01 4.81
65 5.38 5.26 5.11 4.88
<FN>
*Not available above Adjusted Age 70.
</FN>
</TABLE>
96034N
Page 23
<PAGE>
<TABLE>
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Female Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
66 5.52 5.38 5.20 4.95
67 5.67 5.51 5.31 5.01
68 5.83 5.65 5.41 5.08
69 6.01 5.79 5.52 5.14
70 6.20 5.94 5.62 5.20
71 N/A 6.11 5.74 5.27
72 N/A 6.27 5.85 5.32
73 N/A 6.45 5.96 5.37
74 N/A 6.63 6.06 5.41
75 N/A 6.81 6.16 5.45
76 N/A 7.00 6.26 5.49
77 N/A 7.20 6.35 5.52
78 N/A 7.39 6.44 5.54
79 N/A 7.59 6.52 5.56
80 N/A 7.78 6.59 5.58
81 N/A 7.97 6.65 5.60
82 N/A 8.15 6.70 5.61
83 N/A 8.32 6.75 5.62
84 N/A 8.49 6.79 5.62
85 N/A 8.64 6.83 5.63
<FN>
*Not available above Adjusted Age 70.
</FN>
</TABLE>
Option 3 - Joint and Last Survivor Life Annuity (Available only if one
person is Adjusted Age 70 or less)
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Male F50 F55 F60 F65 F70
<S> <C> <C> <C> <C> <C>
50 3.76 3.89 4.01 4.11 4.19
55 3.84 4.01 4.18 4.33 4.46
60 3.90 4.11 4.33 4.56 4.77
65 3.95 4.19 4.47 4.78 5.09
70 3.99 4.25 4.58 4.96 5.39
</TABLE>
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Female F50 F55 F60 F65 F70
<S> <C> <C> <C> <C> <C>
50 3.76 3.84 3.90 3.95 3.99
55 3.89 4.01 4.11 4.19 4.25
60 4.01 4.18 4.33 4.47 4.58
65 4.11 4.33 4.56 4.78 4.96
70 4.19 4.46 4.77 5.09 5.39
</TABLE>
Option 4 - Payments for a Designated Period
<TABLE>
ears of Amount of Years of Amount of Monthly
Payment Monthly Payment Payment Payment
<S> <C> <C> <C>
5 $18.12 23 $5.24
6 15.35 24 5.09
7 13.38 25 4.96
8 11.90 26 4.84
9 10.75 27 4.73
10 9.83 28 4.63
11 9.09 29 4.53
12 8.46 30 4.45
13 7.94 31 4.37
14 7.49 32 4.29
15 7.10 33 4.22
16 6.76 34 4.15
17 6.47 35 4.09
18 6.20 36 4.03
19 5.97 37 3.98
20 5.75 38 3.92
21 5.56 39 3.88
22 5.39 40 3.83
</TABLE>
96034N
Page 24
<PAGE>
ANNUITY TABLES
AMOUNT OF MONTHLY PAYMENT
FOR EACH $1,000 OF ANNUITY VALUE
<TABLE>
Options 1 and 2 - Life Annuities
<CAPTION>
Adjusted Unisex ------------Monthly Payments Guaranteed---------
Age Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.18 4.15 4.12 4.07
51 4.24 4.21 4.18 4.12
52 4.31 4.28 4.24 4.17
53 4.38 4.34 4.30 4.23
54 4.45 4.41 4.36 4.28
55 4.53 4.48 4.43 4.34
56 4.61 4.56 4.50 4.40
57 4.70 4.64 4.57 4.46
58 4.79 4.73 4.65 4.52
59 4.89 4.82 4.72 4.59
60 5.00 4.91 4.81 4.65
61 5.11 5.02 4.89 4.71
62 5.23 5.12 4.98 4.78
63 5.36 5.23 5.07 4.85
64 5.49 5.35 5.17 4.91
65 5.64 5.48 5.26 4.98
66 5.80 5.61 5.36 5.04
67 5.96 5.74 5.46 5.10
68 6.14 5.88 5.57 5.16
69 6.34 6.03 5.67 5.21
70 6.54 6.19 5.77 5.27
71 N/A 6.35 5.88 5.33
72 N/A 6.52 5.98 5.37
73 N/A 6.69 6.08 5.41
74 N/A 6.87 6.18 5.45
75 N/A 7.05 6.27 5.49
76 N/A 7.23 6.35 5.51
77 N/A 7.42 6.44 5.54
78 N/A 7.60 6.51 5.56
79 N/A 7.78 6.58 5.58
80 N/A 7.96 6.64 5.59
81 N/A 8.13 6.69 5.61
82 N/A 8.30 6.74 5.62
83 N/A 8.46 6.78 5.62
84 N/A 8.60 6.82 5.63
85 N/A 8.74 6.85 5.63
</TABLE>
Option 3 - Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Unisex 50 55 60 65 70
<S> <C> <C> <C> <C> <C>
50 3.75 3.85 3.94 4.01 4.07
55 3.85 4.00 4.13 4.24 4.33
60 3.94 4.13 4.32 4.49 4.65
65 4.01 4.24 4.49 4.75 5.00
70 4.07 4.33 4.65 5.00 5.36
</TABLE>
*Not available above Adjusted Unisex Age 70.
96034N
Page 25
<PAGE>
Option 4 - Payments for a Designated Period
<TABLE>
<CAPTION>
Years of Amount of Years of Amount of Monthly
Payment Monthly Payment Payment Payment
<S> <C> <C> <C>
5 $18.12 23 $5.24
6 15.35 24 5.09
7 13.38 25 4.96
8 11.90 26 4.84
9 10.75 27 4.73
10 9.83 28 4.63
11 9.09 29 4.53
12 8.46 30 4.45
13 7.94 31 4.37
14 7.49 32 4.29
15 7.10 33 4.22
16 6.76 34 4.15
17 6.47 35 4.09
18 6.20 36 4.03
19 5.97 37 3.98
20 5.75 38 3.92
21 5.56 39 3.88
22 5.39 40 3.83
</TABLE>
96034N
Page 26
<PAGE>
[American General Logo]
Insurance Company of New York
This is a FLEXIBLE PAYMENT VARIABLE and FIXED GROUP DEFERRED ANNUITY CONTRACT.
NONPARTICIPATING -- NOT ELIGIBLE FOR DIVIDENDS.
All payments and values provided by each certificate, when based on the
investment experience of a Separate Account, are variable, may increase or
decrease, and are not guaranteed as to amount.
For Information, Service or to make a Complaint
Contact your Registered Representative,
or the Annuity Administration Department
American General Life
Insurance Company of New York
2727--A Allen Parkway
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
96034N
EXHIBIT (4)(b)
[Border Graphic]
AMERICAN GENERAL LIFE
Insurance Company of New York
Home Office: 300 South State Street, Syracuse, NY 13202
CERTIFICATE
Unless You have directed otherwise, We will pay a monthly income to the
Annuitant if living on the Annuity Commencement Date. Payment will be made in
accordance with the provisions set forth in this Certificate and the Master
Policy.
All payments and values provided by each certificate, when based on the
investment experience of a Separate Account, are variable, may increase or
decrease, and are not guaranteed as to amount.
CANCELLATION RIGHT. You may return this Certificate for cancellation to us or
to the sales representative through whom it was purchased, within 10 days
after delivery. Upon surrender of this Certificate within the 10 day period,
We will refund the sum of (1) Any Purchase Payments allocated to a Fixed
Account; plus (2) Your Separate Account Value at the end of the Valuation
Period in which your request is received; plus (3) Any additional amount
deducted for premium taxes.
This is a FLEXIBLE PAYMENT VARIABLE AND FIXED GROUP DEFERRED ANNUITY
CERTIFICATE. NONPARTICIPATING - NOT ELIGIBLE FOR DIVIDENDS.
To ensure that the dollar amount of variable annuity payments do not decrease,
your values in the Separate Account must earn a minimum annual aggregate
investment return of 4.9% for the variable annuity options based on an annual
rate of 3.5% and combined annual Separate Account charges of 1.4%.
SIGNED AT THE HOME OFFICE ON THE DATE OF ISSUE.
/s/SANDRA M. SMITH /s/ROBERT A. SLEPICKA
Secretary President
Questions Regarding This Certificate should be directed to:
AMERICAN GENERAL LIFE INSURANCE COMPANY OF NEW YORK
ADMINISTRATIVE CENTER
2727-A Allen Parkway - P.O. Box 1401 - Houston, TX 77251-1401 - (800) 281-8289
96033N
<PAGE>
<TABLE>
INDEX
<CAPTION>
Page
----
<S> <C>
Account Value ................................................... 4
Allocation of Net Purchase Payments ............................. 7
Annuity Options ................................................. 18
Annuity Tables .................................................. 19
Annuity Units ................................................... 17
Automatic Rebalancing ........................................... 12
Beneficiary ..................................................... 8
Certificate Fee ................................................. 15
Change of Investment Advisor or Investment Policy ............... 6
Contingent Annuitant ............................................ 4
Death Proceeds .................................................. 15
Definitions ..................................................... 4
Division Accumulation Units ..................................... 11
Divisions ....................................................... 11
Fixed Account ................................................... 9
General Provisions .............................................. 6
Guaranteed Interest Rates ....................................... 10
Guarantee Periods ............................................... 10
Net Investment Factor ........................................... 11
One-Time Reinvestment Privilege.................................. 15
Ownership Provisions ............................................ 7
Payment of Benefits ............................................. 17
Participant ..................................................... 5
Premium Taxes ................................................... 7
Purchase Payments ............................................... 7
Schedule Page ................................................... 3
Separate Account................................................. 11
Surrenders....................................................... 12
Full Surrender ................................................ 12
Partial Withdrawals ........................................... 13
Surrender Charge .............................................. 13
Surrender Charge Exceptions ................................... 13
Ten Percent Free Withdrawal Privilege ......................... 14
Tax Charge ...................................................... 15
Transfers ....................................................... 11
Variable Annuity Payments ....................................... 17
</TABLE>
96033N
Page 2
<PAGE>
American General Life Insurance Company of New York
<TABLE>
SCHEDULE PAGE
<S> <C>
MINIMUM INITIAL PURCHASE PAYMENT: $5,000
MINIMUM ADDITIONAL PURCHASE PAYMENTS: $100
ADDITIONAL BENEFITS: NONE
MAXIMUM ASSET CHARGE FACTORS (Separate Account Only)
ANNUAL RATE: 1.40%
MAXIMUM ANNU7AL CONTRACT FEE (Per Certificate) $ 30
TRANSFER CHARGE (After First 12 in a Certificate Year) $ 25
ISSUE AGE: 35
ANNUITY COMMENCEMENT DATE: OCTOBER 1, 2027
INITIAL ALLOCATION:
</TABLE>
<TABLE>
<CAPTION>
Net Dollar
Amount of
Percentage Allocations
---------- -----------
<S> <C> <C>
Asian Equity Portfolio 100% $ 5,000
Domestic Income Portfolio 0% $ 00
Emerging Growth Portfolio 0% $ 00
Emerging Markets Equity Portfolio 0% $ 00
Enterprise Portfolio 0% $ 00
Equity Growth Portfolio 0% $ 00
Fixed Income Portfolio 0% $ 00
Global Equity Portfolio 0% $ 00
Government Portfolio 0% $ 00
Growth and Income Portfolio 0% $ 00
High-Yield Portfolio 0% $ 00
International Magnum Portfolio 0% $ 00
Mid Cap Value Portfolio 0% $ 00
Money Market Portfolio 0% $ 00
Real Estate Securities Portfolio 0% $ 00
Strategic Stock Portfolio 0% $ 00
Value Portfolio 0% $ 00
Fixed Account -- 1 Year Guarantee Period 0% $ 00
---------- -----------
Total Allocations 100% $ 5,000
</TABLE>
ANNUITANT: JOHN DOE CERTIFICATE NUMBER: 123456
PARTICIPANT: JOHN DOE DATE OF ISSUE: OCTOBER 1, 1997
JURISDICTION STATE: NEW YORK
MASTER CONTRACT OWNER: AMERICAN GENERAL GROUP VARIABLE ANNUITY TRUST
96033N
Page 3
<PAGE>
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
A brief description of each Portfolio's investment objective follows. However,
no investment allocation should be made without referring to the appropriate
prospectus which describes each Portfolio in detail.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
U.S. Fixed Income Portfolios
The FIXED INCOME PORTFOLIO seeks above-average total return over a market
cycle of three to five years by investing primarily in a diversified portfolio
of U.S. Governments and Agencies, Corporate Bonds, Mortgage-Backed Securities,
Foreign Bonds and other Fixed Income Securities and Derivatives.
The HIGH YIELD PORTFOLIO seeks above-average total return over a market cycle
of three to five years by investing primarily in a diversified portfolio of
High Yield Securities, including Corporate Bonds and other Fixed Income
Securities and Derivatives.
U.S. Equity Portfolios
The EQUITY GROWTH PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of medium and large capitalization companies
that, in the Investment Advisor's judgment, provide above-average potential
for capital growth.
The MID CAP VALUE PORTFOLIO seeks above-average total return over a market
cycle of three to five years by investing in Common Stocks and other Equity
Securities of issuers with equity capitalizations in the range of the
companies represented in the Standard & Poor's Ratings Group MidCap 400 Index.
The VALUE PORTFOLIO seeks above-average total return over a market cycle of
three to five years by investing primarily in a diversified portfolio of
Common Stocks and other Equity Securities that are deemed by the Investment
Advisor to be relatively undervalued based on various measures such as
price/earnings ratios and price/book ratios. Global Portfolios
The ASIAN EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of Asian issuers (excluding Japan) through the
selection of individual stocks that the Investment Advisor believes are
undervalued. The Portfolio intends to invest primarily in Equity Securities
that are traded on recognized stock exchanges of countries in Asia and in
Equity Securities of companies organized under the laws of an Asian country
whose business is conducted principally in Asia.
The EMERGING MARKETS EQUITY PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of emerging market country issuers
with a focus on those in which the Investment Advisor believes the economies
are developing strongly and in which the markets are becoming more
sophisticated.
The GLOBAL EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in Equity Securities of issuers throughout the world, including U.S.
issuers, through the selection of individual stocks that the Investment
Advisor believes are undervalued.
96033N
Page 3A
<PAGE>
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The INTERNATIONAL MAGNUM PORTFOLIO seeks long-term capital appreciation by
investing primarily in Equity Securities of non-U.S. issuers domiciled in EAFE
countries (Australia, Japan, New Zealand, most nations located in Western
Europe and certain developed countries in Asia, such as Hong Kong and
Singapore.
The DOMESTIC INCOME PORTFOLIO seeks current income as its primary investment
objective by investing in a diversified portfolio of fixed-income securities.
The Portfolio expects that at all times at least 80% of its assets will be
invested in (1) fixed-income securities rated at the time of purchase B or
higher by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group,
(2) nonrated debt securities believed by the Investment Adviser to be of
comparable quality, and (3) U.S. Government securities.
The EMERGING GROWTH PORTFOLIO seeks capital appreciation by investing in a
portfolio of securities consisting principally of common stock of small and
medium sized companies considered by the Investment Adviser to be emerging
growth companies.
The ENTERPRISE PORTFOLIO seeks capital appreciation through investments in
securities believed by the Investment Adviser to have above average potential
for capital appreciation.
The GOVERNMENT PORTFOLIO seeks high current return consistent with
preservation of capital by investing primarily in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The
Portfolio may sell and purchase call and put options. The Portolio also may
purchase and sell interest rate futures contracts and options on such
contracts since such transactions are entered into for bona fide hedging
purposes. The Portfolio may purchase or sell U.S. Government Securities on a
forward commitment basis.
The GROWTH AND INCOME PORTFOLIO seeks long-term growth of capital and income
by investing primarily in income-producing equity securities including common
stock and convertible securities. Investments may also be made in
non-convertible preferred stocks and debt securities.
The MONEY MARKET PORTFOLIO seeks protection of capital and high current income
by investing in money-market investments. Investments in the Money Market
Portfolio are neither insured nor guaranteed by the U.S. Government. Although
the Money Market Portfolio seeks to maintain a stable net asset value of $1.00
per share, there is no assurance that it will be able to do so.
The REAL ESTATE SECURITIES PORTFOLIO seeks long-term growth of capital as its
primary investment objective by investing principally in companies operating
in the real estate industry. Real Estate Securities include equity secuities,
including common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies.
The STRATEGIC STOCK PORTFOLIO seeks an above average total return through a
combination of potential capital appreciation and dividend income consistent
with the preservation of invested capital by investing primarily in a
portfolio of dividend paying Equity Securities included in the Dow Jones
Industrial Average or in the Morgan Stanley Capital International USA Index.
96033N
Page 3B
<PAGE>
DEFINITIONS
"WE", "OUR", "US", OR "COMPANY". "We", "our", "us", or "Company" means
American General Life Insurance Company of New York.
YOU, YOUR, PARTICIPANT. The Owner of this Certificate.
ACCOUNT. Any of the Divisions of the Separate Account or the Fixed Account.
ACCOUNT VALUE. The sum of the Fixed Account Value and the Separate Account
Value after deduction of any fees.
ACCUMULATION PERIOD. The period during which Net Purchase Payments are
allocated to either the Fixed Account or the Separate Account and held under
the Certificate.
ACCUMULATION UNIT. An accounting unit of measure used to calculate the value
of a Division of a Certificate before annuity payments begin.
ADMINISTRATIVE CENTER. The American General Life of New York (AGNY) Annuity
Service Center, to which all Purchase Payments, requests, directions and other
communications should be directed. The AGNY Annuity Service Center is located
at 2727A Allen Parkway, Houston, Texas 77019-2191.
AGE. Age of an Annuitant as of his or her last birthday, unless otherwise
stated.
ANNUITANT. The person upon whose date of birth and sex income payments are
based. The Annuitant's name will be found page 3 of this certificate.
ANNUITY UNIT. A unit of measure used to calculate variable annuity payments.
BENEFICIARY. The person entitled to receive benefits in the event the
Participant or Annuitant dies. If no named Beneficiary is living at the time
any payment is to be made, the Participant shall be the Beneficiary, or if the
Participant is not living, the Participant's estate shall be the Beneficiary.
CERTIFICATE YEAR. A period of 12 consecutive months beginning on the Date of
Issue of the Certificate or any anniversary thereof.
CONTINGENT ANNUITANT. A person named by the Owner of a Non-Qualified contract
to become the Annuitant if: (1) the Annuitant dies before the Annuity
Commencement Date; and (2) the Contingent Annuitant is then living. A
Contingent Annuitant may not be named except at the time of application. Once
named, the choice may not be revoked or replaced. If a Contingent Annuitant
dies, a new Contingent Annuitant may not be named. After Annuity Payments
start, a Contingent Annuitant may not become the Annuitant.
CONTINGENT BENEFICIARY. A person named by the Participant to receive benefits
in the event a designated Beneficiary is not living at the time of the Owner's
or Annuitant's death.
CONTRACT OWNER. The organization named on page 3 as Owner of the Master
Contract.
DATE OF ISSUE. The date on which this Certificate becomes effective as shown
on Page 3.
DIVISION. A subdivision of the Separate Account.
FIXED ACCOUNT. An Account which provides interest at a guaranteed fixed rate
for a guaranteed period.
96033N
Page 4
<PAGE>
FIXED ANNUITY OPTION. An Annuity Option with payments which do not vary with
investment performance.
ISSUE AGE. Age last birthday on the Date of Issue. (If the Date of Issue
occurs on the Annuitant's birthday, "last birthday" will mean the birthday
occurring on the Date of Issue).
NET ASSET VALUE PER SHARE. The value of the net assets of a Variable Fund
divided by the number of shares in the Variable Fund.
NET PURCHASE PAYMENT. The gross amount of a Purchase Payment less any Premium
Taxes deducted at the time a Purchase Payment is made.
NON-QUALIFIED CONTRACT. A Certificate that does not qualify for the special
federal income tax treatment applicable in connection with retirement plans.
PARTICIPANT. (Certificate Owner) The person named in the Certificate who is
entitled to exercise all rights and privileges of ownership under the
Certificate.
PARTICIPANT'S ACCOUNT. An account established for each Participant to which
Purchase Payments are credited.
PAYOUT PERIOD. The period, starting with the Annuity Commencement Date, during
which Annuity Payments are made by the Company.
PREMIUM TAX. The amount of tax, if any, charged by a state or municipality on
Purchase Payments or Certificate Values.
PURCHASE PAYMENT. An amount paid to the Company as consideration for the
benefits described herein.
QUALIFIED CONTRACT. A Certificate that is qualified for the special federal
income tax treatment applicable in connection with certain retirement plans.
SEPARATE ACCOUNT. A segregated investment account entitled "Separate Account
E" established by the Company to separate the assets funding variable benefits
from the other assets of the Company. That portion of the assets of the
Separate Account equal to the reserves and other liabilities with respect to
the Separate Account shall not be chargeable with liabilities arising out of
any other business We may conduct. Income, gains and losses, whether or not
realized from assets allocable to the Separate Account, are credited to or
charged against such account without regard to our other income gains or
losses.
UNIT VALUE. The value of: (1) an Accumulation Unit as described in the
"Division Accumulation Units" provision; or (2) an Annuity Unit as described
in the "Annuity Units" provision.
VALUATION DATE. Any day on which we are open for business except, with respect
to any Division, a day on which the related Variable Fund does not value its
shares.
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 ANNUITY OPTION. An Annuity Option under which we promise to pay the
Annuitant or other properly-designated Payee one or more payments which vary
in amount in accordance with the net investment experience of the applicable
Divisions selected to measure the value of a Certificate.
VARIABLE FUND. An individual investment fund or series in which a Division
invests.
WRITTEN, IN WRITING. A written request or notice in acceptable form and
content, which is signed and dated, and received at our Administrative Center.
96033N
Page 5
<PAGE>
GENERAL PROVISIONS
ENTIRE CONTRACT. The Certificate will be attached to and made a part of the
Contract. The Contract, including the Certificate, endorsements if any, and a
copy of the application, if attached, constitute the entire Contract between
the Contract Owner and us. All statements made by the Contract Owner,
Participant or Annuitant will be deemed representations and not warranties. No
statement will be used to reduce a claim under the Certificate unless it is in
writing and made a part of the Certificate. Nothing in the group annuity
Contract invalidates or impairs any right granted to the certificate holder by
Chapter 28, Article 32, Section 3219 of New York Insurance Laws, or the
certififcate.
NOT CONTESTABLE. This Certificate is not contestable.
DISCONTINUANCE OF ACCEPTANCE OF NEW PARTICIPANTS. By giving 30 days prior
written notice, we may limit or discontinue the acceptance of new
Participants' applications and the issuance of new Certificates under the
Master Contract. Such limitation or discontinuance shall have no effect on
rights or benefits with respect to any Certificate issued prior to the
effective date of such limitation or discontinuance.
GUARANTEES. We guarantee that the dollar amount of Variable Annuity Payments
made during the lifetime of the Payee(s) will not be adversely affected by our
actual mortality experience or by the actual expenses incurred by us in excess
of the expense deductions provided for in this Certificate.
SETTLEMENT. All benefits under this Certificate are payable from our
Administrative Center in Houston, Texas.
Nonparticipating. This Certificate is nonparticipating and does not share in
our surplus or earnings.
CHANGE OF INVESTMENT ADVISOR OR INVESTMENT POLICY. Unless otherwise required
by law or regulation, the investment advisor or any investment policy may not
be changed without our consent. If required, approval of or change of any
investment objective will be filed with the Insurance Department of the state
where the Contract and this Certificate are delivered. You will be notified of
any material investment policy change which has been approved. Notification of
an investment policy change will be given in advance to those Master Contract
Owners who have the right to comment on or vote on such change.
Any substitution of the underlying investments of any Division will comply
with all applicable requirements of the Investment Company Act of 1940 and
rules thereunder.
RIGHTS RESERVED BY US. Upon notice to you, this Certificate may be modified by
us, but only if such modification is necessary to:
(1) Operate the Separate Account in any form permitted under the Investment
Company Act of 1940 or in any other form permitted by law;
(2) Transfer any assets in any Division to another Division, or to one or
more other separate accounts, or to the Fixed Account;
(3) Add, combine or remove Divisions in the Separate Account, or combine the
Separate Account with another separate account;
(4) Add, restrict or remove Guarantee Periods of the Fixed Account;
(5) Make any new Division available to You on a basis to be determined by
Us;
(6) Substitute for the shares held in any Division, the shares of another
Variable Fund or the shares of another investment company or any other
investment permitted by law;
(7) Make any changes as required by the Internal Revenue Code or by any
other applicable law, regulation or interpretation in order to continue
treatment of this Certificate as an annuity; or
(8) Make any changes required to comply with rules of any Variable Fund.
When required by law, we will obtain Your approval of changes and we will gain
approval from any appropriate regulatory authority.
96033N
Page 6
<PAGE>
CHANGING THE TERMS OF THE CONTRACT OR THIS CERTIFICATE. Any change in the
Master Contract or this Certificate must be approved by one of Our officers.
No agent has the authority to make any changes or waive any of the terms of
this Certificate.
TERMINATION. Each Certificate will remain in force until surrendered for its
full value, or all annuity payments have been made, or the death proceeds have
been paid, except as follows:
If a Participant's Account Value falls below $500 due to Partial Withdrawals,
we may cancel the Certificate upon 60 days' notice to the Participant. Such
cancellation would be considered a full surrender of the Certificate.
If a Participant's Account Value in any Division (except the Money Market
Division) falls below $500, We reserve the right to transfer the remaining
balance, without charge, to the Money Market Division.
The Master Contract will terminate when all funds from all Certificates are
withdrawn.
PURCHASE PAYMENTS
MINIMUM PAYMENTS. The minimum amounts acceptable as Purchase Payments are
shown on page 3. We reserve the right to modify these minimums or to refuse a
Purchase Payment for any reason.
MAXIMUM PAYMENTS. The maximum amount We will accept during the life of a
Certificate without approval of an officer of the Company is $1,000,000.
ALLOCATION OF NET PURCHASE PAYMENTS. The initial allocation of Net Purchase
Payments is shown on Page 3 of each Certificate, and will remain in effect
until changed by Written notice.
Changes in the allocation will be effective on the date We receive the
Participant's notice. The allocation may be 100% to any available Division or
Guarantee Period, or may be divided among the options in whole percentage
points totaling 100%.
An initial Purchase Payment will be credited to the Participant's Account not
more than two Valuation Periods after we receive it, together with all other
required documentation, in good order at the office designated by the Company
for processing of initial Purchase Payments. Subsequent Purchase Payments will
be credited as of the end of the Valuation Period in which they are so
received. We reserve the right to limit the total number of Fixed Account
Guarantee Periods and Separate Account Divisions that may be chosen while the
Certificate remains in force.
PREMIUM TAXES. When applicable, we will deduct an amount to cover premium
taxes. Such deduction will be made:
1. From Purchase Payment(s) when received; or
2. From Your Account Value at the time annuity payments are to commence; or
3. From the amount of any partial withdrawal; or
4. From proceeds payable upon termination of the Certificate for any other
reason, including death of the Annuitant or Participant, or surrender of
the Certificate.
If premium tax is paid, the Company may reimburse itself for such tax when
deduction is being made under paragraphs 2, 3 or 4 above calculated by
multiplying the sum of Purchase Payments being withdrawn by the applicable
premium tax percentage.
OWNERSHIP PROVISIONS
The Master Contract is owned by the Organization named on page 3 of this
Certificate.
96033N
Page 7
<PAGE>
The Participant will have the right to exercise all rights and privileges in
connection with this Certificate. If this Certificate is jointly owned by more
than one Participant, all Participants must join in any request to exercise
the rights or privileges of a Participant.
In any case, such rights and privileges may be exercised without the consent
of the Beneficiary (other than an irrevocably designated Beneficiary) or any
other person. Such rights and privileges may be exercised only during the
lifetime of the Annuitant and prior to the Annuity Commencement Date, except
as otherwise provided in this Certificate.
A Payee entitled to benefits upon the death of the Participant or the
Annuitant may thereafter exercise such rights and privileges, if any, of
ownership which continue.
BENEFICIARY. The term "Beneficiary", as used in this certificate, means the
Beneficiary designated by the Participant in the application for this
certificate, or as later changed by the Participant. The Beneficiary will
receive any proceeds that may become payable:
1. Upon the death of the Annuitant, provided no Contingent Annuitant
survives; or
2. Upon the death of the Participant (other than a Joint Participant) of a
Non-Qualified contract during the Accumulation Period. (See "Death of
the Participant Prior to the Annuity Date - Non-Qualified Contracts
Only").
Unless otherwise provided in the Beneficiary designation:
1. If any Beneficiary dies, that Beneficiary's interest will pass to any
other Beneficiary according to the surviving Beneficiary's respective
interest.
2. If no Beneficiary survives to receive proceeds, such proceeds will be
paid in one sum to the Participant, if living; otherwise such proceeds
will be paid to the Participant's estate. If payment is made to the
Participant's estate, the estate will be required to accept payment
within 5 years of the date of death.
Provisions in this certificate regarding the payments to a Beneficiary upon
the death of the Annuitant will also apply to any proceeds payable to a
Beneficiary upon the death of the Participant (other than a Joint Participant
- - See "Death of the Participant Prior to the Annuity Date - Non-Qualified
Contracts Only"). Payment in the event of the Participant's death will be made
upon receipt in our Home Office of a written request for proceeds and due
proof of the Participant's death.
CHANGE OF OWNERSHIP. Ownership of a Qualified Contract may not be transferred
except to: (1) the Annuitant; (2) a trustee or successor trustee of a pension
or profit sharing trust which is qualified under Section 401 of the Internal
Revenue Code; (3) the employer of the Annuitant, provided that the Qualified
Contract after transfer is maintained under the terms of a retirement plan
qualified under Section 403(a) of the Internal Revenue Code for the benefit of
the Annuitant; (4) the trustee of an individual retirement account plan
qualified under Section 408 of the Internal Revenue Code; or (5) as otherwise
permitted from time to time by laws and regulations governing the retirement
or deferred compensation plans for which a Qualified Contract may be issued.
In no other case may a Qualified Contract be sold, assigned, transferred,
discounted or pledged as collateral.
The Owner of a Non-Qualified Contract may change the ownership of such
Contract. During the lifetime of the Annuitant and prior to the Annuity
Commencement Date, the Participant may change the ownerhip interest in the
Non-Qualified Contract as evidenced by the Certificate.
A change of ownership will not be binding upon us until we receive Written
notification at Our Administrative Center. When such notification is so
received, the change will be effective as of the date of the signed request
for change, but the change will be without prejudice to Us on account of any
payment made, or any action taken by Us prior to receiving the change, or on
account of any tax consequence.
96033N
Page 8
<PAGE>
DEATH OF THE PARTICIPANT PRIOR TO THE ANNUITY DATE - NON-QUALIFIED CONTRACT
ONLY. As used in the Certificate, the term "Non-Qualified Contract" means a
Certificate that does not qualify for the special federal income tax treatment
applicable in connection with retirement plans.
If a Participant (including the first to die in the case of Joint
Participants) under a Non-Qualified Contract dies prior to the Annuitant and
before the Annuity Commencement Date, the death proceeds must be distributed
to the Beneficiary either (1) within five years after the date of death of the
Participant, or (2) over the life of or a period not greater than the life or
expected life of the Beneficiary, with annuity payments beginning within one
year after the date of death of the Participant.
The Beneficary of a Participant (other than a Joint Participant) will be the
person or persons designated as Beneficiary in the application for the
Certificate, or as later changed prior to the death of such Participant. If a
Joint Participant dies, death proceeds will be paid to the surviving Joint
Participant, if living; otherwise death proceeds will be paid to the person
designated as Beneficiary.
These mandatory distribution requirements will not apply upon the death of a
Participant if the spouse of a deceased Participant elects to continue the
Certificate in the spouse's own name, as Participant. The spouse may make such
election if: (1) the spouse is the designated Beneficiary of a deceased
Participant (other than a Joint Participant); or (2) the spouse is the sole
surviving Joint Participant.
The Beneficiary (including a Joint Participant receiving death proceeds) will
be considered the designated beneficiary for the purposes of Section 72(s) of
the Internal Revenue Code. In all cases, any such designated beneficary will
not be entitled to exercise any rights prohibited by applicable federal income
tax law.
If the Payee under a Non-Qualified Contract dies after the Annuity
Commencement Date and before all of the payments under the Annuity Option have
been distributed, the remaining amount payable must be distributed at least as
rapidly as under the method of distribution then in effect.
If the Participant prior to the Annuity Commencement Date, or the Payee
thereafter, is not a natural person, then the foregoing distribution
requirements shall apply upon the death of the primary Annuitant within the
meaning of the Internal Revenue Code.
PERIODIC REPORTS. We will send to each Participant, at least once during each
Certificate Year, a statement showing the following amounts as of a date not
more than two months prior to the date of mailing:
(1) The number of Accumulation Units credited to the Participant's Account;
and
(2) The dollar value of each Accumulation Unit;
(3) The total value of the Participant's Account;
(4) The Cash Surrender Value of the Participant's Account; and
(5) The Death Benefit.
We will also send such statements as may be required by applicable state and
federal laws, rules and regulations.
PARTICIPANT'S ACCOUNT. We will establish a Participant's Account for the
Participant under a Certificate, and will maintain such account during the
Accumulation Period. The Participant's Account Value for any Valuation Period
will be equal to the Participant's Separate Account Value, if any, plus the
Participant's Fixed Account Value, if any, for that Valuation Period.
FIXED ACCOUNT
FIXED ACCOUNT VALUE. We will credit to the Guarantee Period(s) selected that
portion of each Net Purchase Payment allocated to the Fixed Account. The value
in any one Guarantee Period on a Valuation Date is:
96033N
Page 9
<PAGE>
(1) The accumulated value of the Net Purchase Payments, renewals or
transfers allocated to the Guarantee Period at the Guaranteed Interest
Rate; less
(2) The Accumulated Value of surrenders and transfers out of that Guarantee
Period; less
(3) The Certificate Fee allocated to that Guarantee Period.
GUARANTEE PERIODS. A one year Guarantee Period will always be available, and
additional Guarantee Periods may be added from time to time. If more than one
Guarantee Period is available, you may select more than one. The Guarantee
Period selected will determine the Guaranteed Interest Rate(s).
The Net Purchase Payment or the portion thereof (or amount transferred in
accordance with the transfer privilege provision described below) allocated to
a particular Guarantee Period will earn interest at the Guaranteed Interest
Rate during the Guarantee Period. Guarantee Periods begin on the date as of
which we credit your Account Value to that Guarantee Period or, in the case of
a transfer, on the effective date of the transfer. The Guarantee Period is the
number of years We credit the Guaranteed Interest Rate. The expiration date of
any Guarantee Period is the last day of the Guarantee Period. Subsequent
Guarantee Periods begin on the first day following the expiration date. As a
result of Guarantee Period renewals, additional Purchase Payments and
transfers of portions of the Participant's Account Value, Guarantee Periods of
the same duration may have different expiration dates and Guaranteed Interest
Rates.
We will notify You in writing at least 15, and not more than 45 days prior to
the expiration date of any Guarantee Period. A new Guarantee Period of the
same duration as the previous Guarantee Period will begin automatically unless
we receive Written notice to the contrary from You at least 3 Valuation Dates
prior to the end of such Guarantee Period. You may elect to change to another
Guarantee Period or Division which We offer at such time.
If the amount of Your Account Value in a Guarantee Period is less than $500 at
the end of such Guarantee Period, We reserve the right to transfer such
amount, without charge, to the Money Market Division of the Separate Account.
However, We will transfer such amount to another available Division at Your
request.
GUARANTEED INTEREST RATES. We will periodically establish an applicable
Guaranteed Interest Rate for each Guarantee Period We offer. These rates will
be guaranteed for the duration of the respective Guarantee Periods. The
Guarantee Periods that We make available at any time will be determined at Our
discretion. No Guaranteed Interest Rate shall be less than an effective annual
rate of 3.0%.
INTEREST RATE LOCK ON 1035 EXCHANGES OR OTHER QUALIFIED ROLLOVERS AND
TRANSFERS. This provision will apply if:
1. Proceeds are being transferred to us under Internal Revenue Code (IRC)
Section 1035 (a 1035 Exchange), or under another rollover of values
qualified for special tax treatment under the IRC; and
2. All, or a part of the resulting Net Purchase Payments are to be
allocated to the Fixed Account.
If proceeds from such Exchange, Rollover or Transfer are received by the
Company within 60 days following the date of application for this Certificate,
interest to be credited to the Fixed Account during the Guarantee Period will
be calculated at a rate which is the higher of: (1) the current interest rate
being used by the Company on the date of the application for the Guarantee
Period selected; or (2) the current interest rate being used by the Company on
the date of receipt of proceeds. Proceeds received more than 60 days after the
date the application is signed will receive interest at the rate in effect on
the date of receipt of such proceeds.
Interest will be credited to the Fixed Account as of the date of receipt of
such proceeds, and the interest rate used to calculate such interest will
remain in effect for the duration of the Guarantee Period.
96033N
Page 10
<PAGE>
SEPARATE ACCOUNT
DIVISIONS. The Separate Account has several Divisions, each investing in a
corresponding Variable Fund. Net Purchase Payments will be allocated to the
Divisions and the Fixed Account as shown in the Certificate, unless You change
the allocation. A list of the Divisions of the Separate Account and the
Initial Allocation of Purchase Payments appear on page 3. A brief description
of each Division will be found on pages 3A and 3B.
We will use the Net Purchase Payments and any transferred amounts to purchase
Variable Fund shares applicable to the Divisions at their net asset value. We
will be the owner of all Variable Fund shares purchased with the Net Purchase
Payments or transferred amounts.
DIVISION ACCUMULATION UNITS. Net Purchase Payments and transferred amounts
allocated to the Separate Account will be credited to Your account in the form
of Division Accumulation Units. The number of Division Accumulation Units will
be determined by dividing the amount allocated to a Division by the Division
Accumulation Unit value as of the end of the Valuation Period as of which the
transaction is credited. The value of each Division Accumulation Unit was
arbitrarily set as of the date the Division first purchased Variable Fund
shares. Subsequent values on any Valuation Date are equal to the previous
Division Accumulation Unit value times the Net Investment Factor for the
Valuation Period ending on that Valuation Date.
NET INVESTMENT FACTOR. The Net Investment Factor is an index applied to
measure the investment performance of a Division from one Valuation Period to
the next. The Net Investment Factor may be greater or less than or equal to
one; therefore, the value of an Accumulation Unit may increase, decrease or
remain the same.
The Net Investment Factor for a Division is determined by dividing (1) by (2),
and then subtracting (3) from the result, where:
(1) Is the sum of:
(a) The Net Asset Value Per Share of the Variable Fund shares held in
the Division, determined at the end of the current Valuation
Period; plus
(b) The per share amount of any dividend or capital gain distributions
made on the Variable Fund shares held in the Division during the
current Valuation Period;
(2) Is the Net Asset Value Per Share of the Variable Fund shares held in the
Division, determined at the beginning of the current Valuation Period;
and
(3) Is a factor representing the mortality risk, expense risk, and
administrative expense charge. We will determine the daily asset charge
factor annually, but in no event may it exceed the Maximum Asset Charge
Factor as specified on Page 3.
SEPARATE ACCOUNT VALUE. The Separate Account Value for any Valuation Period is
the total of the values in each Division credited to Your account for such
Valuation Period. The value for each Division will be equal to:
(1) The number of Division Accumulation Units; multiplied by
(2) The Division Accumulation Unit Value for the Valuation Period.
The Separate Account value will vary from Valuation Date to Valuation Date
reflecting the total value in the Divisions.
TRANSFERS. Transfers may be made at any time during the Accumulation Period
after the first 30 days following the Date of Issue. A transfer will be
effective at the end of the Valuation
Period in which We receive Your Written request for a transfer. Transfers will
be subject to the following restrictions:
(1) Prior to the Annuity Commencement Date, You may make up to 12 transfers
each Certificate Year without charge.
(2) There will be a charge of $25.00 for each transfer in excess of 12 in a
Certificate Year.
96033N
Page 11
<PAGE>
(3) Transfers under the Automatic Rebalancing program will not count towards
the 12 free transfers each Certificate Year. The $25 charge will not
apply to transfers made through Automatic Rebalancing. Transfers under
any other asset management arrangement approved by the Company may be
subject to the $25 charge and may count towards the 12 free transfers.
(4) The amount of Account Value that may be transferred each year from a
Fixed Account Guarantee Period to a Separate Account Division is
limited. The limit will be based on the Guarantee Period account balance
at the beginning of the Guarantee Period. Not more than 25% of such
account balance may be transferred to a Separate Account Division during
each Certificate year. The 25% limit does not apply to:
(a) Funds transferred from a Guarantee Period as a result of Dollar
Cost Averaging; or
(b) Transfers within 15 days before or after the end of the applicable
Guarantee Period; or
(c) A renewal at the end of a Guarantee Period to the same Guarantee
Period.
(5) If a transfer would cause the Account Value in any Division or Guarantee
Period to fall below $500, We reserve the right to also transfer the
remaining balance in that Division or Guarantee Period in the same
proportions as the transfer request.
(6) We reserve the right to defer any transfer from the Fixed Account to the
Variable Divisions for up to 6 months.
After the Annuity Commencement Date, You may make one transfer during any 180
day period; such transfer is without charge. You may not make transfers from
the fixed annuity account.
AUTOMATIC REBALANCING. "Automatic Rebalancing" occurs when funds are
transferred by the Company between the Separate Account Divisions so that the
values in each Division match the percentage allocation then in effect.
Automatic Rebalancing of the Separate Account Divisions will occur
periodically:
(1) If Your Account Value is equal to or greater than $25,000; and
(2) If You have selected Automatic Rebalancing.
You may select Automatic Rebalancing when applying for the Certificate, or it
may be selected at a later date. We reserve the right to increase or lower the
Minimum Account Value required for Automatic Rebalancing.
DOLLAR COST AVERAGING. "Dollar Cost Averaging" is an automatic periodic
transfer of funds in accordance with the "Transfers" provision and
instructions from the Participant.
SURRENDERS
GENERAL SURRENDER PROVISIONS. The amount surrendered will normally be paid to
You within 5 Valuation Dates following Our receipt of:
(1) Your Written request on a form acceptable to us; and
(2) The Certificate, if required.
We reserve the right to defer payment of surrenders from the Fixed Account for
up to 6 months from the date We receive the request.
FULL SURRENDER. At any time prior to the Annuity Commencement Date, and during
the lifetime of the Annuitant, You may surrender this Certificate by sending
us a Written request. The amount payable on surrender is:
(1) Your Account Value at the end of the Valuation Period in which We
receive Your request on a form acceptable to Us;
96033N
Page 12
<PAGE>
(2) Minus any applicable Surrender Charge;
(3) Minus any applicable Certificate Fee; and
(4) Minus any applicable premium tax.
The amount payable upon surrender will not be less than the amount required by
state law.
Upon payment of the surrender amount, this Certificate will be terminated and
We will have no further obligation to the Participant.
All collateral assignees must consent to any surrender or partial withdrawal.
We may require that this Certificate be returned to Our Administrative Center
prior to making payment.
PARTIAL WITHDRAWALS. A portion of Your Account Value may be withdrawn at any
time prior to the Annuity Commencement Date. You must send us a Written
request specifying the Divisions or Guarantee Periods from which the Partial
Withdrawal is to be made. However, in cases where You do not so specify, or
the withdrawal cannot be made in accordance with Your specifications, We
reserve the right to implement the withdrawal prorata from each Division and
Guarantee Period based on the Account Value in each. Partial Withdrawals will
be made effective at the end of the Valuation Period in which We receive the
Written request. Partial Withdrawals will be subject to the following
guidelines:
(1) The Partial Withdrawal amount must be at least $100 or, if less, Your
entire Account Value;
(2) We will surrender Division Accumulation Units from the Separate Account,
or interests in a Guarantee Period, so that the total amount withdrawn
will be the sum of:
(a) The amount payable to You;
(b) Plus any Surrender Charge and any applicable premium tax;
(3) If the Account Value in any Division or Guarantee Period (except the
Money Market Division) falls below $500, We reserve the right to
transfer the remaining balance without charge to the Money Market
Division;
(4) If a Partial withdrawal would cause Your Account Value to fall below
$500, We may cancel this Certificate upon 60 days' notice. Such
cancellation would be considered a full surrender of this Certificate.
SURRENDER CHARGE FOR PARTIAL WITHDRAWALS AND FULL SURRENDERS. Except as noted
under "Surrender Charge Exceptions", a Surrender Charge will be applied to the
amount of any Purchase Payment withdrawn during the first 7 years after it was
first credited, as follows:
<TABLE>
<CAPTION>
Year of Purchase Surrender Charge as a Percentage
Payment Withdrawal of Purchase Payment Withdrawn
<S> <C>
1st and 2nd 6%
3rd and 4th 5%
5th 4%
6th 3%
7th 2%
Thereafter 0%
</TABLE>
For purposes of computing the Surrender Charge, the oldest Purchase Payments
are deemed to be withdrawn first, and before any amounts in excess of Purchase
Payments are withdrawn from a Participant's Account. The following
transactions will be considered as withdrawals for purposes of computing the
Surrender Charge: total surrender, partial withdrawal, commencement of an
annuity payment option and termination due to insufficient Participant Account
Value.
SURRENDER CHARGE EXCEPTIONS. The Surrender Charge will not apply:
(1) To any amounts in excess of Purchase Payments that are withdrawn from a
Participant's Account;
96033N
Page 13
<PAGE>
(2) To any amounts in excess of the amount permitted by the 10% Free
Withdrawal Privilege if such amounts are required to be withdrawn to
obtain or retain favorable federal tax treatment; (The granting of this
exception is subject to Our approval);
(3) Upon the death of the Annuitant at any age during the Payout Period;
(4) Upon the death of the Annuitant at any age during the Accumulation
Period if no Contingent Annuitant survives;
(5) Upon the death of the Participant of a Nonqualified Contract unless this
Certificate is being continued under the special rule for a surviving
spouse as defined under Internal Revenue Code Section (72)(s);
(6) Upon selection of an annuity payment option over a period of at least 5
years;
(7) Upon selection of an annuity payment option based on life contingencies
if life expectancy is at least 5 years.
Upon selection of an annuity payment option that does not qualify for a
Surrender Charge Exception, the amount applied will be the greater of the cash
surrender benefit, or 95 percent of what the cash surrender benefit would be
if there were no Surrender Charge.
10% FREE WITHDRAWAL PRIVILEGE. The Surrender Charge in any Certificate year
will not apply to that portion of each withdrawal or a total surrender that is
equal to or less than:
(1) Ten Percent (10%) of the amount of Purchase Payments not previously
withdrawn that have been credited to the Certificate for at least one
year, but not more than 7 years; less
(2) The amount of any previous withdrawals made during such Certificate
Year.
For withdrawals under a systematic withdrawal plan, Purchase Payments credited
for 30 days or more are eligible for the 10% Free Withdrawal Privilege.
If multiple withdrawals are made during a Certificate Year, the amount
eligible for the free withdrawal will be recalculated at the time of each
Partial Withdrawal. After the first Certificate Year, non-automatic and
automatic withdrawals may be made in the same Certificate Year subject to the
10% limitation.
A free withdrawal pursuant to any of the foregoing Surrender Charge Exceptions
is not deemed a withdrawal of Purchase Payments except for purposes of
computing the 10% free withdrawal privilege.
SYSTEMATIC WITHDRAWAL PLAN
The Systematic Withdrawal Plan (the "Plan") allows Partial Withdrawals to be
made at periodic intervals while this Certificate remains in force. The Plan
is available immediately after the Date of Issue of this Certificate with
withdrawals beginning as early as 30 days after the Date of Issue. Additional
Purchase Payments will be accepted by the Company while withdrawals are being
made under the Plan. Withdrawals are automatic. Once Withdrawals have been
started under the Plan, the Company will continue distributions unless the
Participant has provided otherwise. The Participant under this Certificate may
stop withdrawals under the Plan at any time.
The Plan is subject to the following guidelines:
(1) The Annuity Date of this Certificate must be at least one year later
than the date of the first withdrawal;
(2) Each withdrawal must be $100.00 or more;
(3) The Participant may request distributions to be made on an annual,
semi-annual, quarterly or monthly basis;
96033N
Page 14
<PAGE>
(4) We will waive surrender charges on multiple installments, the total of
which does not exceed the amount eligible for free withdrawal under the
10% Free Withdrawal Privilege in a Certificate Year;
(5) After withdrawals are stopped under the Plan, withdrawals may be started
again at a later date subject to the same guidelines that applied to the
initial series of withdrawals.
The Systematic Withdrawal Plan will terminate at the Annuity Date at which
time this Certificate must annuitize.
CERTIFICATE FEE
MANNER OF DEDUCTING. An annual Certificate Fee not to exceed $30.00 will be
deducted at the end of each Certificate Year prior to the Annuity Commencement
Date. Unless paid directly, the fee will be allocated among the Guarantee
Periods and Divisions in proportion to the Participant's Account Value in
each. The entire fee for the year will be deducted from the proceeds of any
full surrender of the Certificate.
TAX CHARGE
RIGHT TO IMPOSE. We reserve the right to impose additional charges or
establish reserves for any federal or local taxes incurred or that may be
incurred by us, and that may be deemed attributable to this Certificate.
ONE-TIME REINVESTMENT PRIVILEGE
REINVESTMENT OF ACCOUNT VALUE. If the Participant has made a full surrender of
the Account Value, the Participant may reinvest the Account Value if We
receive the Written reinvestment request and the net surrender proceeds not
more than 30 days after the date of surrender. In such a case, the
Participant's Account Value will be restored to what it was at the time of the
surrender (less any annual Certificate maintenance charge that has since
become payable). Any subsequent Surrender Charge will be computed as if the
Certificate had been issued at the date of reinvestment in consideration of a
Purchase Payment in the amount of such net surrender proceeds. This one-time
reinvestment privilege is available only if the Participant's Account Value
following the reinvestment would be at least $500. Unless the Participant
requests otherwise in Writing, the Account Value following the reinvestment
will be allocated among the Divisions and Guarantee Periods in the same
proportions as those prior to surrender.
DEATH PROCEEDS
DEATH PROCEEDS BEFORE THE ANNUITY COMMENCEMENT DATE. If the Annuitant dies
before the Annuity Commencement Date, and is survived by a Contingent
Annuitant, this Certificate will be continued with the Contingent Annuitant
being named the Annuitant. If this Certificate is a Non-Qualified Contract,
this Certificate may qualify for continuation under the "Death of the
Participant Prior to the Annuity Date - Non-Qualified Contract Only"
provision. Otherwise, death proceeds will be paid as follows:
(1) If the Annuitant dies, and no Contingent Annuitant survives, death
proceeds will be paid to the Beneficiary designated by the Participant
to receive proceeds.
(2) If a Participant (other than a Joint Participant) dies, and this
Certificate is not being continued under the "Death of the Participant
Prior to the Annuity Date - Non-Qualified Contracts Only" provision,
death proceeds will be paid to the Beneficiary designated by the
Participant to receive proceeds.
96033N
Page 15
<PAGE>
(3) If a Joint Participant dies, death proceeds will be paid to the
surviving Joint Participant, if living. If the surviving Joint
Participant is the spouse of the deceased Joint Participant, then the
surviving Joint Participant may continue the Certificate under the
"Death of the Participant Prior to the Annuity Date - Non-Qualified
Contracts Only" provision as if he or she had been designated as
Beneficiary. Otherwise death proceeds will be paid to the person
designated as Beneficiary unless Joint Participants have specified in
writing that death proceeds are to be paid in a different manner.
If the Annuitant or such Participant dies, the amount of the death proceeds
will be the greatest of the following amounts, less any applicable Premium
Tax:
(1) The sum of all Net Purchase Payments less any prior Partial Withdrawals;
(2) The Participant's Account Value as of the end of the Valuation Period in
which We receive proof of the Annuitant's or such Participant's death
and a Written request from the Beneficiary as to the form of payment; or
(3) The Highest Anniversary Value prior to the date of death, determined as
follows:
(a) We will calculate the Account Values at the end of each of the
past Certificate Anniversaries that occurred prior to the
deceased's 81st birthday;
(b) Each of the Account Values will be increased by the amount of Net
Purchase Payments made since the end of such Certificate Years;
(c) The result will be reduced by the amount of any withdrawals made
since the end of such Certificate Years;
(d) The Highest Anniversary Value will be an amount equal to the
highest of such values.
Note: In determining the "Highest Anniversary Value", we are comparing the
TOTAL of the Account Values - the sum of the Fixed Account Values and Separate
Account Values. Therefore, the Highest Anniversary Value will not necessarily
include either the highest Separate Account Value or the highest Fixed Account
Value.
The death proceeds will not be less than the amount payable on a full
surrender at the date used to value the death benefit. The death proceeds will
become payable when we receive:
(1) Proof of the Participant's or Annuitant's death; and
(2) A Written request from the Beneficiary for either a single sum or
payment under an Annuity Option.
If the Annuitant dies, and a Contingent Annuitant was named but predeceased
the Annuitant, We will require proof of the Contingent Annuitant's death in
addition to proof of the death of the Annuitant. We will pay a single sum to
the Beneficiary unless an Annuity Option is chosen.
DEATH PROCEEDS ON OR AFTER THE ANNUITY COMMENCEMENT DATE. If the Annuitant
dies on or after the Annuity Commencement Date, the Beneficiary will receive
the death proceeds, if any, as provided by the annuity form in effect.
PROOF OF DEATH. We accept any of the following as proof of the Annuitant's or
Participant's death:
(1) A copy of a certified death certificate;
(2) A copy of a certified decree of a court of competent jurisdiction as to
the finding of death;
(3) A written statement by a medical doctor who attended the deceased at the
time of death; or
96033N
Page 16
<PAGE>
(4) Any other proof satisfactory to Us.
PAYMENT OF BENEFITS
APPLICATION OF ACCOUNT VALUE. Unless directed otherwise, We will apply the
Fixed Account Value to provide a Fixed Annuity, and the Separate Account Value
to provide a Variable Annuity. The Participant must tell us in Writing at
least 30 days prior to the Annuity Commencement Date if Fixed and Separate
Account values are to be applied in different proportions. Transfers and
partial withdrawals will be permitted within the 30-day period.
ANNUITY COMMENCEMENT DATE. The Annuity Commencement Date (Annuity Date) is
shown on page 3. The Participant of a Qualified Contract may be required to
receive distributions after the Annuitant's 70th birthday to comply with
certain federal tax requirements. The Annuity Date may be changed by Written
notice from the Participant, subject to our approval.
OPTIONS AVAILABLE TO A PARTICIPANT. The Participant may elect to have annuity
payments made beginning on the Annuity Commencement Date under any one of the
Annuity Options described in this Certificate. We will notify the Participant
60 to 90 days prior to the scheduled Annuity Date that the Certificate is
scheduled to mature, and request that an Annuity Option be selected. If the
Participant has not selected an Annuity Option ten days prior to the Annuity
Commencement Date, We will proceed as follows:
1. If the scheduled Annuity Commencement Date is any date prior to the
Annuitant's 90th birthday, We will extend the Annuity Commencement Date
to the Annuitant's 90th birthday.
2. If the scheduled Annuity Commencement Date is the Annuitant's 90th
birthday, the Account Value less any applicable charges and premium
taxes will be paid in one sum to the Participant.
OPTIONS AVAILABLE TO A BENEFICIARY. The Participant may elect, in lieu of
payment in one sum, that any amount or part thereof due under the Certificate
be applied under any of the options described in this Certificate. Within 60
days after the death of the Annuitant or Participant, the Beneficiary may make
such election if the Participant has not done so. In such case, the
Beneficiary thereafter shall have all the rights and options of the
Participant.
The first annuity payment under any option shall be made on the first day of
the second month after approval of the claim for settlement. Subsequent
payments shall be made periodically in accordance with the manner of payment
elected.
PAYMENT CONTRACT. At such time as one of these options becomes effective, this
Certificate shall be surrendered to the Company in exchange for a payment
contract providing for the option elected.
FIXED ANNUITY PAYMENTS. Fixed Annuity Payments start on the Annuity
Commencement Date. The amount of the first monthly payment for the annuity
selected will be at least as favorable as that produced by the applicable
annuity table of the Certificate.
The dollar amount of any payments after the first payment is specified during
the entire period of annuity payments according to the provisions of the
Annuity Option elected.
VARIABLE ANNUITY PAYMENTS
ANNUITY UNITS. We convert the Division Accumulation Units into Division
Annuity Units at the values determined at the end of the Valuation Period
which contains the tenth day prior to the Annuity Commencement Date. The
number of Division Annuity Units is obtained by dividing the first monthly
payment by the Division Annuity Unit Value determined at the end of the
valuation period described above. (See following paragraph). The first monthly
96033N
Page 17
<PAGE>
payment is determined by applying the dollar value of the Division
Accumulation Units to the applicable Annuity Table. The number of Division
Annuity Units remains constant as long as an annuity remains in force and
allocation among the Divisions has not changed.
Each Division Annuity Unit Value was arbitrarily set when the Division first
converted Division Accumulation Units into Division Annuity Units. Subsequent
values on any Valuation Date are equal to the previous Division Annuity Unit
Value times the Net Investment Factor for that Division for the Valuation
Period ending on that Valuation Date, with an offset for the 3 1/2% assumed
interest rate used in the annuity tables of the Certificate.
Variable Annuity Payments start on the Annuity Commencement Date. Payments
will vary in amount and are determined at the end of the Valuation Period that
contains the tenth day prior to each payment. If the monthly payment under the
annuity form selected is based on a single Division, the monthly payment is
found by multiplying the Division Annuity Unit Value on said date by the
number of Division Annuity Units.
If the monthly payment under the annuity form selected is based upon more than
one Division, the above procedure is repeated for each applicable Division.
The sum of these payments is the Variable Annuity Payment.
We guarantee that the amount of each payment will not be affected by
variations in expense or mortality experience.
ANNUITY OPTIONS
FIRST OPTION - LIFE ANNUITY - An annuity payable monthly during the lifetime
of the Annuitant.
SECOND OPTION - LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS GUARANTEED
- - An annuity payable monthly during the lifetime of the Annuitant, including
the guarantee that if, at the death of the Annuitant, payments have been made
for less than 120 months, 180 months or 240 months (as selected), payments
shall be continued during the remainder of the selected period.
THIRD OPTION - JOINT AND LAST SURVIVOR LIFE ANNUITY - An annuity payable
monthly during the joint lifetime of the Annuitant, and a secondary Annuitant,
and thereafter during the remaining lifetime of the survivor, ceasing with the
last payment prior to the death of the survivor. This option is available only
if one person is Adjusted Age 70 or less.
FOURTH OPTION - PAYMENTS FOR A DESIGNATED PERIOD - An amount payable monthly
for the number of years selected which may be from 5 to 40 years. If this
option is selected on a variable basis, the number of years may not exceed the
life expectancy of the Annuitant or other properly-designated Payee.
FIFTH OPTION - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - The amount due may be
paid in equal monthly installments of a designated dollar amount until the
remaining balance is less than the amount of one installment. Payments under
this option are available on a fixed basis only. To determine the remaining
balance at the end of any month, such balance at the end of the previous month
is decreased by the amount of any installment paid during the month and the
result will be accumulated at an interest rate not less than 3.5% compounded
annually. If the remaining balance at any time is less than the amount of one
installment, such balance will be paid and will be the final payment under the
option.
In lieu of monthly payments, payments may be elected on a quarterly,
semi-annual or annual basis, in which cases the amount of each annuity payment
will be determined on a basis consistent with that described in this
Certificate for monthly payments.
No election of any Annuity Option may be made if the accumulated value is less
than $2,000, or if the initial annuity payment will be less than $20 per
month. If the minimum is not met, the Company will make a lump-sum payment of
the Account Value (less any Surrender Charge, uncollected annual Maintenance
Charge and applicable premium tax) to the Annuitant or other properly-
designated Payee.
96033N
Page 18
<PAGE>
In the event the age or sex of the Annuitant has been misstated, (age of the
Annuitant if issued on a unisex basis), any amount payable will be that which
would have been payable had the misstatement not occurred. We will deduct any
overpayment from the next payment or payments due and add any underpayments to
the next payment due. Interest at an effective annual rate of 3.5% will be
added to any such adjustment.
ANNUITY TABLES. The tables that follow show the dollar amount of the first
monthly payment for each $1,000 applied under the options. The first two pages
of tables are based on the 1983a Male or Female Tables adjusted by projection
scale G for 9 years. The table on the last page is based on the 1983a Male or
Female Tables adjusted by projection scale G for 9 years with unisex rates
based on 60% female and 40% male and interest at the rate of 3 1/2% per year.
Under the First or Second Options, the amount of each payment will depend upon
the sex of the Annuitant (unless issued on a unisex basis) and the Annuitant's
adjusted age at the time the first payment is due. Under the Third Option, the
amount of each payment will depend upon the sex of both Annuitants (unless
issued on a unisex basis) and their adjusted ages at the time the first
payment is due.
In using the table of annuity payment rates, the ages of the Annuitants must
be reduced by one year for Annuity Commencement Dates occurring during the
decade 2000-2009, reduced two years for Annuity Commencement Dates occurring
during the decade 2010-2019, and reduced an additional year for each decade
that follows. The age 85 life annuity Option 2 rates are also used for ages
above 85.
ALTERNATE AMOUNT OF INSTALLMENTS UNDER FIXED LIFE INCOME OPTIONS. When annuity
payments are to begin, the Company will provide life income payments based on
fixed single premium immediate annuity rates then offered by the Company to
the same class of Annuitants if:
(1) A fixed life income option is elected; and
(2) Such rates are more favorable than those guaranteed in the Certificate.
96033N
Page 19
<PAGE>
ANNUITY TABLES
AMOUNT OF MONTHLY PAYMENT
FOR EACH $1,000 OF ANNUITY VALUE
<TABLE>
Options 1 and 2 - Life Annuities
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Male Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.37 4.33 4.28 4.21
51 4.44 4.40 4.34 4.26
52 4.52 4.47 4.40 4.32
53 4.59 4.54 4.47 4.37
54 4.68 4.62 4.54 4.43
55 4.77 4.70 4.61 4.49
56 4.86 4.78 4.69 4.55
57 4.96 4.87 4.76 4.61
58 5.06 4.97 4.84 4.67
59 5.18 5.07 4.93 4.73
60 5.30 5.17 5.01 4.79
61 5.42 5.28 5.10 4.86
62 5.56 5.40 5.20 4.92
63 5.71 5.52 5.29 4.98
64 5.87 5.65 5.38 5.04
65 6.04 5.79 5.48 5.10
66 6.22 5.92 5.58 5.15
67 6.41 6.07 5.68 5.21
68 6.62 6.22 5.77 5.26
69 6.84 6.37 5.87 5.30
70 7.07 6.53 5.96 5.35
71 N/A 6.70 6.07 5.40
72 N/A 6.87 6.16 5.44
73 N/A 7.04 6.24 5.47
74 N/A 7.21 6.32 5.50
75 N/A 7.38 6.40 5.52
76 N/A 7.55 6.47 5.55
77 N/A 7.72 6.54 5.57
78 N/A 7.89 6.60 5.58
79 N/A 8.05 6.66 5.60
80 N/A 8.21 6.71 5.61
81 N/A 8.36 6.75 5.62
82 N/A 8.50 6.79 5.62
83 N/A 8.64 6.82 5.63
84 N/A 8.76 6.85 5.63
85 N/A 8.88 6.88 5.64
</TABLE>
<TABLE>
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Female Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.05 4.03 4.01 3.97
51 4.10 4.09 4.06 4.02
52 4.17 4.14 4.12 4.07
53 4.23 4.21 4.17 4.12
54 4.30 4.27 4.23 4.18
55 4.37 4.34 4.30 4.23
56 4.44 4.41 4.36 4.29
57 4.52 4.48 4.43 4.35
58 4.61 4.56 4.50 4.41
59 4.70 4.65 4.58 4.48
60 4.79 4.74 4.66 4.54
61 4.89 4.83 4.74 4.61
62 5.00 4.93 4.83 4.67
63 5.12 5.03 4.92 4.74
64 5.24 5.14 5.01 4.81
65 5.38 5.26 5.11 4.88
<FN>
*Not available above Adjusted Age 70.
</FN>
</TABLE>
96033N
Page 20
<PAGE>
<TABLE>
<CAPTION>
Adjusted Age ------------Monthly Payments Guaranteed---------
of Female Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
66 5.52 5.38 5.20 4.95
67 5.67 5.51 5.31 5.01
68 5.83 5.65 5.41 5.08
69 6.01 5.79 5.52 5.14
70 6.20 5.94 5.62 5.20
71 N/A 6.11 5.74 5.27
72 N/A 6.27 5.85 5.32
73 N/A 6.45 5.96 5.37
74 N/A 6.63 6.06 5.41
75 N/A 6.81 6.16 5.45
76 N/A 7.00 6.26 5.49
77 N/A 7.20 6.35 5.52
78 N/A 7.39 6.44 5.54
79 N/A 7.59 6.52 5.56
80 N/A 7.78 6.59 5.58
81 N/A 7.97 6.65 5.60
82 N/A 8.15 6.70 5.61
83 N/A 8.32 6.75 5.62
84 N/A 8.49 6.79 5.62
85 N/A 8.64 6.83 5.63
<FN>
*Not available above Adjusted Age 70.
</FN>
</TABLE>
Option 3 - Joint and Last Survivor Life Annuity (Available only if one
person is Adjusted Age 70 or less)
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Male F50 F55 F60 F65 F70
<S> <C> <C> <C> <C> <C>
50 3.76 3.89 4.01 4.11 4.19
55 3.84 4.01 4.18 4.33 4.46
60 3.90 4.11 4.33 4.56 4.77
65 3.95 4.19 4.47 4.78 5.09
70 3.99 4.25 4.58 4.96 5.39
</TABLE>
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Female F50 F55 F60 F65 F70
<S> <C> <C> <C> <C> <C>
50 3.76 3.84 3.90 3.95 3.99
55 3.89 4.01 4.11 4.19 4.25
60 4.01 4.18 4.33 4.47 4.58
65 4.11 4.33 4.56 4.78 4.96
70 4.19 4.46 4.77 5.09 5.39
</TABLE>
Option 4 - Payments for a Designated Period
<TABLE>
Years of Amount of Years of Amount of Monthly
Payment Monthly Payment Payment Payment
<S> <C> <C> <C>
5 $18.12 23 $5.24
6 15.35 24 5.09
7 13.38 25 4.96
8 11.90 26 4.84
9 10.75 27 4.73
10 9.83 28 4.63
11 9.09 29 4.53
12 8.46 30 4.45
13 7.94 31 4.37
14 7.49 32 4.29
15 7.10 33 4.22
16 6.76 34 4.15
17 6.47 35 4.09
18 6.20 36 4.03
19 5.97 37 3.98
20 5.75 38 3.92
21 5.56 39 3.88
22 5.39 40 3.83
</TABLE>
96033N
Page 21
<PAGE>
ANNUITY TABLES
AMOUNT OF MONTHLY PAYMENT
FOR EACH $1,000 OF ANNUITY VALUE
<TABLE>
Options 1 and 2 - Life Annuities
<CAPTION>
Adjusted Unisex ------------Monthly Payments Guaranteed---------
Age Option 1* Option 2 Option 2 Option 2
None 120 180 240
<S> <C> <C> <C> <C>
50 4.18 4.15 4.12 4.07
51 4.24 4.21 4.18 4.12
52 4.31 4.28 4.24 4.17
53 4.38 4.34 4.30 4.23
54 4.45 4.41 4.36 4.28
55 4.53 4.48 4.43 4.34
56 4.61 4.56 4.50 4.40
57 4.70 4.64 4.57 4.46
58 4.79 4.73 4.65 4.52
59 4.89 4.82 4.72 4.59
60 5.00 4.91 4.81 4.65
61 5.11 5.02 4.89 4.71
62 5.23 5.12 4.98 4.78
63 5.36 5.23 5.07 4.85
64 5.49 5.35 5.17 4.91
65 5.64 5.48 5.26 4.98
66 5.80 5.61 5.36 5.04
67 5.96 5.74 5.46 5.10
68 6.14 5.88 5.57 5.16
69 6.34 6.03 5.67 5.21
70 6.54 6.19 5.77 5.27
71 N/A 6.35 5.88 5.33
72 N/A 6.52 5.98 5.37
73 N/A 6.69 6.08 5.41
74 N/A 6.87 6.18 5.45
75 N/A 7.05 6.27 5.49
76 N/A 7.23 6.35 5.51
77 N/A 7.42 6.44 5.54
78 N/A 7.60 6.51 5.56
79 N/A 7.78 6.58 5.58
80 N/A 7.96 6.64 5.59
81 N/A 8.13 6.69 5.61
82 N/A 8.30 6.74 5.62
83 N/A 8.46 6.78 5.62
84 N/A 8.60 6.82 5.63
85 N/A 8.74 6.85 5.63
</TABLE>
Option 3 - Joint and Last Survivor Life Annuity
<TABLE>
<CAPTION>
Adjusted Age Adjusted Age of Secondary Annuitant
of Annuitant
Unisex 50 55 60 65 70
<S> <C> <C> <C> <C> <C>
50 3.75 3.85 3.94 4.01 4.07
55 3.85 4.00 4.13 4.24 4.33
60 3.94 4.13 4.32 4.49 4.65
65 4.01 4.24 4.49 4.75 5.00
70 4.07 4.33 4.65 5.00 5.36
<FN>
*Not available above Adjusted Unisex Age 70.
</FN>
</TABLE>
96033N
Page 22
<PAGE>
Option 4 - Payments for a Designated Period
<TABLE>
Years of Amount of Years of Amount of Monthly
Payment Monthly Payment Payment Payment
<S> <C> <C> <C>
5 $18.12 23 $5.24
6 15.35 24 5.09
7 13.38 25 4.96
8 11.90 26 4.84
9 10.75 27 4.73
10 9.83 28 4.63
11 9.09 29 4.53
12 8.46 30 4.45
13 7.94 31 4.37
14 7.49 32 4.29
15 7.10 33 4.22
16 6.76 34 4.15
17 6.47 35 4.09
18 6.20 36 4.03
19 5.97 37 3.98
20 5.75 38 3.92
21 5.56 39 3.88
22 5.39 40 3.83
</TABLE>
96033N
Page 23
<PAGE>
AMERICAN GENERAL LIFE
Insurance Company of New York
This is a FLEXIBLE PAYMENT VARIABLE and FIXED GROUP DEFERRED ANNUITY CONTRACT.
NONPARTICIPATING -- NOT ELIGIBLE FOR DIVIDENDS.
All payments and values provided by each certificate, when based on the
investment experience of a Separate Account, are variable, may increase or
decrease, and are not guaranteed as to amount.
For Information, Service or to make a Complaint
Contact your Registered Representative,
or the Annuity Administration Department
American General Life
Insurance Company of New York
2727--A Allen Parkway
P.O. Box 1401
Houston, Texas 77251-1401
(800) 281-8289
96033N
EXHIBIT (5)(a)
AMERICAN GENERAL LIFE INSURANCE COMPANY of New York ("AGNY")
300 SOUTH STATE STREET, SYRACUSE, NEW YORK13202
[American General Logo] GENERATIONS(TM)
===========
Variable Annuity
VARIABLE ANNUITY CERTIFICATE APPLICATION
INSTRUCTIONS: Please type or print in permanent black ink.
1. ANNUITANT
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________ (Max Age 85)
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
2. CONTINGENT ANNUITANT (optional)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________ (Max Age 85)
Sex: [ ]M [ ]F SS#:__________________________
-----------------------------------------------------------------------------
3. OWNER (Complete only if different than Annuitant)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________ (Max Age 85)
Sex: [ ]M [ ]F Tax ID or SS#:__________________________
-----------------------------------------------------------------------------
JOINT OWNER (optional)
Name: ______________________________________
Address: ______________________________________
______________________________________
Phone: _____________ DOB:____________________ (Max Age 85)
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)
Name/Relationship
CONTINGENT (if more than one, indicate percentages)
Name/Relationship
-----------------------------------------------------------------------------
5. PAYMENT INFORMATION
Initial Purchase Payment (minimum $5,000) $________
If [ ] 1035X OR [ ] Transfer, estimated amount $_________
[ ] Non-Qualified
[ ] Qualified: (check appropriate boxes in sections A and B)
A. [ ]Rollover [ ]Transfer
B. Type of Plan: [ ]IRA [ ]SEP-IRA [ ]401(k) [ ]401(a)
[ ]Other________
-----------------------------------------------------------------------------
6. INVESTMENT OPTIONS (Total allocation must equal 100%. Use whole
percentages only.
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% 1-Year Guarantee Period ____%
Equity Growth (132) ____% Mid Cap Value (136) ____% Other________________ ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
-----------------------------------------------------------------------------
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
<TABLE>
<S> <C> <C>
Asian Equity (140) ____% Global Equity (130) ____% Morgan Stanley
Domestic Income (125) ____% Government (131) ____% Real Estate Securities (138) ____%
Emerging Growth (126) ____% Growth and Income (133) ____% Strategic Stock (141) ____%
Emerging Markets Equity (127) ____% High Yield (134) ____% Value (139) ____%
Enterprise (128) ____% International Magnum (135) ____% Other________________ ____%
Equity Growth (132) ____% Mid Cap Value (136) ____%
Fixed Income (129) ____% Money Market (137) ____%
</TABLE>
AGNY 8771-33 VAGAPLNY
EXHIBIT 8
ADMINISTRATIVE SERVICES AGREEMENT
1.(f) REGISTERED PRODUCT SERVICES. As requested by AGNY, AGL shall provide all
accounting, computer support, and transfer agent services related to (i) the
sale and servicing of products of AGNY that are registered with the Securities
and Exchange Commission ("SEC") and (ii) the administration of SEC-registered
separate accounts of AGNY.
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference made to our firm under the caption "Independent
Auditors" and to the use of our reports dated March 20, 1997, as to American
General Life Insurance Company of New York, in Amendment No.19 to the
Registration Statement under the Investment Company Act of 1940 on Form N-4 of
American General Life Insurance Company of New York Separate Account E.
ERNST & YOUNG LLP
Houston, Texas /s/ERNST & YOUNG LLP
February 2, 1998
EXHIBIT 15(b)
LIMITED POWER OF ATTORNEY
WHEREAS, American General Life Insurance Company of New York ("AGNY")
intends from time to time to file with the SEC, one or more Form N-4
Registration Statement(s) under the Securities Act of 1933 and the Investment
Company Act of 1940, on behalf of AGNY and Separate Account E with such
amendments thereto as may be necessary or appropriate, together with any and
all exhibits and other documents related thereto;
WHEREAS, the Form N-4 Registration Statement must be signed by AGNY's
principal executive officer, principal financial officer and a majority of the
members of the Board of Directors or an attorney in fact for those individual
members of the Board of Directors;
NOW THEREFORE, the undersigned individual, in his capacity as director
or officer of the Company hereby appoints Sandra M. Smith, Associate General
Counsel and Secretary of AGNY and Steven A. Glover, Associate General Counsel
of AGNY's Sole Shareholder American General Life Insurance Company ("AGL") and
each of them, either of whom may act without the joinder of the other, his
true and lawful attorney-in-fact and with full power of substitution and
resubstitution, to execute in his name, place and stead, in his capacity as a
director or officer or both, as the case may be, of the Company, any and all
Form N-4 Registration Statements and any and all amendments thereto as each
said attorney-in-fact shall deem necessary or appropriate, together with all
instruments necessary or incidental in connection therewith, and to file the
same or cause the same to be filed with the Commission. The above-named
attorneys-in-fact shall each have full power and authority to do and perform
in the name and on behalf of the undersigned, in any and all capacities, every
act whatsoever necessary or desirable in connection with any and all Form N-4
Registration Statements, and any and all amendments thereto, as fully and for
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts of each said
attorney-in-fact.
Date: January 15, 1998
/s/CHRISTOPHER S. RUISI
-----------------------
Christopher S. Ruisi
