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Registration No. 333 -
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
AMERICAN NATIONAL INSURANCE COMPANY
(Exact Name of Depositor)
One Moody Plaza
Galveston, Texas 77550
(Complete Address of Depositor's Principal Executive Offices)
Rex D. Hemme Jerry L. Adams
Vice President, Actuary Greer, Herz & Adams, L.L.P.
American National With copy to: One Moody Plaza, 18th Floor
Insurance Company Galveston, Texas 77550
One Moody Plaza
Galveston, Texas 77550
(Name and Address of Agent for Service)
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Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Securities being offered: Variable Universal Life Insurance Policies.
=================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
CROSS REFERENCE SHEET
Item Number in Form N-8B-2 Caption in Prospectus
1 Cover Page
2 Cover Page
3 Safekeeping of the Separate Account's Assets
4 Distributor of the Policies
5 American National Insurance Company and the
Separate Account
6 American National Insurance Company and the
Separate Account
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 American National Insurance Company and the
Separate Account; Allocation of Premium and
Accumulation Value; Distributions; Charges and
Deductions; General Provisions; Voting Rights
11 American National Insurance Company and the
Separate Account; Fixed Account
12 Cover Page; Summary; American National Insurance
Company and the Separate Account
13 Summary; Charges and Deductions
i
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14 The Policy; Allocation of Premium and
Accumulation Value
15 Allocation of Premium and Accumulation Value
16 American National Insurance Company and the
Separate Account; Allocation of Premium and
Accumulation Value
17 The Policy; Distributions
18 American National Insurance Company and the
Separate Account; Fixed Account; The Policy;
Allocation of Premium and Accumulation Value;
General Provisions
19 Safekeeping of the Separate Account's Assets
20 Not Applicable
21 Distributions
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 American National Insurance Company and the
Separate Account
26 Summary; Americna National Insurance Company
and the Separate Account; Charges and Deductions
27 American National Insurance Company and the
Separate Account
28 American National Insurance Company and the
Separate Account; Senior Executive Officers and
Directors American National Insurance Company
29 American National Insurance Company and the
Separate Account
30 American National Insurance Company and the
Separate Account
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 American National Insurance Company and the
Separate Account
36 Not Applicable
37 Not Applicable
38 Distributor of the Policies
39 Distributor of the Policies
40 American National Insurance Company and the
Separate Account; Distributor of the Policies
41 Distributor of the Policies
42 Not Applicable
43 Not Applicable
44 Allocation of Premium and Accumulation Value
45 Not Applicable
ii
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46 American National Insurance Company and the
Separate Account; Allocation of Premium and
Accumulation Value
47 American National Insurance Company and the
Separate Account; Allocation of Premium and
Accumulation Value
48 Safekeeping of the Separate Account's Assets
49 Not Applicable
50 American National Insurance Company and the
Separate Account
51 Summary; The Policy; Allocation of Premiums and
Accumulation Value; Charges and Deductions
52 American National Insurance Company and the
Separate Account
53 Federal Tax Matters
54 Not Applicable
55 Appendix - Illustration of Death Benefits and
Accumulation Values
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
iii
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UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
[The representation required by Section 26(e)(2)(A) of the Investment
Company Act of 1940 will be included in a pre-effective amendment.]
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
The cross reference sheet
The prospectus consisting of 52 pages.
Undertaking to file reports.
Rule 484 undertaking.
Representation pursuant to Section 26(e)(2)(A).
Signatures.
Written Consents (to be filed by pre-effective amendment).
The following exhibits, corresponding to those required by the instructions
as to exhibits in Form N-8B-2:
(1) Form of Resolution of the Board
of Directors of American National
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<TABLE>
<CAPTION>
<S> <C>
Insurance Company authorizing
establishment of American National
Variable Life Separate Account.................... Attached hereto as
Exhibit "1"
(2) Not Applicable
(3) (a) Distribution and Administrative
Services Agreement........................... Attached hereto as Exhibit "3a"
(b) Not Applicable
(c) Schedule of Sales Commissions................ To be filed by pre-effective amendment
(4) Not Applicable
(5) Flexible Premium Variable Life
Insurance Policy ................................. Attached hereto as Exhibit "5"
(6) Articles of Incorporation of
American National Insurance Company............... Attached hereto as Exhibit "6a"
By-laws of American National
Insurance Company................................. Attached hereto as Exhibit "6b"
(7) Not Applicable
(8) Form of American National Investment
Accounts, Inc. Fund Participation
Agreement......................................... Attached hereto as Exhibit "8a"
Form of Variable Insurance Products Fund
Fund Participation Agreement...................... Attached hereto as Exhibit "8b"
Form of Variable Insurance Products Fund II
Fund Participation Agreement...................... Attached hereto as Exhibit "8c"
Form of Variable Insurance Products Fund III
Fund Participation Agreement...................... Attached hereto as Exhibit "8d"
Form of T. Rowe Price Fund
Participation Agreement........................... Attached hereto as Exhibit "8e"
Form of MFS Variable Insurance Trust
Participation Agreement........................... Attached hereto as Exhibit "8f"
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Form of Insurance Series
Participation Agreement........................... Attached hereto as Exhibit "8g"
Form of Van Eck Worldwide Insurance Trust
Participation Agreement........................... Attached hereto as Exhibit "8h"
Form of Lazard Retirement Series, Inc.
Participation Agreement........................... Attached hereto as Exhibit "8i"
(9) Not Applicable
(10) Application Form.................................. To be filed by pre-effective amendment
(11) Independent Auditors' Consent..................... To be filed by pre-effective amendment
(12) Opinion of Counsel................................ To be filed by pre-effective amendment
(13) Consent of Counsel................................ To be filed by pre-effective amendment
(14) Actuarial Opinion................................. To be filed by pre-effective amendment
(15) Procedures Memorandum Pursuant to
Rule 6e-3(T)(b)(12)(iii).......................... To be filed by pre-effective amendment
(27) Financial Data Schedule........................... To be filed by pre-effective amendment
</TABLE>
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has caused this
Registration Statement to be signed on its behalf, in the City of Galveston, and
the State of Texas on the day of April, 1998.
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: AMERICAN NATIONAL INSURANCE COMPANY
By: /s/ Robert L. Moody
---------------------------------------
Robert L. Moody, Chairman of the Board,
President and Chief Executive Officer
AMERICAN NATIONAL INSURANCE COMPANY
(Depositor)
By: /s/ Robert L. Moody
---------------------------------------------
Robert L. Moody, Chairman of the Board, President
and Chief Executive Officer
ATTEST:
/s/ Vincent B. Soler, Jr.
- ----------------------------------------
Vincent E. Soler, Jr.
Vice President, Secretary and Treasurer
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in their capacities and on the dates
indicated:
Signature Title Date
/s/ Michael W. McCroskey 4-24-98
- -------------------- Executive Vice President - ______________
Michael W. McCroskey Investments (Principal Financial
Officer)
/s/ Stephen B. Pavlicek 4-24-98
- -------------------- Vice President and Controller ______________
Stephen B. Pavlicek (Principal Accounting
Officer)
<PAGE>
Signature Title Date
/s/ Robert L. Moody 4-24-98
- ------------------------ Chairman of the Board, ________________
Robert L. Moody Director, President and Chief
Executive Officer
- ------------------------ Director ________________
G. Richard Ferdinandtsen
/s/ Irwin M. Herz, Jr. 4-24-98
- ------------------------ Director ________________
Irwin M. Herz, Jr.
/s/ R. Eugene Lucas 4-24-98
- ------------------------ Director ________________
R. Eugene Lucas
- ------------------------ Director ________________
E. Douglas McLeod
- ------------------------ Director ________________
Frances Anne Moody
- ------------------------ Director ________________
Russell S. Moody
/s/ W.L. Moody IV 4-24-98
- ------------------------ Director ________________
W. L. Moody IV
/s/ Joe Max Taylor 4-24-98
- ------------------------ Director ________________
Joe Max Taylor
<PAGE>
Exhibit 99.B1
STATE OF TEXAS (S)
(S)
COUNTY OF GALVESTON (S)
I, the undersigned, Secretary of the AMERICAN NATIONAL INSURANCE COMPANY,
Galveston, Texas, do hereby certify that the following is a true and correct
copy from the corporate records of said Corporation, of a resolution duly
adopted by the Board of Directors thereof, at a regular meeting of said Board, a
quorum thereof present and acting, on the 30th day of July, 1987, to wit:
Resolution on Variable Universal Life
Insurance Establishing Separate Accounts
RESOLVED, That the officers of the Company be, and they hereby are,
authorized to establish one or more separate accounts of this Company, in
accordance with the insurance laws of the State of Texas, to provide an
investment medium for variable life insurance policies issued by this
company as may be designated as participating therein. Any such separate
account shall receive, hold, invest and reinvest only the monies arising
from: (1) premiums, contributions or payments made pursuant to variable
life insurance policies participating therein; (2) such assets of the
company as may be necessary for the establishment of such separate account
or accounts; and (3) the dividends, interest and gains produced by the
foregoing; and
FURTHER RESOLVED, That the separate account may be divided into various
sub-accounts as determined necessary by the officers of the Company to fund
such variable policies. Purchase payments (net of any applicable
deductions) remitted to the Company under the policies and allocated to the
separate account shall be allocated to the appropriate sub-account in
accordance with the terms of the policies. Each sub-account, in turn,
shall invest in the shares of one or more registered management investment
companies, or designated investment series thereof, as specified for
investment by it, at net asset value per share next to be determined
following receipt of an order for purchase by such sub-account. To the
extent that such registered management investment company, or companies,
establishes additional investment series, the officers of the Company are
empowered and authorized to establish such additional sub-accounts as there
are additional investment series, with each such sub-account to invest
solely in the shares of a specified additional investment series; and
FURTHER RESOLVED, That the separate account shall be administered and
accounted for as part of the general business of the Company, but the
income, gains and losses of the separate account shall be credited to or
charged solely against the assets held in the separate account, without
regard to any other income arising out of other business that this Company
may conduct. The assets of the separate account
<PAGE>
shall not be chargeable with the liabilities arising out of any other
business that this Company may conduct; and
FURTHER RESOLVED, Each sub-account shall be administered and accounted for
as part of the general business of the Company, but the income (including
capital gains, or losses, if any) of each sub-account shall be credited to
or charged against the assets held in that sub-account in accordance with
the terms of the policies funded therein, without regard to other income of
the remaining sub-accounts or arising out of any other business that this
Company may conduct. The assets of each sub-account shall not be
chargeable with liabilities arising out of the business conducted by
another sub-account, nor shall a sub-account be chargeable with liabilities
arising out of any other business that this Company may conduct; and
FURTHER RESOLVED, That the officers of the Company be, and they hereby are,
authorized:
(i) to register the variable life insurance policies issued or to be
issued by the Company under the provisions of the Securities Act of
1933 to the extent that they shall determine that such registration is
necessary;
(ii) to register any such separate account or accounts with the
Securities and Exchange Commission under the provisions of the
Investment Company Act of 1940 to the extent that they shall determine
that such registration is necessary;
(iii) to prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including such pre-
effective and post-effective 4 amendments);
(iv) to apply for exemption from those provisions of the
aforementioned Acts and the rules promulgated thereunder as they may
deem necessary or desirable and to take any and all other actions
which they may deem necessary, desirable or appropriate in connection
with such Acts;
(v) to file the variable policies participating in any such separate
accounts with the appropriate state insurance departments and to
prepare and execute all necessary documents to obtain approval of the
insurance departments; and
(vi) to prepare or have prepared and execute all necessary documents
to obtain approval of, or clearance with, or other appropriate actions
2
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required, or any other regulatory authority that may be necessary in
connection with the foregoing matters; and
(vii) to enter into agreements with appropriate entities for the
provisions of administrative and other required services on behalf of
the Separate Account(s) and for the safekeeping of assets of such
Separate Account(s); and
FURTHER RESOLVED, That the form of any resolutions required by any state
authority to be filed in connection with any of the documents or
instruments referred to in any of the preceding resolutions be, and the
same hereby are, adopted as fully set forth herein if (i) in the opinion of
the officers of the Company the adoption of the resolutions is advisable;
and (ii) the Corporate Secretary or Assistant Secretary of the Company
evidences such adoption by inserting into these minutes copies of such
resolutions; and
FURTHER RESOLVED, That the officers of the Company, and each of them, are
hereby authorized to prepare and to execute the necessary documents and to
take such further actions as may be deemed necessary or appropriate, in
their discretion, to implement the purpose of the foregoing resolutions.
And I do further certify that said resolution has never been rescinded or
reconsidered and still remains in force.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
the said Corporation, this day of , 19 .
VINCENT E. SOLER, JR.
-----------------------------------------
Secretary
SUBSCRIBED AND SWORN TO BEFORE ME, this day of , 19 .
-----------------------------------------
Notary Public
State of Texas
3
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Exhibit 99.B3a
DISTRIBUTION AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, made and entered into on this _____ day of
________________, by and between AMERICAN NATIONAL INSURANCE COMPANY ("American
National"), a life insurance company organized under the laws of the State of
Texas, American National Variable Life Separate Account ("Separate Account"), a
separate account established by American National pursuant to the Texas
Insurance Code and SECURITIES MANAGEMENT AND RESEARCH, INC. ("SM&R"), a
corporation organized under the laws of the State of Florida.
W I T N E S S E T H:
WHEREAS, American National proposes to issue to the public certain variable
contracts ("Contracts") and has authorized the creation of one or more separate
investment accounts in connection therewith; and
WHEREAS, American National has established the Separate Account for the
purpose of issuing the Contracts and is registering the Separate Account with
the Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940; and
WHEREAS, the Contracts to be issued by the Separate Account are to be
registered with the Commission under the Securities Act of 1933 for offer and
sale to the public, and otherwise in compliance with all applicable laws; and
WHEREAS, SM&R, a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers, Inc.,
proposes to act as the distributor in the offering and sale of said Contracts;
WHEREAS, SM&R also proposes to perform certain administrative, processing
and clerical services for American National in connection with the offering and
sale of said Contracts; and
WHEREAS, American National desires to obtain such distribution and other
services from SM&R;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, American National, the Separate Account and SM&R hereby agree as
follows:
1. SM&R will serve as distributor for the Contracts which will be issued
by American National through the Separate Account and will be
registered with the Commission for offer and sale to the public. As
Distributor, SM&R will use its best efforts to effect offers and sales
of the Contracts to the public on a continuing basis. SM&R shall be
responsible for compliance with the requirements of any applicable
state broker-dealer regulations and the Securities Exchange Act of
1934 as each applies to SM&R in connection with its duties as
Distributor of said Contracts. Moreover, SM&R shall conduct its
affairs in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (NASD).
2. SM&R will assist American National in identifying, training and
qualifying (under appropriate NASD and/or state requirements)
insurance agents desiring to sell the Contracts. SM&R will register
such agents as its registered representatives before they engage in
the sale of the Contracts and will supervise and control such agents
in the sale of the Contracts in the
<PAGE>
manner and to the extent required by the applicable rules of the NASD
and the Commission. If any such agent of American National should fail
or refuse to submit to the supervision of SM&R in accordance with the
terms of this Agreement or otherwise fail to meet the rules and
standards imposed by SM&R on its registered representatives, SM&R
shall take whatever steps may be necessary to terminate the sales
activities of such agent relating to the Contracts.
3. As distributor, SM&R will be responsible for the preparation of
marketing materials (and where appropriate obtaining regulatory
approval), for actively recruiting additional sales agents and sales
organizations and for providing sales training (including continuing
education required for license maintenance).
4. SM&R may contract with other broker-dealers registered under the
Securities Exchange Act of 1934 and authorized by applicable law to
sell variable contracts issued by the Separate Account. Any such
contractual arrangement is expressly made subject to this Agreement,
and SM&R will at all times be responsible to American National for the
distribution of all Contracts issued by the Separate Account.
5. The amount of any commissions payable in connection with the sale of
Contracts will be made by American National to the sales personnel of
SM&R and this function is being performed as a purely ministerial
service and the Records in respect thereof are properly reflected on
the Books and Records maintained by or for SM&R. The gross amounts
paid or advances made by American National on behalf of SM&R will be
transmitted to SM&R for proper reporting.
6. Warranties.
(a) American National represents and warrants to SM&R that:
(i) Any and all Registration Statements required for the
Contracts or the Separate Account have been filed with the
Commission in the form previously delivered to SM&R and that
copies of any and all amendments thereto will be forwarded
to SM&R at the time that they were filed with the
Commission;
(ii) The Registration Statements and any further amendments or
supplements thereto will, when they become effective,
conform in all material respects to the requirements of the
Securities Act of 1933, the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder,
and will not contain untrue statements of material facts or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished
in writing to American National by SM&R expressly for use
herein;
(iii) American National is validly existing as a stock life
insurance company in good standing under the laws of the
State of Texas with corporate power to
2
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own its properties and conduct its business as described in
the Prospectus, and has been duly qualified for the
transaction of business and is in good standing under the
laws of each other jurisdiction in which its owns or leases
properties, or conducts any business, so as to require such
qualification;
(iv) The Contracts to be issued by the Separate Account through
SM&R hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as
provided herein, will be duly and validly issued and will
conform to the description of such Contracts contained in
the Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are
appropriately licensed in a manner as to comply with the
state insurance laws;
(vi) The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any statutes, any indenture,
mortgage, deed of trust, note agreement or other agreement
or instrument to which American National is a party or by
which American National is bound, American National's
Charter as a stock life insurance company or By-Laws, or any
order, rule or regulation of any court or governmental
agency or body having jurisdiction over American National or
any of its properties; and no consent, approval,
authorization or order of any court or governmental agency
or body is required for the consummation by American
National of the transactions contemplated by this Agreement,
except such as may be required under the Securities Exchange
Act of 1934 or state insurance or securities laws in
connection with the purchase and distribution of the
Contracts by SM&R; and
(vii) There are no material legal or governmental proceedings
pending to which American National or the Separate Account
is a party or of which any property of American National or
the Separate Account is the subject, other than as set forth
in the Prospectus relating to the Contracts, and other than
litigation incident to the kind of business conducted by
American National which, if determined adversely to American
National, would individually or in the aggregate have a
material adverse effect on the financial position, surplus
or operations of American National.
(b) SM&R represents and warrants to American National that:
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934 and a member
in good standing of the National Association of Securities
Dealers and is in compliance with the securities laws in
those states in which it conducts business as a broker-
dealer;
(ii) It shall permit the offer and sale of Contracts only by and
through persons
3
<PAGE>
who are appropriately licensed under both the securities
laws and state insurance laws;
(iii) The performance of this Agreement and the consummation of
the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of or
constitute a default under, any statute, any indenture,
mortgage, deed of trust, note agreement or other agreement
or instrument to which SM&R is a party or by which SM&R is
bound, the Certificate of Incorporation and By-Laws of SM&R,
or any other rule or regulation of any court or governmental
agency or body having jurisdiction over SM&R or its
property;
(iv) No offering, sale or other disposition of any Contracts will
be made until SM&R is notified by American National that the
subject Registration Statement has been declared effective
and that the Contracts have been released for sale by
American National; and such offering, sale or other
disposition shall be limited to those jurisdictions that
have approved or otherwise permit the offer and sale of the
Contracts by American National.
(v) To the extent that any statements or omissions made in the
Registration Statements with respect to the Contracts, or
any amendment or supplement thereto are made in reliance
upon and in conformity with written information furnished to
American National by SM&R expressly for use therein, such
Registration Statements and any amendments or supplements
thereto will, when they become effective or are filed with
the Commission, as the case may be, conform in all material
respects to the requirements of the Securities Act of 1933
and the rules and regulations of the Commission thereunder
and will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
7. SM&R shall keep, in manner and form prescribed or approved by American
National and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934 correct records and books of account
as required to be maintained by a registered broker-dealer acting as
distributor of all transactions entered into on behalf of American
National and with respect to variable contract business it conducts of
American National. SM&R shall make such records and books of account
available for inspection by the Commission, and American National
shall have the right to inspect, make copies of or take possession of
such records and books of accounts at any time on demand.
SM&R, however, may request that some or all of the books and records
relating to the sales of the Contracts which are required to be
maintained by it as a registered broker-dealer pursuant to Rule 17a-3
and 17a-4 under the 1934 Act be prepared and maintained in accordance
with such rules by American National on behalf of and as agent for
SM&R. American National agrees that for the purposes of this
Agreement, such books and records shall be deemed to be the property
of SM&R and shall be subject at all times to examination by the
Securities and Exchange Commission in accordance with Section 17(a) of
the 1934
4
<PAGE>
Act and SM&R shall have the right to inspect and make copies of such
books and records of accounts at any time on demand.
8. Upon the request of SM&R, American National agrees to prepare and send
all confirmations required to be sent by SM&R in connection with
crediting purchase payments under the Contracts. Any such
confirmation shall be sent upon or before the completion of each
"transaction", as that term is used in Rule 15c1-4 of the 1934 Act,
and shall reflect the facts of the transaction and indicate that the
confirmation is forwarded on behalf of SM&R in its capacity of
Distributor of Contracts.
9. Subsequent to having been authorized to commence with the offering
contemplated herein, SM&R will utilize the currently effective
Prospectus relating to the subject Contracts in connection with its
selling efforts. As to the other types of sales material, SM&R agrees
that it will use only sales materials which conform to the
requirements of federal and state laws and regulations, and which have
been filed where necessary with the appropriate regulatory
authorities, including the National Association of Securities Dealers.
10. SM&R will not use any Prospectus, sales literature, or any other
printed matter or material in the offer or sale of any Contract if, to
the knowledge of SM&R, any of the foregoing misstates the duties,
obligations or liabilities of American National, the Separate Account
or SM&R.
11. SM&R shall not be entitled to any remuneration for its services as
distributor. However, in payment for the administrative, processing
and clerical services provided by SM&R, American National shall pay
SM&R a processing fee of $50 for each Contract application submitted
by SM&R and accepted by American National. In addition, upon
presentation of proper evidence of expenditures, American National
will reimburse SM&R for all of SM&R's reasonable charges and expenses
directly incurred in connection with the performance of its duties and
obligations contained in this Agreement.
12. SM&R makes no representation or warranties regarding the number of
Contracts to be sold or the amount to be paid thereunder. SM&R does,
however, represent that it will actively market such Contracts on a
continuous basis while there is an effective registration thereof with
the Commission.
13. SM&R may render similar services or act as a distributor or dealer for
issuers other than the Separate Account or sponsors other than
American National in the offering of their Contracts.
14. The Contracts shall be offered for sale on the terms described in the
currently effective Prospectus describing such Contracts.
15. American National will use its best efforts to register for sale, from
time to time if necessary, additional dollar amounts of the Contracts
under the Securities Act of 1933 and should it ever be required, under
state Blue Sky Laws and to file for approval under state insurance
laws when necessary. American National may require SM&R to assist it
in obtaining any necessary clearance or approval of prospectuses,
sales literature and proxy materials in accordance with the
requirements of the Commission, the NASD or other regulatory bodies.
5
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16. American National reserves the right at any time to suspend or limit
the public offering of the subject Contracts upon one day's written
notice to SM&R.
17. American National agrees to advise SM&R immediately:
(a) of any request by the Commission (i) for amendment of the
Securities Act Registration Statement relating to the Contracts,
or (ii) for additional information;
(b) of issuance by the Commission of any stop order suspending the
effectiveness of its Registration Statement or the initiation of
any proceedings for that purpose; and
(c) of the happening of any material event, if known, which makes
untrue any statement made in its Registration Statement or which
requires the making of a change therein in order to make any
statement made therein not misleading.
18. American National will furnish to SM&R such information with respect
to the Separate Account and the Contracts in such form and signed by
such of its officers as SM&R may reasonably request; and will warrant
that the statements therein contained when so signed will be true and
correct.
19. Each of the undersigned parties agrees to notify the other in writing
upon being apprised of the institution of any proceeding investigation
or hearing involving the offer or sale of the subject Contracts.
20. Absent the prior written consent of American National, this Agreement
will terminate automatically upon its assignment.
21. This Agreement shall terminate without payment of any penalty by
either party:
(a) at the option of American National or of SM&R upon sixty (60)
days' advance written notice to the other; or
(b) at the option of American National upon institution of formal
proceedings against SM&R by the National Association of
Securities Dealers or by the Commission; or
(c) at the option of American National, if SM&R or any representative
thereof at any time (i) employs any device, scheme, or artifice
to defraud; makes any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they
were made, not misleading; or engages in any act, practice, or
course of business which operates or would operate as a fraud or
deceit upon any person; (ii) fails to promptly account and pay
over the American National money due it according to its records;
or (iii) violates the conditions of this Agreement.
22. Each notice required by this Agreement may be given by wire or
facsimile transmission and confirmed in writing to :
6
<PAGE>
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
Attn: President
[Name of Separate Account]
One Moody Plaza
Galveston, Texas 77550
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
Attn: President
23. American National agrees to indemnify SM&R for any liability that SM&R
may incur to a Contract Owner or party-in-interest under a Contract
(i) arising out of any act or omission in the course of, or in
connection with, rendering services under this Agreement, or (ii)
arising out of the purchase, retention or surrender of a Contract;
PROVIDED, HOWEVER, that American National will not indemnify SM&R for
any such liability that results from the willful misfeasance, bad
faith or gross negligence of SM&R, or from the reckless disregard, by
SM&R, of its duties and obligations arising under this Agreement.
24. This Agreement shall be subject to the laws of the State of Texas and
construed so as to interpret the Contracts as insurance products
written within the business operation of American National.
25. This Agreement covers and includes all agreements, verbal and written,
between SM&R and American National with regard to the offer and sale
of the Contracts, and supersedes and annuls any and all agreements
between the parties with regards to the distribution of the Contracts;
except that this Agreement shall not effect the operation of previous
agreements entered into between SM&R and American National unrelated
to the sale of the Contracts. This Agreement may be amended from time
to time by the mutual fund agreement and consent of the undersigned
parties; PROVIDED, that such amendment shall not affect the rights of
existing Contract Owners, and that such amendment be in writing and
duly executed.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested on the date first stated above.
AMERICAN NATIONAL INSURANCE COMPANY
By: ______________________________________________
Carl R. Robertson, Senior Executive Vice President
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
7
<PAGE>
By: AMERICAN NATIONAL INSURANCE COMPANY
By: _________________________________________
Carl R. Robertson, Senior Executive Vice President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: _________________________________________
Michael W. McCroskey, President
8
<PAGE>
Exhibit 99.B5
AMERICAN NATIONAL INSURANCE COMPANY
A STOCK LIFE INSURANCE COMPANY
Insured John Doe $1,000,000 Specified Amount
Policy Number UVSPC111 MARCH 1, 1998 Date of Issue
Home Office: One Moody Plaza
Galveston, Texas 77550
AMERICAN NATIONAL INSURANCE COMPANY will pay the Death Benefit to the
Beneficiary subject to the provisions of the Policy. The Death Benefit is
payable upon receipt at Our Home Office in Galveston, Texas, of Satisfactory
Proof of the Insured's Death. The Policy is issued in consideration of the
Application and payment of the premiums shown on the Policy Data Page. This
Policy is a legal contract between the Owner and American National Insurance
Company.
READ YOUR POLICY CAREFULLY.
Signed for the Company at Galveston, Texas, on the Date of Issue.
SECRETARY PRESIDENT
RIGHT TO CANCEL POLICY. You may cancel the Policy by returning it to Us or our
Agent within ten days after You receive the Policy. We will refund the premiums
paid adjusted by investment gains during the fifteen day period after such
premiums have been allocated to the American National Money Market Portfolio and
by investment gains and losses thereafter.
THE ACCUMULATION VALUE IN THE AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
IS BASED ON THE INVESTMENT EXPERIENCE OF THAT SEPARATE ACCOUNT AND MAY INCREASE
OR DECREASE DAILY. THE ACCUMULATION VALUE IS NOT GUARANTEED.
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT, OR BOTH
MAY VARY UNDER THE PROVISIONS OF THE POLICY.
VARIABLE LIFE INSURANCE POLICY.
INVESTMENT EXPERIENCE REFLECTED IN SOME VALUES AND BENEFITS.
NONPARTICIPATING. NO DIVIDENDS
<PAGE>
GUIDE TO POLICY PROVISIONS
PAGE
POLICY DATA PAGE
DEFINITION OF POLICY TERMS 3
NONPARTICIPATING POLICY 4
DEATH BENEFIT 4
POLICY CHANGE OPTIONS 5
PREMIUMS 5
POLICY ACCOUNTS 6
ACCUMULATION VALUE 7
SURRENDER OPTION 10
OWNERSHIP 12
BENEFICIARY INFORMATION 12
GENERAL PROVISIONS 13
SETTLEMENT OPTIONS 13
A copy of the Application follows the Policy Data Page.
2
<PAGE>
POLICY DATA PAGE
OWNER THE INSURED
BENEFICIARY AS STATED IN COPY OF APPLICATION ATTACHED UNLESS SUBSEQUENTLY
CHANGED IN COMPLIANCE WITH POLICY PROVISION
AGE AT ISSUE 35
NAME OF INSURED JOHN DOE $1,000,000 specified amount
POLICY NUMBER UVSPC111 MARCH 1, 1998 date of issue
FORM BENEFIT
NUMBER DESCRIPTION
FPVL Variable LIfe INSURANCE
INSURED SEX MALE
INITIAL PREMIUM $10,000.00
ANNUAL CHARGE $35.00
MONTHLY DEDUCTION
A COST OF INSURANCE CHARGE
TAX EXPENSE CHARGE OF 0.40% ANNUALLY OF THE ACCUMULATION VALUE
ASSET CHARGE OF 1.25% ANNUALLY OF ACCUMULATION VALUE IN FIXED AND GENERAL
ACCOUNTS
PREMIUM CHARGE
AFTER FIRST POLICY YEAR, PREMIUM CHARGE OF 4.00% IS DEDUCTED FROM PREMIUMS
RECEIVED
DAILY ASSET CHARGE
A DAILY ASSET CHARGE OF 1.25% ANNUALLY OF THE AVERAGE DAILY NET ASSET VALUE
OF EACH SUBACCOUNT
PREMIUM ALLOCATION:
SUBACCOUNTS
AN GROWTH 25%
VIP II INDEX 500 25%
VIP III GROWTH AND INCOME 25%
T. ROWE PRICE MID-CAP GROWTH 25%
IT IS POSSIBLE THAT COVERAGE WILL EXPIRE IF THE SURRENDER VALUE IS NOT
SUFFICIENT TO CONTINUE COVERAGE
THE MAXIMUM COST OF INSURANCE RATE IS BASED ON THE 1980 CSO MALE MORTALITY
TABLE.
THE SURRENDER PREMIUM IS $10,000.
3
<PAGE>
INSURED JOHN DOE MALE AGE 35
BENEFITS AVAILABLE TO THE ATTAINED AGE FOR WHICH COST OF INSURANCE RATES ARE
SHOWN.
MONTHLY GUARANTEED MAXIMUM COST OF INSURANCE RATES PER $1,000
ATTAINED ATTAINED
AGE FPVL AGE FPVL
35 0.18105 69 3.21711
36 0.19358 70 3.52705
37 0.20778 71 3.88204
38 0.22366 72 4.29064
39 0.24205 73 4.75546
40 0.26295 74 5.26768
41 0.28553 75 5.81837
42 0.30979 76 6.40015
43 0.33657 77 7.00642
44 0.36503 78 7.64322
45 0.39518 79 8.33077
46 0.42785 80 9.09381
47 0.46222 81 9.95631
48 0.49912 82 10.94073
49 0.54023 83 12.04578
50 0.58556 84 13.25074
51 0.63848 85 14.53291
52 0.69732 86 15.87433
53 0.76462 87 17.26936
54 0.83872 88 18.71940
55 0.91880 89 20.23570
56 1.00402 90 21.84586
57 1.09441 91 23.59569
58 1.19083 92 25.57485
59 1.29585 93 28.00726
60 1.41289 94 31.40129
61 1.54541 95 36.79827
62 1.69520 96 46.58899
63 1.86320 97 67.04387
64 2.04954 98 83.33333
65 2.25092 99 83.33333
66 2.46660
67 2.69582
68 2.94303
TABLE OF SURRENDER CHARGES
NUMBER OF YEARS SINCE SURRENDER PREMIUM WAS PAID SURRENDER CHARGE PERCENTAGE
1 9.0%
2 8.5%
3 8.0%
4 7.0%
5 6.0%
6 5.0%
7 4.0%
8 3.0%
9 2.0%
10 or more 0.0%
4
<PAGE>
DEFINITION OF POLICY TERMS
ACCUMULATION UNIT - a standard of measurement used with respect to each
subaccount to calculate the Accumulation Value. The Accumulation Unit Value
fluctuates with the value of the shares of the corresponding portfolio owned by
each subaccount less any applicable deductions.
ACCUMULATION UNIT VALUE - the value of an Accumulation Unit.
ACCUMULATION VALUE - the total amount that the Policy provides for investment at
any time. The value of the Policy as defined in the Accumulation Value
Provision.
APPLICANT - the person whose signature is shown as such in the Application.
APPLICATION - the Application for the Policy and any Application for an increase
in the Specified Amount.
ATTAINED AGE - the age at issue as shown on the Policy Data Page plus the number
of complete Policy Years that the Policy has been in force.
BENEFICIARY - the Beneficiary is designated in the Application. If changed,
the Beneficiary is as shown in the latest change filed and recorded with Us.
The Beneficiary is named to receive the Death Benefit in the event of the
Insured's death.
COST OF INSURANCE - that portion of the Monthly Deduction required to pay for
the Policy's insurance coverage.
DAILY ASSET CHARGE - a charge equal to an annual rate of 1.25% of the average
daily net asset value of each Subaccount of the Separate Account.
DATE OF ISSUE - the Date of Issue set forth in the Policy that is used to
determine Policy anniversary dates, Policy Years and Monthly Deduction Dates.
DEATH BENEFIT - the amount of insurance coverage provided under the Policy.
HOME OFFICE - means American National Insurance Company, One Moody Plaza,
Galveston, Texas.
INSURED - the person named as such on the Policy Data Page and upon whose life
the Policy is issued.
LAPSE - this Policy will Lapse when the Surrender Value is not sufficient to
provide for a Monthly Deduction. Coverage will terminate in accordance with
the Grace Period provision of this Policy.
MONTHLY DEDUCTION - the sum of the cost of insurance charge and the tax charge
specified on the policy data page.
MONTHLY DEDUCTION DATE - the same date in each succeeding month as the Date of
Issue except that whenever the Monthly Deduction falls on a date other than a
Valuation Date, the Monthly Deduction Date will be deemed the next Valuation
Date. This is the date the Monthly Deduction is taken from the Accumulation
Value.
NET PREMIUM - the Premium less the applicable premium charge, if any. No premium
charge is deducted from premiums paid during the first Policy Year.
OWNER - the Owner of the Policy, as designated in the Application or as
subsequently changed. If a Policy has been absolutely assigned, the assignee is
the Owner. A collateral assignee is not the Owner.
PAYEE - the person to whom any of the proceeds of the Policy are payable.
POLICY - this life insurance contract.
POLICY DATA PAGE - the pages of the Policy so entitled.
POLICY DEBT - the sum of all unpaid Policy loans and accrued interest thereon.
POLICY YEAR - the period from one Policy anniversary date until the next Policy
anniversary date.
5
<PAGE>
PREMIUM CHARGE - after the first Policy Year, premiums paid will be reduced by a
4% charge prior to allocation among the subaccounts or the fixed account.
PREMIUM PAYER - the person responsible for the payment of premiums for the
Policy.
SATISFACTORY PROOF OF INSURED'S DEATH - means all of the following must be
submitted: (1) a certified copy of the death certificate; (2) a claimant
statement; (3) the Policy; and (4) any other information We may reasonably
require to establish the validity of the claim.
SPECIFIED AMOUNT - the amount insurance selected, as shown on the Policy Data
Page.
SURRENDER PREMIUM - The amount shown on the Policy Data Page, as changed by
subsequent endorsements, which is used to calculate surrender charges.
SURRENDER VALUE - the Accumulation Value less any Policy Debt and surrender
charges.
VALUATION DATE - a Valuation Date is each day on which the New York Stock
Exchange ("NYSE") and We are open for trading.
VALUATION PERIOD - the period commencing at the close of regular trading on the
NYSE on one Valuation Date and ending at the close of regular trading on the
NYSE on the next succeeding Valuation Date.
YOU, YOUR - the owner of the Policy.
WE, US, OUR - means American National Insurance Company.
WRITTEN REQUEST - means a request in writing in a form satisfactory to Us and
filed at Our Home Office.
NONPARTICIPATING POLICY
The Policy is nonparticipating and does not share in Our profits or surplus.
DEATH BENEFIT
DEATH BENEFIT - As long as the Policy remains in force, We will, upon
Satisfactory Proof of the Insured's Death, pay the Death Benefit Proceeds at the
time of the Insured's death. Subject to the rights of any assignee, Death
Benefit Proceeds will be paid to the surviving Beneficiary or Beneficiaries
specified in the application and as subsequently changed. If no Beneficiary is
chosen, the proceeds will be paid to the Insured's estate.
The amount of the Death Benefit payable will be determined at the end of the
Valuation Period during which the Insured's death occurred. The Death Benefit
equals the greater of:
(1) the initial Specified Amount plus any increases and less any decreases; or
(2) the Policy's Accumulation Value on the date of death multiplied by the
corridor percentage for the Insured's attained age from the table shown on the
next page.
MONTHLY DEDUCTION DUE AT DEATH - If the Insured should die during the grace
period, We will deduct an amount to cover Monthly Deductions to the end of the
month of death.
POLICY DEBT ADJUSTMENT - We will deduct any Policy Debt from any Death Benefit.
MISSTATEMENT OF AGE OR SEX - If the Insured's age or sex has been stated
incorrectly, the Death Benefit will be that which could have been purchased by
the most recent Cost of Insurance charge at the correct age and sex.
SUICIDE - If the Insured should die by suicide, while sane or insane, within 2
years from the Date of Issue, the Death Benefit will be limited to the premiums
paid less any partial surrenders and Policy Debt. If the Insured should die by
suicide, while sane or insane, within 2 years from the effective date of any
increase in Specified Amount, the Death
6
<PAGE>
Benefit for the increase will be limited to the Cost of Insurance associated
with the increase. The provisions of this paragraph shall apply to a
reinstatement for 2 years from the effective date of such reinstatement to the
extent that We shall be liable only for the return of Cost of Insurance and
expenses, if any, paid on or after the reinstatement.
PAYMENT OF THE DEATH BENEFIT - The Death Benefit may be paid in one sum or under
the settlement options of the Policy.
TABLE OF CORRIDOR PERCENTAGES
<TABLE>
<CAPTION>
INSURED'S AGE INSURED'S AGE INSURED'S AGE
BEGINNING OF CORRIDOR BEGINNING OF CORRIDOR BEGINNING OF CORRIDOR
POLICY YEAR % POLICY YEAR % POLICY YEAR %
<S> <C> <C> <C> <C> <C>
0-40 250 53 164 67 118
41 243 54 157 68 117
42 236 55 150 69 116
43 229 56 146 70 115
44 222 57 142 71 113
45 215 58 138 72 111
46 209 59 134 73 109
47 203 60 130 74 107
48 197 61 128 75-90 105
49 191 62 126 91 104
50 185 63 124 92 103
51 178 64 122 93 102
52 171 65 120 94 101
66 119 95 and thereafter 100
</TABLE>
POLICY CHANGE OPTIONS
At any time that this Policy is in effect, You may make Written Request for any
of the following changes in the Policy. The Policy must accompany the change
request. The requested change will require Our consent.
INCREASE IN SPECIFIED AMOUNT - You must submit a new Application to increase the
Specified Amount. We also require evidence satisfactory to Us that the Insured
is insurable under Our current rules and practices. We may limit the number and
size of increases in a Policy Year. The increase will become effective on the
Monthly Deduction Date that coincides with or next follows the date We approve
the increase. A policy endorsement will show the effective date for the
increase. You may cancel this increase by following the Right to Cancel
provision as stated on the front of the Policy.
An increase in the Specified Amount may result in certain increased charges,
including the cost of insurance rate, and surrender charge, and may have
federal tax consequences.
DECREASE IN SPECIFIED AMOUNT - A partial surrender will decrease the Specified
Amount of the Policy. See partial surrender provision on page 10.
PREMIUMS
PREMIUM PAYMENTS - The initial premium shown on the Policy Data Page is due on
the Date of Issue, and must be paid in order to put the Policy in force. You may
choose the amount and frequency of any additional premium payments, subject to
the limits described below. All premiums are payable in advance. Subsequent
payments must be made at Our Home Office. If You stop paying premiums, the
Policy will continue in force subject to the provisions of the Grace Period.
If the total premiums paid on this Policy should exceed the limitations of the
Internal Revenue Code, We will return the excess premiums to You within the time
permitted by law. Premium payments which result in an increase in the net amount
at risk under the Policy will require evidence of insurability. No additional
premium may be made after the Insured's age 90, except as may be required during
a grace period.
ADDITIONAL PREMIUMS - You may make additional premium payments at any time while
the Policy is in force, but We have the right to limit the amount of any
additional premium payment. Except with respect to additional payments required
in a grace period, any additional payment must be at least $5,000.
7
<PAGE>
ALLOCATION OF PREMIUMS - Premium payments will be allocated between the
subaccounts and fixed account as shown on the Policy Data Page. You may change
the allocation for premium payments by sending Us a Written Request to do so. We
will initially allocate any premium received on the Date of Issue to the money
market subaccount for fifteen days during the period allowed to examine the
Policy. Upon expiration of this period, if the Policy is not canceled, the
Accumulation Value in the money market subaccount will be automatically
transferred to the other subaccounts in accordance with Your premium allocation
percentages for the subaccounts or the fixed account as the case may be. No
allocation will be permitted which would result in less than 1% of the Net
Premium being allocated to any one subaccount or the fixed account. The minimum
initial deposit in any subaccount or the fixed account is $500.
GRACE PERIOD - A grace period is granted for the payment of a premium sufficient
to cover the Monthly Deduction when the Surrender Value is insufficient. The
grace period begins on the date the Surrender Value is insufficient to cover the
Monthly Deduction. We will mail notice of the grace period and of the required
premium payment to You and to any assignee on record at Our Home Office. The
grace period will end 61 days after the notice is mailed. Failure to pay the
required premium within the grace period will cause the Policy to terminate. If
the Insured dies during the grace period, any overdue Monthly Deductions and
Policy Debt will be deducted from the Death Benefit proceeds.
TERMINATION OF COVERAGE - The Policy coverage will terminate on the first to
occur of:
(1) the Insured's death;
(2) expiration of the grace period; or
(3) Written Request for surrender and submission of the Policy for the Surrender
Value.
REINSTATEMENT - A policy may be reinstated any time within five years at the end
of the grace period. A Policy can not be reinstated if it was surrendered. At
the time of the reinstatement request, all these conditions must be met:
(1) You must provide Us any facts We need to satisfy Us that the Insured is then
insurable for the Policy;
(2) Any Policy Debt must be restored or paid back with compound interest;
(3) You must pay a premium sufficient to keep the policy in force for three
months after the date of reinstatement;
(4) You must pay all of the Monthly Deductions that were not collected during
the grace period; and
(5) You must pay the amount necessary to pay the Premium Charge.
The interest rate for reinstatement of Policy Debt will be 6% per year. If the
Policy Debt with interest would exceed the Surrender Value of the reinstated
Policy, the excess must be paid before reinstatement.
The original Date of Issue, and the Dates of Issue of increases in Specified
Amount (if applicable), will be used for purposes of calculating the surrender
charges for the reinstated Policy. If any Policy Debt is reinstated, the amount
thereof will be held in our General Account. Accumulation Value calculations
will then proceed as described under the Accumulation Value provision. The
Policy Date of reinstatement will be the first Monthly Deduction Date on or next
following the date of approval by Us.
POLICY ACCOUNTS
AMERICAN NATIONAL FIXED ACCOUNT - You may elect to allocate or transfer all or a
part of the amount credited under the Policy to a fixed account. Such amounts
allocated or transferred become part of Our General Account, which consists of
all assets owned by Us other than those in the various separate accounts of
American National. Subject to applicable law, We have sole discretion over the
investment of the assets of the fixed account and You do not share in the
investment experience of those assets. Instead, We guarantee that the part of
the Accumulation Value in the fixed account will accrue interest daily at an
annual interest rate that We will declare periodically. The declared rate will
not be less than 3% per year, compounded daily.
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT - The variable benefits under
this Policy are provided through investments in the American National Variable
Life Separate Account. We established the American National Variable Life
Separate Account as a separate investment account to support variable universal
life insurance contracts. We own the assets of the American National Variable
Life Separate Account. Assets equal to the reserves and other liabilities of the
American National Variable Life Separate Account will not be charged with
liabilities that arise from any other business We conduct. We may transfer to
Our General Account any assets which exceed the reserves and other liabilities
of the American National Variable Life Separate Account. American National
Variable Life Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of 1940.
It is also subject to the laws of the State of Texas.
8
<PAGE>
SUBACCOUNTS - The American National Variable Life Separate Account has multiple
subaccounts. Each subaccount will invest exclusively in shares of the
corresponding portfolios of the available funds. Each subaccount represents a
separate investment portfolio of a fund. Only the elected subaccounts of the
American National Variable Life Separate Account are shown on the Policy Data
Page.
You will share only in the income, gains and losses of the particular
subaccounts to which premium payments have been allocated. We will value the
assets of each subaccount of the American National Variable Life Separate
Account at the end of each valuation period. A valuation period is the period
commencing at the close of regular trading on the New York Stock Exchange on one
valuation date and ending at the close of regular trading on the New York Stock
Exchange on the next succeeding valuation date. A valuation date is each day on
which the New York Stock Exchange and American National are open for trading.
TRANSFERS - At any time that this Policy is in effect, You may transfer all or a
portion of the amounts from one subaccount to another subaccount, or to the
fixed account. The minimum amount that may be transferred is $250. You may make
12 transfers each Policy Year without charge. The maximum charge for each
additional transfer during the Policy Year is $10.
Transfers from the fixed account to the subaccounts are permitted only once each
Policy Year and only during the thirty day period beginning on the policy
anniversary. This transfer is without charge. The maximum amount which may be
transferred out of the fixed account each year is the greater of: (a) 25% of the
amount in the fixed account, or (b) $1,000. Such transfer requests received
prior to the policy anniversary will be effected on the policy anniversary.
Transfer requests received within the thirty day period beginning on the policy
anniversary will be effected as of the end of the valuation period in which a
proper transfer request is received by Us.
ADDITION, DELETION, OR SUBSTITUTION OF INVESTMENT - We have the right, subject
to applicable law, to make additions to, deletions from, or substitutions for
the shares that are held by the American National Variable Life Separate
Account or that the American National Variable Life Separate Account may
purchase. We reserve the right to eliminate the shares of any of the series of
the funds and to substitute shares of another series of a fund or of another
open-end management investment company if the shares of the series are no longer
available for investment or if, in Our judgment, further investment in the
series should become inappropriate in view of the purposes of the American
National Variable Life Separate Account.
We will not substitute any shares attributable to Your interest in a subaccount
of the American National Variable Life Separate Account without notice to You
and prior approval of the Securities and Exchange Commission, to the extent
required by the Investment Company Act of 1940. We have the right to establish
additional subaccounts of the American National Variable Life Separate Account,
each of which would invest only in a new and corresponding series of the funds
or in shares of another open-end management investment company.
We also have the right to eliminate existing subaccounts of the American
National Variable Life Separate Account. In the event of any substitution or
change, We may, by appropriate endorsement, make such changes in the Policy as
may be necessary or appropriate.
We also have the right, where permitted by law:
(1) to operate the American National Variable Life Separate Account as a
management company under the Investment Company Act of 1940;
(2) to de-register the American National Variable Life Separate Account under
the Act if registration is no longer required; and
(3) to combine the American National Variable Life Separate Account with other
separate accounts.
ACCUMULATION VALUE
ACCUMULATION VALUE - The Accumulation Value is the sum of the values
attributable to the Policy in the subaccounts of the American National Variable
Life Separate Account, which will reflect the investment performance of the
chosen subaccounts, plus the Accumulation Value held in the fixed account which
includes interest paid. The entire investment risk of the American National
Variable Life Separate Account is borne by You. We do not guarantee minimum
Accumulation Value.
9
<PAGE>
DETERMINATION OF ACCUMULATION VALUE - Accumulation Value is determined on each
Valuation Date. On the Date of Issue, Accumulation Value will equal the Net
Premium, reduced by the Monthly Deduction. Thereafter, on each Valuation Date,
the Accumulation Value of a Policy will equal:
(1) The sum of the values attributable to the Policy in each of the subaccounts
on that Valuation Date, determined for each subaccount by multiplying the
subaccount's Accumulation Unit Value by the number of Accumulation Units
allocated to the Policy; plus
(2) The value attributable to the Policy in the Fixed Account; plus
(3) Any Accumulation Value impaired by Policy Debt held in the Our general
account; plus
(4) Any Net Premiums received on that Valuation Date; less
(5) Any partial surrender, and its charge, made on that Valuation Date; less
(6) Any Monthly Deduction to be made on that Valuation Date; less
(7) Any federal or state income taxes charged against the Accumulation Value.
In computing the Accumulation Value, the number of Accumulation Units allocated
to the Policy is determined after any transfers among the subaccounts or the
fixed account and after deduction of transfer charges but before any other
Policy transactions, such as receipt of Net Premiums and partial surrenders, on
the Valuation Date.
CREDITING OF ACCUMULATION UNITS - All Net Premiums allocated to and Accumulation
Value transferred to a subaccount will purchase Accumulation Units in the
subaccount. The number of Accumulation Units purchased is determined by
dividing the dollar amount of the Net Premium allocated to the subaccount by the
subaccount's Accumulation Unit Value next computed following allocation of the
Net Premium.
DETERMINING THE ACCUMULATION UNIT VALUES - The Accumulation Unit Value of each
subaccount reflects the investment performance of that subaccount. The
Accumulation Unit Value of each subaccount shall be calculated by:
(1) Multiplying the per share net asset value of the subaccount on the
Valuation Date times the number of shares held by the subaccount, after the
purchase or redemption of any shares on that date; less
(2) The Daily Asset Charge as shown on the Policy Data Page; and
(3) Dividing the result by the total number of Accumulation Units held in the
subaccount on the Valuation Date, before the purchase of redemption of any
units on that date.
The Accumulation Unit Value for each subaccount shall be calculated at the end
of each Valuation Period.
MONTHLY DEDUCTION - On each Monthly Deduction Date, the Monthly Deduction will
be deducted from the Accumulation Value of the Policy to compensate Us for the
insurance provided and for tax related expenses. Each of these charges is
described in more detail below. The Monthly Deduction will be allocated among
the subaccounts and the fixed account, in the same proportion as the
Accumulation Value in each subaccount and the fixed account, bears to the total
Accumulation Value on that date. Because portions of the Monthly Deduction,
such as the cost of insurance, can vary from month to month, the Monthly
Deduction itself may vary in amount from month to month.
COST OF INSURANCE - The monthly Cost of Insurance is equal to the net amount of
risk multiplied by the Cost of Insurance rate. The net amount of risk equals the
Death Benefit less the Accumulation Value at the beginning of the month after
deduction of the policy charges, shown on the Policy Data Page. The Cost of
Insurance is based on the Insured's sex, Attained Age, and risk class. Any
change in the Cost of Insurance rates will be made on a uniform basis for
Insureds of the same age, sex, and risk class. The monthly guaranteed maximum
rates for the initial Specified Amount of this Policy are shown on the Policy
Data Page. Guaranteed maximum rates are based on the 1980 CSO Smoker or
Nonsmoker Mortality Table based on sex.
TAX EXPENSE CHARGE - The tax expense charge is included in the Monthly Deduction
during the first ten Policy Years. The annual rate of the tax expense charge is
listed on the Policy Data Page. This annual rate is a percentage of the
Accumulation Value attributable to premium paid in the first Policy Year. This
amount is calculated as the first year premium percentage. The first year
premium percentage is recalculated every time premium is paid. During the first
Policy Year and prior to receiving any premium after the first Policy Year, the
first year premium percentage is one. When premium is paid after the first
Policy Year, the first year premium percentage is calculated as (a) multiplied
by the result of one minus the quotient of (b) divided by (c), where (a) is the
first year premium percentage immediately before receipt of the premium, (b) is
the amount of the additional premium paid, and (c) is the Policy's Accumulation
Value immediately after receipt of the additional premium.
CONTINUATION OF INSURANCE - Insurance coverage under this Policy will be
continued until the Surrender Value will not cover the Monthly Deduction as
provided in the grace period provision.
SURRENDER VALUE - The Surrender Value is the Accumulation Value on the date of
surrender less any surrender charge and any Policy Debt.
10
<PAGE>
SURRENDER CHARGE - If the Policy lapses or is surrendered, partially
surrendered, or a systematic withdrawal is requested, We may access a surrender
charge based upon the amount of premium withdrawn and the Surrender Premium
shown on the Policy Data Page. Surrender Premiums are calculated separately for
the original Specified Amount and for each increase in Specified Amount.
Withdrawals of Accumulation Value are made in the following order. First,
Accumulation Value in excess of total Surrender Premiums paid, the Policy
earnings, is withdrawn. Once withdrawals exceed the earnings, then withdrawals
are made from Surrender Premiums, on a first paid, first withdrawn basis.
Finally, when withdrawals exceed both earnings and Surrender Premiums, then
withdrawals are made from premiums paid in excess of the total Surrender
Premium, on a first paid, first withdrawn basis.
At any time, an amount of the Accumulation Value equal to the greater of:
(1) Accumulation Value less total premiums, or
(2) Accumulation Value multiplied by 10% may be withdrawn without a surrender
charge. The percentage is reset to 10% at the beginning of each Policy
Year. Each time a withdrawal is made, the 10% is reduced by the percentage
withdrawn which is the amount of the withdrawal divided by the Accumulation
Value immediately prior to the withdrawal.
Surrenders of amounts in excess of 10% include a return of premium that may be
subject to a surrender charge. For any Surrender Premium returned, a surrender
charge is imposed based upon the number of years since the Surrender Premium was
paid. The Policy's Surrender Premium will be reduced to reflect any Surrender
Premium returned. The surrender charge is a percentage of the Surrender Premium
withdrawn. There are no surrender charges for withdrawals of premiums in excess
of the total Surrender Premium. The surrender charge percentages are shown on
the Policy Data Page.
SURRENDER OPTION
FULL SURRENDER - If the Policy is being fully surrendered, the actual Policy
must be returned to Us along with a Written Request. The Policy will cease to be
in force when We receive it with Your Written Request for full surrender. The
amount available for surrender is the Surrender Value at the end of the
valuation period during which the surrender request is received at Our Home
Office.
We will pay the Surrender Value to You within seven days in most cases after We
receive Your Written Request. We reserve the right to defer the payment of any
Surrender Value for up to six months which does not depend on the investment
performance of the separate account.
PARTIAL SURRENDER - You may make Written Request for partial surrender of any
amount less than the Surrender Value. The minimum amount of any partial
surrender is $100. A request for a partial surrender should specify the
allocation of that surrender from the fixed account and each subaccount, as
applicable. In the absence specifications of allocation, We will allocate
partial surrenders to the fixed account and subaccounts in proportion to the
value in fixed account and in each subaccount on the date the partial surrender
is made. Partial surrenders can be taken as systematic withdrawals as described
below.
Upon a partial surrender, the Specified Amount generally will be reduced in the
same proportion as the Accumulation Value. If, however, the decrease in
Specified Amount would cause the Policy to violate the maximum premium
limitations required by federal tax law, the decrease will be limited to the
extent necessary to meet these requirements. Where increases in the Specified
Amount occurred previously, a partial surrender will reduce the original
Specified Amount first and then each increase in order, beginning with the least
recent increase. Thus, partial surrenders may affect the cost of insurance
charge and have Federal Tax consequences.
We will pay the partial surrender amount to You within seven days, in most
cases, after We receive Your Written Request. We reserve the right to defer the
payment of any Surrender Value for up to six months which do not depend on the
investment performance of the separate account.
SYSTEMATIC WITHDRAWALS - You can instruct Us to make automatic payments of a
predetermined dollar amount of Accumulation Value monthly, quarterly, semi-
annually or annually from specified subaccounts and the fixed account. The
minimum systematic withdrawal payment is $100. The minimum systematic
withdrawal from each subaccount and the fixed account is $50. The maximum amount
which may be withdrawn each month from the fixed account is the 10 greater of:
(1) ten percent of the amount in the fixed account, or
(2) $1,000.
11
<PAGE>
Systematic withdrawals may be started on the Date of Issue or at some date in
the future. We must receive a Written Request specifying the dollar amount and
the mode of payment. You may specify systematic withdrawals be made from any
subaccount and fixed account. In the absence of specifications, systematic
withdrawals will be taken from each 10 subaccount and from the fixed account in
the proportion that the Accumulation Value in each bears to the total
Accumulation Value of the Policy. Surrender charges will apply in accordance
with partial surrenders.
WAIVER OF SURRENDER CHARGES - We will waive the surrender charge upon partial
surrenders, systematic withdrawals and full surrenders in the event the Insured
becomes confined to a hospital, hospice facility or convalescent care facility,
disabled, diagnosed with a terminal illness or involuntarily unemployed. Those
waivers and any restrictions associated with such waivers are set forth below.
Nursing Home Waiver - The surrender charge will not be imposed as a result of
any withdrawal made pursuant to the Insured's confinement, upon the written
proof from a licensed physician, to the following facilities for 60 or more
consecutive days:
(1) a hospital licensed or recognized as a general hospital by the state in
which it is located and is engaged in providing or operating diagnostic and
major surgery facilities for the medical care and treatment of injured and sick
persons on an inpatient basis for which a charge is make and provides 24-hour
nursing service by or under the supervision of a graduate registered
nurse(R.N.);
(2) convalescent care facility licensed by the state as a convalescent nursing
facility, a skilled nursing facility, a convalescent hospital, a convalescent
unit of a hospital, an intermediate care facility, or a custodial care facility
and provides continuous nursing service by or under the supervision of a
physician or a R. N. and maintains a daily record of each patient which is
available for review by Us and administers a planned program of observation and
treatment by a physician which is in accordance with existing standards of
medical practice for the injury or sickness causing the confinement; and
(3) hospice facility which provides a formal program of care for terminally ill
patients whose life expectancy is less than 6 months, provided on an inpatient
basis and directed by a physician and is licensed, certified or registered in
accordance with state law. Proof of confinement must be provided. This waiver
only applies to surrenders and withdrawals requested no later than 90 days after
the last day of confinement to such facility. The nursing home waiver is not
available if the Insured is confined to a hospital, nursing home or hospice
facility on the Date of Issue and if the application is signed by power of
attorney. The Insured must be age 80 or younger on the Date of Issue and must
have entered the hospital, convalescent care facility or hospice facility after
90 days from the Date of Issue.
Disability Waiver - The surrender charge will not be imposed upon any withdrawal
while the Insured is physically disabled. We require proof of such disability,
including written confirmation of receipt and approval of any claim for Social
Security Disability Benefits. Proof of continued disability may be required
through the date of any partial surrender or systematic withdrawal. We reserve
the right to have the Insured claiming such disability examined by a licensed
physician. The disability waiver is not available if the Insured is receiving
Social Security Disability Benefits on the Date of Issue or is age 65 or older.
We will not accept any additional premium once the disability waiver has been
elected.
Involuntary Unemployment Waiver - We will waive the surrender charge for any
partial surrender or systematic withdrawal in the event the Insured becomes
involuntarily unemployed. The involuntary unemployment waiver is available upon
submission of a letter from a state Department of Labor indicating the Insured
was employed at least 60 days prior to the election of such waiver. The
involuntary unemployment waiver may be exercised only once and is not available
if the Insured is receiving unemployment benefits on the Date of Issue.
Terminal Illness Waiver - We will waive the surrender charge for any surrender
or systematic withdrawal where the Insured is diagnosed with a terminal illness.
We will require proof of such illness including written confirmation from
licensed physician. We reserve the right to have an Insured diagnosed with such
illness examined by a licensed physician. The terminal illness waiver is not
available if the Insured is diagnosed with a terminal illness prior to or on the
Date of Issue. We will not accept any additional premium once the terminal
illness waiver has been elected.
POLICY LOAN - You may request a policy loan after the first Policy Year, while
Your Policy is in force. The maximum amount You may borrow is 90% of the
Surrender Value at the end of the valuation period during which the Written
Request is received. Preferred loans are available after the seventh policy
year. Determination of whether a loan is preferred occurs at the time the loan
is made. Subject to the maximum policy loan amount, the amount available as a
preferred loan is equal to the Accumulation Value less Policy Debt and less
premiums paid. The minimum amount You may borrow is $100. The Policy is the
sole security for the loan. Loan interest is due on each Policy anniversary date
or when the loan is paid back if that occurs first. We will pay the loan amount
to You within seven days in most cases after
12
<PAGE>
We receive Your request for the loan in Our Home Office. We reserve the right to
defer the payment of any loan for up to six months which do not depend on the
investment performance of the separate account.
Unless You request otherwise, We will allocate loans to the fixed account and
subaccounts in proportion to the value in the fixed account and in each
subaccount on the date the loan is made. Value in each subaccount equal to the
portion allocated to the subaccount will be transferred into the fixed account.
The value equal to the Policy Debt in the fixed account will earn interest at an
annual rate of 3.0% credited on the Policy anniversary, 5% on preferred loans.
When a loan repayment is made, value in the fixed account equal to the loan
repayment will be allocated to the fixed account and subaccounts using the same
percentages used to allocate premiums. Each repayment may not be less than $10.
Interest on policy loans is charged at an annual rate of 5%. Interest not paid
when due is added to the Policy Debt and will bear interest at the same rate.
Whenever the Policy Debt exceeds the Surrender Value, the grace period provision
will apply.
DEFERMENT OF PAYMENTS AND EMERGENCY PROCEDURE - We may suspend or delay all
procedures which require valuation of a subaccount if the New York Stock
Exchange is closed (except for holidays or weekends) or trading is restricted
due to an existing emergency as defined by the Securities and Exchange
Commission so that We cannot value the subaccounts. Any provision of this Policy
which specifies a valuation date will be superseded by this emergency procedure.
OWNERSHIP
OWNER - While this Policy is in force You may exercise the rights of ownership.
If You are a minor, first the Applicant, then the Beneficiary, if living and
legally competent, may exercise all rights of owners. If You die while the
Insured is living, ownership will pass to the contingent owner, if named. If
there is no contingent owner, ownership passes to Your estate. All rights of
the Owner, the contingent owner, the Applicant and the Beneficiary are subject
to the rights of:
(1) any assignee of record; and
(2) any irrevocable Beneficiary.
BENEFICIARY INFORMATION
BENEFICIARY INTEREST - Beneficiaries will be designated as first, second, third,
and so on. A Beneficiary or class of Beneficiaries will receive the death
benefit in that order. All relationships are in reference to the Insured. Unless
changed by endorsement or written request:
(1) two or more class members will share the Death Benefit equally;
(2) surviving class members will share equally the Death Benefit to which a
deceased or disqualified class members would have been entitled; or
(3) if no Beneficiary survives the Insured, or qualifies, the Death Benefit will
be paid to the Insured's estate.
A Beneficiary will not share in the Death Benefit if:
(1) the Beneficiary dies within 6 days after the Insured's death; and
(2) We have not received proof of the Insured's death.
If the Beneficiary is not a natural person, the Beneficiary must still exist at
the time of the Insured death. All Beneficiaries' interests are subject to any
assignment on record at Our Home Office.
CHANGE OF BENEFICIARY - You may change a Beneficiary by a Written Request.
The change will not take effect until it is recorded at Our Home Office.
However, once such a change is recorded, the change will take effect as of the
date the request was signed, whether or not the Insured is living on the date
the change is recorded, subject to any payment made or other action taken by Us
before such recording. The change is subject to:
(1) the rights of an assignee of record; and
(2) the rights of an irrevocable Beneficiary.
13
<PAGE>
GENERAL PROVISIONS
CONTRACT AND REPRESENTATIONS - The Policy, any endorsements, any riders, any
Applications, if attached at the Date of Issue, or the effective date of any
increase, form the entire contract. All statements in any Application, in the
absence of fraud, will be deemed representations and not warranties. No
statement will be used to void the Policy or in defense of a claim under it
unless:
(1) it is contained in a written Application; and
(2) copy of the Application is attached to the Policy at the Date of Issue or at
the time that an increase occurs.
EFFECTIVE DATE - The Policy takes effect on the Date of Issue shown on the
Policy Data Page upon:
(1) payment of the first premium, as shown on the Policy Data Page; and
(2) Policy delivery during the Insured's lifetime and good health.
Any Increase in Specified Amount, addition of a rider, or reinstatement of
coverage will take effect on the Monthly Deduction Date which coincides with or
next follows the date We approve an Application for such change or for
reinstatement of this Policy. Policy Years, anniversaries, and months are
measured from the Date of Issue.
INCONTESTABILITY - This Policy will be incontestable after it has been in force
during the Insured's lifetime for 2 years from the Date of Issue except for
nonpayment of premium and except as to any provision or condition relating to
disability benefits, additional benefits for accidental death or fraud. Any
Increase in coverage, addition of a rider after the Policy Date of Issue, or any
reinstatement shall be incontestable, after it has been in force during the
Insured lifetime for 2 years after the Policy Date of such Increase in coverage,
addition of a rider, or reinstatement, except as to any provision relating to
disability benefits, additional benefits for accidental death, or fraud. The
basis of contest by Us shall be the answers stated in the relevant Applications
for such policy event.
MODIFICATIONS - We reserve the right to modify the provisions of this Policy to
comply with applicable law. Any modification of this Policy must be in writing
and signed by the president or a vice president of Our Company. We do not
authorize Our agents to modify, waive, or extend any of the conditions of this
Policy.
ANNUAL REPORT - We will send You and any assignee of record a report at least
once a year. This report will show current information about the Policy.
ASSIGNMENT - No assignment will bind Us until recorded at this Home Office. We
are not obliged to see that an assignment is valid or sufficient. Any claim by
an assignee is subject to proof of the validity and extent of the assignee's
interest in the Policy.
SETTLEMENT OPTIONS
AVAILABILITY OF SETTLEMENT OPTIONS - All or a part of the Death Benefit proceeds
may be applied to any of the following options. We will first discharge in a
single sum any liability under an assignment of the Policy and any applicable
premium related-taxes, fees, or assessments imposed by any Federal, State,
Municipal or other government authority. The remaining amount is the net sum
payable. Other options can be used if agreed to by Us. If You have not elected
an option before the Insured's death, the Beneficiary may choose one.
Any election or change must be by Written Request. Our consent is required for
any of the following:
(1) any payment to joint or successive Payees;
(2) any payment to a corporation, association, partnership, trustee, or estate;
or
(3) any change in an option previously elected.
We do not have to apply to an option a net sum payable of less than $2,000.00
for any Payee.
SETTLEMENT OPTIONS - The Table of Settlement Options, referred to in this
provision, is located on the next page of the Policy. The options are:
OPTION 1. Installments for a Fixed Period. Equal installments will be paid for a
fixed number of years. The amount of the installments will be based on Table A.
Installments will include interest at the effective rate of 2.5% per year. At
Our option, additional interest may be paid.
OPTION 2. Installments for a Fixed Period and Life Thereafter. Equal monthly
installments will be paid for as long as the Payee lives with installments
certain for a fixed period. The fixed period is 10 years under Table B, 20 years
under Table C, or as long as the Payee lives under Table D.
14
<PAGE>
OPTION 3. Installments of a Fixed Amount. Equal annual, semi-annual, quarterly,
or monthly installments will be paid. The sum of the installments paid in 1 year
must be at least $40.00 for each $1,000.00 of net sum payable. Installments
will be paid until the total of the following amounts is exhausted: (1) the net
sum payable; plus (2) interest at the effective rate of 2.5% per year; plus (3)
any additional interest that We may elect to pay. The final installment shall be
the balance of the net sum payable plus interest, and may be more or less than
the other installments.
OPTION 4. Interest Payment. We will hold the net sum payable at interest.
Interest will be paid at the effective rate of 2.5% per year. Additional
interest may be paid at Our option. On interest due dates, an amount of at least
$100.00 may be withdrawn from the amount held. If the amount held falls below
$2,000.00, We will pay the entire amount held to the Payee.
GENERAL PROVISIONS FOR SETTLEMENT OPTIONS - The first installment under Option
1, 2, or 3 is paid as of the date the net sum payable is available. The first
installment may be postponed for up to 10 years, but only with Our consent. If
it is postponed, the net sum payable will accumulate with compound interest at
the effective rate of 2.5% per year. To avoid paying installments of less than
$20.00 each, We may:
(1) change the installments to a quarterly, semi-annual, or annual basis;
(2) reduce the number of installments or
(3) do both.
If You elect an option, You can withhold the Beneficiary right to assign,
encumber, or commute any unpaid amount.
Except to the extent permitted by law, unpaid amounts are not subject to any
claims of a beneficiary's creditors. In no case may installments under Option 2
be commuted. At Our option, installments under the other options may be
commuted. When commutation is allowed, the effective interest is equal to the
interest rate used in computing the settlement option, plus 1%.
The Payee under any option might die after payments under the option have
started. If so, under option 1 or 2, We will pay the commuted value of any
unpaid fixed-period installments to the Payee's estate. Under option 3 or 4, We
will pay any balance held by Us to the Payee's estate. With Our consent, the
option elected may provide for payment in another manner.
BASIS OF CALCULATIONS - The payment amounts illustrated in the Settlement
Options Tables are based on the Individual Annuity Mortality Table (1983 Table
"a"), from 1983 to 1993 with Projection Scale "G", and 2.5% interest. The
attained age at settlement will be adjusted downward by one year for each full
five year period that has elapsed since January 1, 1993.
SETTLEMENT OPTION TABLES
OPTION 1 - TABLE A
MONTHLY PAYMENTS FOR EACH $ 1,000.00 OF THE NET SUM PAYABLE
Multiply the monthly payment by 2.993 to obtain the quarterly payment, by 5.963
to obtain the semi-annual payment, and by 11.840 to obtain the annual payment.
<TABLE>
<CAPTION>
Years Amount Years Amount Years Amount Years Amount Years Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 84.46 7 12.95 13 7.49 19 5.49 25 4.46
2 42.66 8 11.47 14 7.03 20 5.27 26 4.34
3 28.79 9 10.32 15 6.64 21 5.08 27 4.22
4 21.86 10 9.39 16 6.30 22 4.90 28 4.12
5 17.70 11 8.64 17 6.00 23 4.74 29 4.02
6 14.93 12 8.02 18 5.73 24 4.60 30 3.93
- -----------------------------------------------------------------------------------------------
</TABLE>
OPTION 2 - TABLES B, C AND D
MONTHLY PAYMENT FOR LIFE FOR EACH $ 1,000.00 OF THE NET SUM PAYABLE
Age in years means age of Payee on birthday prior to the due date of the first
payment. For Tables B and C, multiply the monthly payment by 2.993 to obtain the
quarterly payment, by 5.969 to obtain the semi-annual payment, and by 11.868 to
15
<PAGE>
obtain the annual payment. For Table D, amounts for payments other than monthly
are available on request, and amounts for ages 0 - 45 are available on request
for all tables.
<TABLE>
<CAPTION>
AGE TABLE B TABLE C TABLE D AGE TABLE B TABLE C TABLE D
IN Guaranteed Guaranteed Life IN Guaranteed Guaranteed Life
YEARS Period Period Only YEARS Period Period Only
10 Years 20 Years 10 Years 20 Years
Male Amount Amount Amount Female Amount Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C>
46 $3.59 $3.52 $ 3.61 46 $3.31 $3.28 $3.32
47 3.64 3.57 3.67 47 3.36 3.33 3.37
48 3.70 3.62 3.73 48 3.41 3.37 3.42
49 3.77 3.67 3.80 49 3.46 3.42 3.47
50 3.83 3.73 3.87 50 3.52 3.47 3.53
51 3.90 3.79 3.94 51 3.57 3.52 3.59
52 3.98 3.84 4.02 52 3.63 3.57 3.65
53 4.05 3.90 4.10 53 3.70 3.63 3.72
54 4.13 3.97 4.18 54 3.76 3.69 3.78
55 4.22 4.03 4.27 55 3.83 3.75 3.86
56 4.31 4.09 4.37 56 3.91 3.81 3.93
57 4.40 4.16 4.47 57 3.99 3.87 4.02
58 4.50 4.23 4.58 58 4.07 3.94 4.10
59 4.60 4.29 4.69 59 4.15 4.01 4.19
60 4.71 4.36 4.82 60 4.24 4.07 4.29
61 4.83 4.43 4.95 61 4.34 4.15 4.39
62 4.95 4.50 5.09 62 4.44 4.22 4.50
63 5.07 4.56 5.23 63 4.55 4.29 4.62
64 5.21 4.63 5.39 64 4.66 4.36 4.74
65 5.35 4.69 5.56 65 4.78 4.44 4.87
66 5.49 4.75 5.75 66 4.91 4.51 5.02
67 5.64 4.81 5.94 67 5.04 4.59 5.17
68 5.80 4.87 6.15 68 5.18 4.66 5.33
69 5.96 4.92 6.37 69 5.33 4.73 5.50
70 6.12 4.97 6.60 70 5.48 4.79 5.69
71 6.29 5.01 6.85 71 5.65 4.86 5.89
72 6.47 5.05 7.12 72 5.82 4.91 6.11
73 6.64 5.09 7.41 73 6.00 4.97 6.35
74 6.82 5.12 7.71 74 6.18 5.02 6.61
75 7.00 5.15 8.04 75 6.37 5.06 6.89
76 7.18 5.17 8.39 76 6.57 5.10 7.19
77 7.36 5.19 8.77 77 6.77 5.13 7.51
78 7.53 5.21 9.17 78 6.97 5.16 7.86
79 7.70 5.23 9.60 79 7.18 5.19 8.24
80** 7.87 5.24 10.07 80** 7.83 5.21 8.65
</TABLE>
** and over
16
<PAGE>
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
INVESTMENT EXPERIENCE REFLECTED IN SOME VALUES AND
BENEFITS. NONPARTICIPATING. NO DIVIDENDS.
ALPHABETIC GUIDE PAGE
PAGE
Accumulation Value 7
Addition, Deletion or Substitution of Investment 7
Additional Premiums 5
Allocation of Premiums 6
American National Fixed Account 6
American National Variable Life Separate Account 6
Annual Report 12
Assignment 12
Availability of Settlement Options 12
Basis of Calculations 13
Beneficiary Interest 11
Change of Beneficiary 11
Continuation of Insurance 8
Contract and Representations 12
Cost of Insurance 8
Death Benefit 4
Decrease in Specified Amount 5
Deferment of Payments and Emergency Procedure 11
Determination of Accumulation Value 8
Determing the Accumulation Value 8
Effective Date 12
Full Surrender 9
General Provisions for Settlement Options 13
Grace Period 6
Incontestability 12
Increase in Specified Amount 5
Misstatement of Age or Sex 4
Modifications 12
Monthly Deduction 8
Monthly Deduction Due at Death 4
Owner 11
Partial Surrender 9
Payment of Death Benefit 5
Policy Debt Adjustment 4
Policy Loan 10
Premiums Payments 5
Reinstatement 6
Settlement Options 12
Settlement Option Tables 13
Subaccounts 7
Suicide 4
Surrender Charge 9
Surrender Value 9
Systematic Withdrawals 9
Table of Corridor Percentages 5
Tax Expense Charge 8
Termination of Coverage 6
Transfers 7
Unscheduled Premium 6
Waiver of Surrender Charges 10
17
<PAGE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
1
<PAGE>
VARIABLE LIFE INSURANCE POLICY
ISSUED BY
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550
(409) 763-4661
This prospectus describes an individual variable life insurance policy (the
"Policy") offered by American National Insurance Company ("we, us, our, American
National"). The Policy provides for the payment of a Death Benefit upon the
death of the Insured, and for a Cash Surrender Value that can be obtained by
fully or partially surrendering the Policy or by policy loans. The Policy
continues in effect while the Surrender Value is sufficient to pay the Monthly
Deduction Amount.
In almost all cases, the Policy will be a modified endowment contract for
federal income tax purposes. IF THE POLICY IS A MODIFIED ENDOWMENT, PARTIAL OR
FULL SURRENDERS, ASSIGNMENTS AND LOANS (INCLUDING LOANS TO PAY LOAN INTEREST)
UNDER OR SECURED BY THE POLICY WILL BE TAXABLE TO THE POLICYOWNER TO THE EXTENT
OF ANY GAIN IN THE POLICY. A 10% penalty tax may also apply to the taxable
portion of any distribution prior to the Insured's age 59 l/2. In most cases,
the Death Benefit payable under the Policy will be excludable from the gross
income of the Beneficiary. (See "FEDERAL TAX MATTERS" on page 23.)
The minimum initial premium is $10,000. Although the Policy may operate as a
single premium policy, additional payments may be made at any time, subject to
certain restrictions. You may, within limits, allocate premiums (net of any
charges) to one or more of the twenty-seven eligible investments, which are the
Fixed Account and the twenty-six Subaccounts of the Separate Account. The Fixed
Account offers a minimum guaranteed return and is funded by the general assets
of American National.
The Policy is a variable policy because the Death Benefit may, and the
Accumulation Value will, vary up or down to reflect the investment performance
of amounts allocated to Subaccounts of the American National Variable Life
Separate Account (the "Separate Account"). The Policyowner ("you, your") bears
the investment risk for all amounts so allocated; there is no guaranteed minimum
Accumulation Value.
Assets of each Subaccount of the Separate Account are invested in an Eligible
Portfolio. The Eligible Portfolios are described in separate prospectuses that
accompany this Prospectus. The Policy's available Eligible Portfolios are:
AMERICAN NATIONAL PORTFOLIOS MFS PORTFOLIOS
ANIA BALANCED PORTFOLIO MFS VALUE SERIES PORTFOLIO
ANIA GROWTH PORTFOLIO MFS EMERGING GROWTH SERIES PORTFOLIO
ANIA MANAGED PORTFOLIO MFS RESEARCH SERIES PORTFOLIO
ANIA MONEY MARKET PORTFOLIO MFS GROWTH WITH INCOME SERIES
FIDELITY PORTFOLIOS PORTFOLIO
VIP II ASSET MANAGER PORTFOLIO VAN ECK PORTFOLIOS
VIP II INDEX 500 PORTFOLIO VAN ECK HARD ASSETS PORTFOLIO
VIP III GROWTH OPPORTUNITIES PORTFOLIO VAN ECK WORLDWIDE EMERGING MARKETS
VIP II CONTRAFUND PORTFOLIO PORTFOLIO
VIP II ASSET MANAGER GROWTH PORTFOLIO FEDERATED PORTFOLIOS
T. ROWE PRICE PORTFOLIOS FEDERATED UTILITY FUND II PORTFOLIO
T. ROWE PRICE EQUITY INCOME PORTFOLIO FEDERATED GROWTH STRATEGIES FUND II
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO
PORTFOLIO FEDERATED FUND FOR U.S. GOVERNMENT
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO SECURITIES II PORTFOLIO
T. ROWE PRICE LIMITED-TERM BOND FEDERATED HIGH INCOME BOND FUND II
PORTFOLIO PORTFOLIO
FEDERATED EQUITY INCOME FUND II
PORTFOLIO
LAZARD PORTFOLIOS
LAZARD RETIREMENT EMERGING MARKETS
PORTFOLIO
LAZARD RETIREMENT SMALL CAP PORTFOLIO
It may not be advantageous to purchase the Policy described in this prospectus
to replace existing life insurance nor to increase insurance coverage when other
insurance is owned.
This Prospectus provides a detailed discussion of matters you should consider
before buying a Policy. The Policy or certain of its investment options may not
be available in all jurisdictions. Various rights and benefits may differ
between jurisdictions to meet applicable law and/or regulations.
An interest in the Policy is not a deposit or obligation of, nor guaranteed or
endorsed by any bank or bank subsidiary, nor is the Policy federally insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other Agency. The Contract involves investment risk, including possible loss of
principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES AUTHORITY, NOR HAS THE COMMISSION OR
ANY STATE SECURITIES AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus must be accompanied by a current prospectus or a prospectus
profile for each Eligible Portfolio.
Please read this Prospectus and the prospectus for each of the Eligible
Portfolios carefully and retain them for future reference.
January 1, 1998
2
<PAGE>
TABLE OF CONTENTS
Definitions.......................................... 4
Summary.............................................. 6
The Policy......................................... 6
Right to Examine................................... 6
Premium Payments................................... 6
Investment of Premiums............................. 6
Transfers.......................................... 6
Accumulation Value................................. 6
Charges, Deductions and Expenses................... 6
Surrenders......................................... 6
Death Benefit...................................... 6
Policy Loans....................................... 6
Federal Income Tax Consequences.................... 6
Portfolio Company Annual Expenses.................. 7
American National Insurance Company
and the Separate Account......................... 8
American National Insurance Company................ 8
The Separate Account............................... 8
The American National Fund...................... 9
The Fidelity Funds.............................. 9
T. Rowe Price Series............................ 10
MFS Variable Insurance Trust.................... 10
Van Eck Worldwide Insurance Trust............... 11
Federated Insurance Series...................... 11
Lazard Retirement Series, Inc................... 11
Addition, Deletion or Substitution of Investments.. 12
Resolving Material Conflicts......................... 12
Fixed Account........................................ 13
The Policy........................................... 13
Purpose of the Policy.............................. 13
Policy Application and Issuance.................... 13
Premium Payments................................... 13
Policy Lapse and the Grace Period.................. 13
Reinstatement...................................... 14
Allocation of Premium and Accumulation Value......... 14
Allocation of Premium.............................. 14
Determination of Accumulation Value................ 14
Crediting of Accumulation Units................. 14
Determining the Accumulation Unit Values........ 14
Transfers.......................................... 15
Dollar Cost Averaging.............................. 15
Asset Allocation Program........................... 15
Distributions........................................ 15
Death Benefit...................................... 15
Increase in Specified Amount.................... 16
Decrease in Specified Amount.................... 16
Full Surrender and Partial Withdrawal.............. 16
Systematic Withdrawal Program...................... 17
Waiver of Surrender Charges........................ 17
Nursing Home Waiver............................. 17
Disability Waiver............................... 17
Involuntary Unemployment Waiver................. 18
Terminal Illness Waiver......................... 18
Policy Loans....................................... 18
Loan Privileges................................. 18
Loan Interest................................... 18
Effect of Policy Loans.......................... 18
Policy Debt..................................... 18
Repayment of Policy Debt........................ 18
Payment of Policy Benefits......................... 19
Optional Methods of Payment........................ 19
General Provisions for Settlement Options.......... 19
Charges and Deductions............................... 20
Premium Charges.................................... 20
Monthly Deduction.................................. 20
Cost of Insurance Charge........................ 20
Tax Expense Charge.............................. 20
Asset Charge....................................... 20
Annual Fee......................................... 21
Portfolio Company Annual Expenses.................. 21
Surrender Charges.................................. 21
Other Charges...................................... 21
Transfer Fee.................................... 21
Charges for Taxes............................... 21
Exceptions to Charges.............................. 21
General Provisions................................... 21
The Contract....................................... 22
Right to Examine................................... 22
Control of Policy.................................. 22
Beneficiary........................................ 22
Change of Beneficiary.............................. 22
Change in Policyowner or Assignment................ 22
Payment of Proceeds................................ 22
Incontestability................................... 22
Misstatement of Age or Sex......................... 22
Suicide............................................ 23
Postponement of Payments........................... 23
Distributor of the Policies.......................... 23
Federal Tax Matters.................................. 23
Tax Status of the Policy........................... 23
Definition of Life Insurance.................... 23
Diversification and Investor Control............ 24
Tax Treatment of Policy Benefits................... 24
General......................................... 24
Modified Endowment Contracts.................... 24
Distributions from Policies Classified as
Modified Endowment Contracts.................. 25
Distributions from Policies not Classified as
Modified Endowment Contracts.................. 25
Policy Loan Interest............................ 25
Investment in the Contract...................... 25
Multiple Policies............................... 25
Possible Legislative Changes....................... 25
Taxation of American National...................... 25
Safekeeping of the Separate Account's Asset.......... 26
Voting Rights........................................ 26
State Regulations of American National............... 26
Preparing for the Year 2000.......................... 27
Legal Matters........................................ 27
Legal Proceedings.................................... 27
Experts.............................................. 27
Additional Information............................... 27
Financial Statements................................. 27
Management of American National Insurance Company.... 28
Appendix A........................................... 31
3
<PAGE>
DEFINITIONS
Accumulation Unit - A standard of measurement used with respect to each
Subaccount to calculate the Accumulation Value of a Policy. The value of an
Accumulation Unit fluctuates with the value of the shares of the corresponding
Eligible Portfolio owned by each Subaccount less any applicable deductions (See
"CHARGES AND DEDUCTIONS" on page 20).
Accumulation Unit Value - The value of an Accumulation Unit.
Accumulation Value - The total amount that a Policy provides for investment at
any time. It is equal to the total of the accumulation value held in the
Separate Account, the Fixed Account, and the accumulation value held in American
National's General Account to secure Policy Debt.
Age at Issue - The age at the Insured's last birthday preceding the Policy Date.
Attained Age - The Age at Issue of the Insured plus the number of complete
policy years that the Policy has been in force.
Beneficiary - The beneficiary is designated by the Policyowner in the
application. If changed, the beneficiary is as shown in the latest change filed
and recorded with American National. If no beneficiary survives the Insured, the
Insured's estate will be the beneficiary. The interest of any beneficiary is
subject to that of any assignee.
Daily Asset Charge - A charge equal to an annual rate of 1.25% of the average
daily net asset value of each Subaccount of the Separate Account.
Date of Issue - The date of issue set forth in the Policy that is used to
determine policy anniversary dates, policy years and Monthly Deduction Date.
Policy anniversaries are one-year periods measured from the date of issue and
each succeeding policy anniversary date.
Declared Rates - American National guarantees that it will credit interest in
the Fixed Account at an effective annual rate of at least 3.0%. American
National may, at its discretion, declare higher interest rates for amounts
allocated or transferred to the Fixed Account.
Death Benefit - The amount of insurance coverage provided under the Policy.
Death Benefit Proceeds - The proceeds payable to the Beneficiary upon receipt by
American National of the proof of the death of the Insured while the Policy is
in force equal to: (1) the Death Benefit; minus (2) any Policy Debt; minus (3)
any Monthly Deduction that may apply to that period, including the deduction for
the month of death.
Eligible Portfolio - A Portfolio which corresponds to and in which a Subaccount
can be invested.
Fixed Account - An account that is a part of American National's General Account
to which all or a portion of Net Premiums and transfers may be allocated for
accumulation at fixed rates of interest.
General Account - The general account of American National which includes all of
American National's assets except those assets segregated into its separate
accounts.
Home Office - American National's Home Office is located at One Moody Plaza,
Galveston, Texas 77550-7999.
Insured - The person upon whose life the Policy is issued.
Monthly Deduction - The sum of the cost of insurance charge and the tax charge
specified on the policy data page.
Monthly Deduction Date - The same date in each succeeding month as the Date of
Issue except that whenever the Monthly Deduction falls on a date other than a
Valuation Date, the monthly deduction date will be deemed the next Valuation
Date.
Net Premium - The Premium less the applicable premium charge, if any. No premium
charge is deducted from premiums paid during the first Policy Year.
Policy Date - The date that all financial, contractual and administrative
requirements have been met and processed for the Policy and any supplements
thereto. This date is the effective date for all coverage applied for in the
original application and any supplemental applications.
Policy Debt - The sum of all unpaid Policy loans and accrued interest thereon.
Policyowner - The person or entity entitled to exercise rights of ownership of
the Policy, as designated in the application or as subsequently changed. If a
Policy has been absolutely assigned, the assignee is the Policyowner. A
collateral assignee is not the Policyowner.
Policy Year - The period from one Policy anniversary date until the next Policy
anniversary date.
Portfolio - A separate series of securities designed to meet specified
investment objectives. Currently there are twenty-six portfolios, all of which
are Eligible Portfolios.
4
<PAGE>
Premium - A payment made into a Policy other than to repay Policy Debt.
Satisfactory Proof of Death - Means all of the following must be submitted: (1)
a certified copy of the death certificate; (2) a claimant statement; (3) the
Policy; and (4) any other information that American National may reasonably
require to establish the validity of the claim.
Separate Account - American National Variable Life Separate Account, a separate
account created by American National to receive and invest Net Premiums
allocated by the Policyowner to the Separate Account.
Specified Amount - The amount of insurance selected, as shown on the Policy's
Data page.
Subaccount - A subdivision of the Separate Account. Each Subaccount invests
exclusively in the shares of a corresponding Eligible Portfolio.
Surrender Premium - The amount shown on the Policy Data Page, as changed by
subsequent endorsements, which is used to calculate surrender charges.
Surrender Value - The Policy Accumulation Value on the date of surrender, less
any Policy Debt and surrender charges.
Valuation Date - A valuation date is each day on which the New York Stock
Exchange ("NYSE") and American National are open for trading.
Valuation Period - The period commencing at the close of regular trading on the
NYSE on one Valuation Date and ending at the close of regular trading on the
NYSE on the next succeeding Valuation Date.
5
<PAGE>
SUMMARY
The following summary of the information in this Prospectus should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus.
The Policy. The individual flexible premium variable life insurance Policy
offered by this prospectus is designed to provide lifetime insurance coverage
for the Insured named in the Policy. It is not offered primarily as an
investment. A diagram depicting how a premium flows through the Policy and its
investment portfolios, and how expenses, charges, and fees are deducted is
included in the Prospectus Appendix at page 72.
Right to Examine. You have the right to return the Policy within 10 days (or
more where required by applicable state insurance law) after you receive it. We
will return to you the Premiums paid adjusted by investment gains or losses,
unless state insurance law requires otherwise. (See "Right to Examine" on page
22)
Premium Payments. Premiums may be paid at any time subject to certain
restrictions and limitations. The minimum initial premium for a Policy is
$10,000. Any additional Premium generally must be at least $5,000 and may
require additional underwriting. (See "Premium Payments" on page 13)
Investment of Premiums. Your initial premium will be held in the American
National Money Market Portfolio Subaccount during the 15-day period after the
Date of Issue. Thereafter, your initial and all subsequent premium is invested
according to your instructions in one or more of the Subaccounts of the Separate
Account or the Fixed Account. Allocations must be in whole percentages. The
minimum initial amount allocated to any Subaccount and/or the Fixed Account is
$500. (See "Allocation of Premium" on page 14)
Transfers. Once we mail the confirmation for the initial premium payment, and
after the Right to Examine period, you may transfer portions of the Policy's
Accumulation Value without charge among the Subaccounts and/or the Fixed Account
up to twelve times each Policy Year. Subsequent transfers will be subject to a
$10.00 transfer fee. Transfers out of the Fixed Account are limited. (See
"Transfers" on page 15)
Accumulation Value. The Accumulation Value of the Policy will vary daily based
on, among other things, the net investment experience of the Subaccounts to
which amounts have been allocated and the interest paid on the Fixed Account.
The Accumulation Value is not guaranteed except in the Fixed Account. You bear
the investment risk with respect to the Accumulation Value that is invested in
the Subaccounts, and we bear the investment risk with respect to the
Accumulation Value that is invested in the Fixed Account.
Charges, Deductions and Expenses. After the first Policy Year, a 4% premium
charge will be deducted from each premium before allocating any amount to a
Subaccount or the Fixed Account. (See "Premium Charges" on page 20.)
The Accumulation Value will be reduced by a monthly cost of insurance charge on
each Monthly Deduction Date and by a tax expense charge on each Monthly
Deduction Date during the first ten Policy Years. The current cost of insurance
will not exceed the maximums stated in the Policy. The annualized tax expense
charge is 0.40%. The monthly charge is one-twelfth of the annualized rate. (See
"Monthly Deduction" on page 20) For Policies with less than $50,000 of
Accumulation Value, a $35.00 annual fee will be assessed. (See "Annual Fee" on
page 21)
The Accumulation Value will be reduced by an Asset Charge at an annual rate of
1.25%. (See "Asset Charge" on page 20) In addition to the Separate Account
expenses described above, any amounts invested in the Subaccounts will be
subject to the Eligible Portfolio annual expenses shown on the following page.
Surrenders. The Policy permits full surrender for the Cash Surrender Value at
any time. Partial withdrawals are allowed subject to certain limitations. The
Free Withdrawal Amount may be withdrawn each Policy Year free of Surrender
Charges. Other surrenders may be subject to a Surrender Charge of up to 9.00%.
Any increase in Specified Amount will result in additional Surrender Charges.
(See "Surrender Charge" on page 21) The Surrender Charge may be waived upon the
occurrence of certain events. (See "Waiver of Surrender Charges" on page 17)
Partial surrenders will reduce both the Accumulation Value and the Death Benefit
payable under the Policy. (See "Full Surrender and Partial Withdrawal" on page
16)
Death Benefit. The Policy's Death Benefit equals the greater of (a) the initial
Specified Amount plus any later increase and less any later decrease, less any
Policy Debt; and (b) the Policy's Accumulation Value on the date of death
multiplied by the corridor percentage for the Insured's attained age, less any
Policy Debt. The amount and/or duration of the life insurance coverage provided
by the Policy are not guaranteed. (See "Death Benefit" on page 15)
Policy Loans. After the first Policy Year (from Date of Issue in Indiana), a
loan privilege is available under the Policy subject to certain limitations.
(See "Policy Loans" on page 20)
Federal Income Tax Consequences. Under current federal tax law, life insurance
policies receive tax-favored treatment. The death benefit is fully excludable
from the beneficiary's gross income for federal income tax purposes, according
to Section 101(a)(1) of the Internal Revenue Code. A Policyowner is not taxed on
any increase in the policy value while a life insurance policy remains in force.
In most cases, the Policy will be a Modified Endowment Contract ("MEC"). If a
Policy is a MEC, certain distributions made during an Insured's lifetime such as
full and partial surrenders, collateral assignments and loans are included in
gross income on an income-first basis. A 10% federal penalty tax may be imposed
on income distributed before the Policyowner attains age 59 1/2. Policies that
are not MECs receive preferential tax treatment with respect to certain
distributions. (See "FEDERAL TAX MATTERS" on page 23)
6
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO COMPANY ANNUAL EXPENSES Management Other Total Management Other Total
Fees Expenses Portfolio Fees w/o Exp. w/o Exp. w/o
Portfolio Expenses Reduction Reduction Reduction
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANIA Balanced 1 3
ANIA Growth 1 3
ANIA Managed 1 3
ANIA Money Market 1 3
VIP II Asset Manager 4
VIP II Index 500 1 1
VIP II Contrafund 4
VIP II Asset Manager: Growth 4
VIP III Growth Opportunities 4
T. Rowe Price Equity Income 5
T. Rowe Price International Stock 5
T. Rowe Price Mid-Cap Growth 5
T. Rowe Price Limited-Term Bond 5
MFS Value Series 1
MFS Emerging Growth Series 1
MFS Research Series 1
MFS Growth With Income Series 1
Van Eck Worldwide Hard Assets
Van Eck Worldwide Emerging Markets
Federated Utility Fund II
Federated Growth Strategies Fund II
Federated Fund for U.S. Government Securities
II
Federated High Income Bond Fund II
Federated Equity Income Fund II
Lazard Retirement Emerging Markets 2,6
Lazard Retirement Small Cap 2,6
- ------------------------------------------------------------------------------------------------------------------
1
2
3
4
5
6
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
AND THE SEPARATE ACCOUNT
AMERICAN NATIONAL INSURANCE COMPANY
American National is a stock life insurance company chartered in 1905 in the
State of Texas. It is licensed to do life insurance business in 49 states, the
District of Columbia, Puerto Rico, Guam, and American Samoa. American National's
home office is located at the American National Insurance Building, One Moody
Plaza, Galveston, Texas 77550-7999. The Moody Foundation (the "Foundation"), a
charitable foundation established for charitable and educational purposes, owns
approximately 23.7% of American National's common stock and the Libbie S. Moody
Trust, a private trust, owns approximately 37.6% of such shares. Robert L. Moody
("RLM"), Chairman of the Board, President and Chief Executive Officer of
American National, RLM's son, Ross R. Moody, and Frances Moody Newman, RLM's
mother, are trustees of the Foundation.
The Moody National Bank of Galveston (the "Bank") is trustee of the Libbie S.
Moody Trust. RLM is Chairman of the Board and Chief Executive Officer of the
Bank and a Director and President of Moody Bank Holding Company, Inc. ("MBHC"),
the Bank's controlling stockholder. RLM is also a Director and President of
Moody Bancshares, Inc. ("Bancshares"), MBHC's sole shareholder. The Three R
Trusts, trusts established by RLM for the benefit of his children, own 100% of
Bancshares' Class B stock (which elects a majority of Bancshares' directors) and
49.6% of its Class A Stock. The trustee of the Three R Trusts is Irwin M. Herz,
Jr., a partner in Greer, Herz & Adams, L.L.P., 18th Floor, One Moody Plaza,
Galveston, Texas, General Counsel to American National, the Bank, Bancshares,
MBHC, the American National Fund and SM&R.
American National's total assets on December 31,1997 were $ x,xxx,xxx,xxx on a
statutory basis.
American National writes life, health and accident insurance and annuities.
THE SEPARATE ACCOUNT
American National established the Separate Account on July 30, 1987 pursuant to
the insurance laws of the State of Texas. American National is the depositor of
the Separate Account. Under Texas law, the assets of the Separate Account are
held exclusively for the benefit of Policyowners and persons entitled to
payments under variable life policies issued by American National. American
National is the legal holder of the assets in the Separate Account and will at
all times maintain assets in the Separate Account with a total market value at
least equal to the reserve and other contract liabilities for the Separate
Account. The assets of the Separate Account attributable to the Policies are not
chargeable with liabilities arising out of any other business that American
National may conduct. Income, as well as both realized and unrealized gains or
losses from the assets of the Separate Account, is credited to or charged
against the Separate Account without regard to income, gains or losses arising
out of other business that American National conducts. Nevertheless, these
assets shall be available to cover the liabilities of American National's
General Account, but only to the extent that the Separate Account's assets
exceed the reserve and other contract liabilities for the Separate Account. In
addition to these assets, the Separate Account assets may include accumulations
of the charges American National makes against Policies and other variable life
policies participating in the Separate Account. From time to time, any such
assets due American National may be transferred in cash to American National's
General Account.
The Separate Account is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 ("1940 Act") as a unit
investment trust, which is a type of investment company. Such registration does
not involve any SEC supervision of the management or investment policies or
practices of the Separate Account. For state law purposes, the Separate Account
is treated as a division of American National. There are currently twenty-six
Subaccounts within the Separate Account available to Policyowners and each
invests only in a corresponding Eligible Portfolio.
Each Subaccount of the Separate Account will only invest in the shares of a
corresponding Eligible Portfolio. The Eligible Portfolios are investment
portfolios of the following investment companies: American National Fund,
Fidelity Funds T. Rowe Price Series, MFS Variable Insurnace Trust, Van Eck
Worldwide Insurance Trust, Federated Insurance Series, and Lazard Retirement
Series, Inc., each of which is registered with the SEC under the 1940 Act as an
open-end, diversified, series management investment company.
The investment objectives and policies of certain Eligible Portfolios may be
similar to the investment objectives and policies of mutual fund portfolios
other than the Eligible Portfolios that may be managed by the same investment
adviser or manager. The investment results of the Eligible Portfolios however,
may be higher or lower than the results of such other portfolios. There can be
no assurance, and no representation is made, that the investment results of any
of the Eligible Portfolios will be comparable to the investment results of any
other portfolio, even if the other portfolio has the same investment adviser or
manager.
The Separate Account will purchase and redeem shares of the Eligible Portfolios
at net asset value. Shares will be redeemed to the extent necessary for American
National to collect charges under the Policy, to pay the Surrender Value upon
surrender, to make Policy loans, to provide benefits under the Policy, or to
transfer assets from one Subaccount to another, or to the Fixed Account, as
requested by the Policyowners. Any dividend or capital gain distribution
received from an Eligible Portfolio will be reinvested immediately at net asset
value in shares of that Eligible Portfolio and retained as assets of the
corresponding Subaccount.
8
<PAGE>
The investment objectives and policies of each Eligible Portfolio are summarized
below. There is no assurance that any of the Eligible Portfolios will achieve
their stated objectives. More detailed information, including a description of
investment objectives, policies, restrictions, expenses and risks, is in the
prospectus for the Eligible Portfolios, which must accompany this Prospectus and
which should be read carefully together with this Prospectus and retained.
Each Policyowner should periodically consider the allocation among the
Subaccounts and the Fixed Account in light of current market conditions and the
investment risks attendant to investing in the Eligible Portfolios.
The American National Fund
Four of the Subaccounts of the Separate Account invest in the shares of a
corresponding portfolio of the American National Fund. The American National
Fund is registered with the SEC under the 1940 Act as an open-end diversified,
series management investment company. The American National Fund's current
Eligible Portfolios and respective investment objectives are as follows:
ANIA GROWTH PORTFOLIO ... seeks to achieve capital appreciation, normally
through the purchase of common stocks (although such Portfolio investments are
not restricted to any one type of security). Capital appreciation may also be
sought in other types of securities, including bonds and preferred stocks.
ANIA BALANCED PORTFOLIO ... seeks to provide conservation of principal,
reasonable current income and long-term capital appreciation by investing in a
balanced portfolio of fixed-income securities such as bonds, preferred stock and
short-term obligations combined with common stocks and securities convertible
into common stocks.
ANIA MANAGED PORTFOLIO ... seeks to achieve growth of capital and/or current
income by investing in a diversified portfolio consisting of, at the American
National Fund's investment adviser's discretion, money market instruments, debt
securities, stock or a combination thereof. It is anticipated that over longer
periods a larger portion of the Managed Portfolio will consist of equity
securities.
ANIA MONEY MARKET PORTFOLIO ... seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. The
Money Market Portfolio will invest only in money market instruments of high
quality determined by the American National Fund's investment advisor.
SM&R is the investment adviser and manager of the American National Fund. It
also provides investment advisory and portfolio management services to American
National and other clients. It maintains a staff of experienced investment
personnel and related support facilities.
The Fidelity Funds
Pursuant to a Participation Agreement between American National, Fidelity
Distributors Corporation and the Fidelity Funds, five of the Subaccounts of the
Separate Account invest in the shares of five corresponding portfolios of the
Fidelity Funds. The Fidelity Funds are registered with the SEC under the 1940
Act as open-end diversified, series management investment companies organized as
Massachusetts's business trusts.
Fidelity Management & Research Company ("FMR"), the Fidelity Funds' investment
adviser, was founded in 1946. FMR provides a number of mutual funds and other
clients with investment research and portfolio management services. It maintains
a large staff of experienced investment personnel and a full compliment of
related support facilities. Fidelity Management & Research (U.K.) Inc. ("FMR
U.K.") and Fidelity Management and Research (Far East) Inc. ("FMR Far East") are
wholly owned subsidiaries of FMR that provide research with respect to foreign
securities. FMR U.K. and FMR Far East maintain their principal business offices
in London and Tokyo, respectively. As of December 31, 1996, FMR advised funds
having more than 29 million shareholder accounts with a total value of more than
$432 billion. Fidelity Distributors Corporation distributes shares for the
Fidelity funds. FMR Corp. is the holding company for the Fidelity companies.
Through ownership of voting common stock, Edward C. Johnson 3d, President and a
Trustee of the Fidelity Funds, and various trusts for the benefit of Johnson
family members form a controlling group with respect to FMR Corp. The Fidelity
Fund's current Eligible Portfolios and respective investment objectives are as
follows:
VIP II ASSET MANAGER PORTFOLIO ... seeks high total return with reduced risk
over the long-term by allocating its assets among stocks, bonds and short-term
fixed-income instruments.
VIP II INDEX 500 PORTFOLIO ... seeks to provide investment results that
correspond to the total return (i.e., the combination of capital charges and
income) of common stocks publicly traded in the United States. In seeking this
objective, the Fidelity Index 500 Portfolio attempts to duplicate the
composition and total return of the Standard & Poor's 500 Composite Stock Price
Index while keeping transaction costs and other expenses low. The Fidelity Index
500 Portfolio is designed as a long-term investment option.
VIP II CONTRAFUND PORTFOLIO ... seeks capital appreciation by investing in
companies FMR believes to be undervalued due to an overly pessimistic appraisal
by the public. In pursuit of the fund's goal, FMR looks for companies with the
following characteristics: (i) unpopular, but improvements seem possible due to
developments such as a change in management, a new product line, or an improved
balance sheet, (ii) recently popular, but temporarily out of favor due to short-
term or one-time factors, or (iii) undervalued compared to other companies in
the same industry.
VIP II ASSET MANAGER: GROWTH PORTFOLIO ... seeks to maximize total return over
the long term by allocating its assets among stocks, bonds, and short-term
instruments. Allocating among different types of investments allows the fund to
take advantage of opportunities wherever they may occur, but also subjects the
fund to the risks of a given investment type.
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VIP III GROWTH OPPORTUNITIES PORTFOLIO ... seeks to ride out stock market
pursuit of potentially high long-term returns. The portfolio is designed for
investors who want to be invested in the stock market for its long-term growth
potential. The fund invests for growth and does not pursue income.
T. Rowe Price Series
Pursuant to a Participation Agreement between American National, T. Rowe Price
Associates, Inc. and Robert Fleming Holdings Limited, four of the Subaccounts of
the Separate Account invest in the shares of four corresponding portfolios, of
the T. Rowe Price Series. T. Rowe Price Associates, Inc. is responsible for
selection and management of the portfolio investments of T. Rowe Price Equity
Series and T. Rowe Price Fixed Income Series. Rowe Price-Fleming International,
Inc., incorporated in 1979 as a joint venture between T. Rowe Price Associates,
Inc. and Robert Fleming Holdings Limited, is responsible for selection and
management of the portfolio investments of T. Rowe Price International Series.
The T. Rowe Price Fund's current Eligible Portfolios and respective investment
objectives are as follows:
T. Rowe Price Equity Series, Inc.
T. ROWE PRICE EQUITY INCOME PORTFOLIO ... seeks to provide substantial dividend
income and also capital appreciation by investing primarily in common stocks
particularly of established companies with favorable prospects for both
increasing dividends and capital appreciation.
T. ROWE PRICE MID-CAP GROWTH PORTFOLIO ... seeks to provide long term capital
appreciation by investing primarily in common stocks of medium-sized (mid-cap)
growth companies. The focus is on companies with superior earnings growth
potential that are no longer considered new or emerging, but are not yet well
established. Mid-cap growth company stocks are generally more volatile than
stocks of large, well established companies, but they offer the possibility of
more rapid growth.
T. Rowe Price International Series, Inc.
T. ROWE PRICE INTERNATIONAL STOCK PORTFOLIO ... seeks a total return on its
assets from long-term growth of capital and income, by investing substantially
all of its assets in common stocks of established non-U.S. companies. The
Portfolio will not purchase any debt security which at the time of purchase is
rated below investment grade. This would not prevent the Portfolio from
retaining a security downgraded to below investment grade after purchase.
T. Rowe Price Fixed Income Series, Inc.
T. ROWE PRICE LIMITED-TERM BOND PORTFOLIO ... seeks a high level of income
consistent with modest price fluctuation by investing primarily in investment
grade debt securities.
MFS Variable Insurance Trust
Pursuant to a Participation Agreement between American National, Massachusetts
Financial Services Company and the MFS Variable Insurance Trust, four of the
Subaccounts of the Separate Account invest in the shares of four corresponding
portfolios of the MFS Variable Insurance Trust. Massachusetts Financial Service
Company is the investment advisor to each series and manages the series
portfolios in accordance with the investment objectives and policies of each
series. The MFS Variable Insurance Trust's current Eligible Portfolios and
respective investment objectives are as follows:
MFS VALUE SERIES PORTFOLIO ... seeks capital appreciation. Dividend income, if
any, is a consideration incidental to the Series' objective of capital
appreciation. While the Series' policy is to invest primarily in common stocks,
it may seek appreciation in other types of securities such as fixed income
securities (which may be unrated), convertible bonds, convertible preferred
stocks and warrants when relative values make such purchases appear attractive
either as individual issues or as types of securities in certain economic
environments. The Series may invest in lower rated fixed income securities or
comparable unrated securities.
MFS EMERGING GROWTH SERIES PORTFOLIO ... SEEKS TO PROVIDE long-term growth of
capital through investing primarily in common stocks of emerging growth
companies, which involves greater risk than is customarily associated with
investments in more established companies. The Series may invest in a limited
extent in lower rated fixed income securities or comparable unrated securities.
MFS RESEARCH SERIES PORTFOLIO ... seeks to provide long-term growth of capital
and future income by investing a substantial proportion of its assets in the
common stocks or securities convertible into common stocks of companies believed
to possess better than average prospects for long-term growth. No more than 5%
of the Portfolio's convertible securities, if any, will consist of securities in
lower rated categories or securities believed to be of similar quality to lower
rated securities. The Portfolio may invest in a limited extent in lower rated
fixed income securities or comparable unrated securities.
MFS GROWTH WITH INCOME SERIES PORTFOLIO ... seeks to provide reasonable current
income and long-term growth and income. Under normal market conditions, the
Series will invest at least 65% of its assets in common stocks or securities
convertible into common stocks that are believed to have long-term prospects for
growth and income. The Series may also invest up to 75% of its net assets in
foreign securities that are not traded on a U.S. exchange.
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Van Eck Worldwide Insurance Trust
Pursuant to a Participation Agreement between American National and Van Eck
Worldwide Insurance Trust, two Subaccounts of the Separate Account invest in the
shares of two corresponding Portfolios of the Van Eck Worldwide Insurance Trust.
The Van Eck Worldwide Insurance Trust's current Eligible Portfolios and
respective investment objectives are as follows:
VAN ECK WORLDWIDE HARD ASSETS PORTFOLIO (formerly Van Eck Gold and Natural
Resources Portfolio) ... seeks long-term capital appreciation by investing
primarily in "Hard Asset Securities." Income is a secondary consideration. Hard
Asset Securities include equity securities of "Hard Asset Companies" and
securities, including structured notes, whose value is linked to the price of a
Hard Asset commodity or a commodity index. "Hard Asset Companies" includes
companies that are directly or indirectly (whether through supplier
relationships, servicing agreements or otherwise) engaged to a significant
extent in the exploration, development, production or distribution of one or
more of the following (together "Hard Assets"): (i) precious metals, (ii)
ferrous and non-ferrous metals, (iii) gas, petroleum, petrochemicals and other
hydrocarbons, (iv) forest products, (v) real estate and (vi) other basic non-
agricultural commodities.
VAN ECK WORLDWIDE EMERGING MARKETS PORTFOLIO ... seeks long-term capital
appreciation by investing primarily in equity securities in emerging markets
around the world.
Van Eck Associates Corporation serves as investment advisor and manages the
investment operations of the Van Eck Portfolios and furnishes the Portfolios
with a continuous investment program which includes determining which securities
should be bought, sold or held.
Federated Insurance Series
Pursuant to a Participation Agreement between American National, Federated
Advisors and the Federated Insurance Series, five of the Subaccounts of the
Separate Account invest in the shares of five corresponding Portfolios of the
Federated Insurance Series. Federated Advisors is responsible for the portfolio
investment decisions of the Federated Insurance Series, subject to direction by
the Federated Insurance Series Trustees. The Federated Insurance Series' current
Eligible Portfolios and respective investment objectives are as follows:
FEDERATED UTILITY FUND II PORTFOLIO ... seeks to achieve high current income and
moderate capital appreciation. The Portfolio invests primarily in equity and
debt securities of utility companies.
FEDERATED GROWTH STRATEGIES FUND II PORTFOLIO ... seeks capital appreciation.
The Portfolio invests at least 65% of its assets in equity securities of
companies with prospects for above average growth in earnings and dividends.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II PORTFOLIO ... seeks current
income by investing in a diversified portfolio limited to U.S. government
securities.
FEDERATED HIGH INCOME BOND FUND II PORTFOLIO ... seeks high current income. The
Portfolio invests in fixed income securities that are lower rated corporate debt
obligations, WHICH ARE commonly referred to as "junk bonds." The risk in
investing in junk bonds is described in the prospectus for the Insurance
Management Series, which should be read carefully before investing.
FEDERATED EQUITY INCOME FUND II PORTFOLIO ... SEEKS TO PROVIDE above average
income and capital appreciation by investing in income producing equity
securities including common stocks, preferred stocks, and debt securities that
are convertible into common stocks, in cash and cash items during times of
unusual conditions to maintain liquidity. Cash items may include commercial
paper, Europaper, certificates of deposit, obligations of the U. S. Government,
repurchase agreements and other short-term instruments.
Lazard Retirement Series, Inc.
Pursuant to a Participation Agreement between American National, Lazard Freres
Asset Management and the Lazard Retirement Series, Inc., two of the Subaccounts
of the Separate Account invest in the shares of two corresponding Portfolios of
the Lazard Retirement Series, Inc. The investment objectives and policies of
each Portfolio of the Lazard Retirement Series, Inc. are summarized below. There
is no assurance that any of the Portfolios will achieve their stated objectives.
More detailed information, including a description of investment objective,
policies, restrictions, expenses and risks, is in the prospectus of each of the
Lazard Retirement Series, Inc. which must accompany this Prospectus and which
should be read carefully together with this Prospectus and retained.
LAZARD RETIREMENT EMERGING MARKETS PORTFOLIO ... seeks capital appreciation.
This Portfolio invests primarily in equity securities of non-United States
issuers located, or doing significant business, in emerging market countries
that the Investment Manager considers inexpensively priced relative to the
return on total capital or equity.
LAZARD RETIREMENT SMALL CAP PORTFOLIO ... seeks capital appreciation. This
Portfolio invests primarily in equity securities of companies with market
capitalization under $1 billion that the Investment Manager considers
inexpensively priced relative to the return on total capital or equity.
Lazard Freres Asset Management serves as investment advisor and continually
furnishes an investment program for each Portfolio consistent with its
investment objectives and policies, including the purchase, retention and
disposition of securities.
American National has entered into arrangements with either the investment
advisor or distributor for certain of the Eligible Portfolios pursuant to which
the advisor or distributor pays American National a fee based upon an annual
percentage of the average aggregate net amount invested by
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American National on behalf of the Portfolio. These percentages differ, and
American National is paid a greater percentage by some investment advisors or
distributors than other advisors or distributors. These agreements reflect
administrative and other services provided by American National.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
American National reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Separate Account or that the Separate Account may purchase. If the shares of
an Eligible Portfolio are no longer available for investment or if in American
National's judgment further investment in any Eligible Portfolio should become
inappropriate in view of the purposes of the Separate Account, American National
may redeem the shares, if any, of that Eligible Portfolio, and substitute shares
of another registered open-end management company. American National will not
substitute any shares attributable to a Policyowner's interest in a Subaccount
of the Separate Account without notice and prior approval of the SEC and
possibly state insurance authorities, to the extent required by the 1940 Act or
other applicable law. The Separate Account may, to the extent permitted by law,
purchase other securities for other policies or permit a conversion between
policies upon request by the Policyowners.
American National also reserves the right to establish additional Subaccounts of
the Separate Account, each of which would invest in shares corresponding to a
new portfolio of the American National Fund or in shares of another investment
company having a corresponding investment objective. American National may
eliminate one or more Subaccounts with SEC approval if marketing needs, tax
considerations or investment conditions warrant. Any new Subaccounts may be made
available to existing Policyowners on a basis to be determined by American
National.
If any of these substitutions or changes are made, American National may by
appropriate endorsement change the Policy to reflect the substitution or change.
If American National deems it to be in the best interest of Policyowners, and
subject to any approvals that may be required under applicable law, the Separate
Account may be operated as a management company under the 1940 Act, it may be
de-registered under that Act if registration is no longer required, or it may be
combined with other American National Separate Accounts. In addition, American
National may, when permitted by law, restrict or eliminate any voting rights as
to the Separate Account.
The Policyowner will be notified of any material change in the investment policy
of any Eligible Portfolio in which the Policyowner has an interest.
Unless Policyowners have directed a different allocation, shares of the Eligible
Portfolios will be redeemed, pro rata, to the extent necessary for American
National to collect charges under the Policy, to pay the Surrender Value upon
full or partial surrenders of the Policies, to provide benefits under the
Policy, or to transfer assets from one Subaccount to another or to the Fixed
Account.
RESOLVING MATERIAL CONFLICTS
The Eligible Portfolios presently serve as the investment medium for the
Policies. In addition, the Eligible Portfolios (other than the portfolios of the
American National Fund) are available to registered separate accounts of
insurance companies, other than American National, offering variable annuity and
variable life insurance contracts. The Eligible Portfolios may also be available
to certain qualified pension and retirement plans.
We do not currently foresee any disadvantages to you resulting from the Eligible
Portfolios selling shares to fund products other than the Policies. However,
there is a possibility that a material conflict of interest may arise between
Policyowners whose Accumulation Value is allocated to the Separate Account and
the owners of variable life insurance policies and variable annuity contracts
issued by other companies whose values are allocated to one or more other
separate accounts investing in any one of the Eligible Portfolios. Shares of
certain Eligible Portfolios may also be sold to certain qualified pension and
retirement plans. As a result, there is a possibility that a material conflict
may arise between the interests of Policyowners or owners of other policies
(including policies issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of a material conflict,
American National will take any necessary steps, including removing the Separate
Account from that Eligible Portfolio, to resolve the matter. The Board of
Directors of each Eligible Portfolio will monitor events in order to identify
any material conflicts that may arise and determine what action, if any, should
be taken in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
We do not currently foresee any disadvantages to you resulting from the Eligible
Portfolios selling shares to fund products other than the Policies. However,
there is a possibility that a material conflict of interest may arise between
Policyowners whose Accumulation Value is allocated to the Separate Account and
the owners of variable life insurance policies and variable annuity contracts
issued by other companies whose values are allocated to one or more other
separate accounts investing in any one of the Eligible Portfolios. Shares of
certain Eligible Portfolios may also be sold to certain qualified pension and
retirement plans. As a result, there is a possibility that a material conflict
may arise between the interests of Policyowners or owners of other policies
(including policies issued by other companies), and such retirement plans or
participants in such retirement plans. In the event of a material conflict,
American National will take any necessary steps, including removing the Separate
Account from that Eligible Portfolio, to resolve the matter. The Board of
Directors of each Eligible Portfolio will monitor events in order to identify
any material conflicts that may arise and determine what action, if any, should
be taken in response to those events or conflicts. See the accompanying
prospectuses for the Eligible Portfolios for more information.
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FIXED ACCOUNT
During the Accumulation Period, Policyowners may elect to allocate all or a
portion of their Net Premium to the Fixed Account and, subject to certain
limitations, they may also transfer Accumulation Value from the Subaccounts to
the Fixed Account. Transfers from the Fixed Account to the Subaccounts are
restricted. (See "Transfers" on page 15.)
Net Premiums allocated to the Fixed Account and transfers from a Subaccount to
the Fixed Account are placed in the General Account of American National. The
General Account includes all of American National's assets except those
segregated in its separate accounts. American National has the sole discretion
to invest the assets of its General Account, subject to applicable law. American
National bears an investment risk for all amounts allocated or transferred to
the Fixed Account and interest credited thereto, less any deduction for charges
and expenses, whereas the Policy owner bears the investment risk that the
declared rate will fall to a lower rate after the expiration of a declared rate
period. Because of exemptive and exclusionary provisions, interests in the
General Account have not been registered under the Securities Act (the "1933
Act"), nor is the General Account registered as an investment company under the
1940 Act. Accordingly, neither the General Account nor any interest therein is
generally subject to the provisions of the 1933 or 1940 Act. American National
understands that the staff of the SEC has not reviewed the disclosures in this
Prospectus relating to the Fixed Account portion of the Policy; however,
disclosures regarding the Fixed Account portion of the Policy may be subject to
generally applicable provisions of the federal securities laws regarding the
accuracy and completeness of statements made in prospectuses.
American National guarantees that it will credit interest to the Fixed Account
at an effective annual rate of at least 3.0% compounded daily. American National
may, at its discretion, declare higher interest rate(s) for amounts allocated or
transferred to the Fixed Account. With respect to each amount allocated to the
Fixed Account, the declared interest rate in effect at the time of allocation
will be credited for one year from that date.
THE POLICY
Purpose of the Policy
The Policy is designed to provide the Policyowner with lifetime insurance
protection. Unlike traditional life insurance, the Policyowner is not required
to pay scheduled premiums to keep a Policy in force, but may, subject to certain
limitations, vary the frequency and amount of premium payments.
The Policy varies from conventional fixed benefit life insurance in a number of
additional respects. Because the Death Benefit may, and the Accumulation Value
will, vary with the investment experience of the chosen Subaccounts of the
Separate Account, the Policyowner benefits from any appreciation in value of the
underlying assets, but bears the investment risk of any depreciation in value.
Because the Policy provides for an accumulation of Surrender Value as well as a
Death Benefit, the Policy can be used for various individual and business
financial planning purposes. Purchasing the Policy in part for such purposes
entails certain risks. For example, if the investment performance of the
Subaccounts to which Policy Accumulation Value is allocated is poorer than
expected, the Policy may lapse or may not accumulate sufficient Policy
Accumulation Value or Surrender Value to fund the purpose for which the Policy
was purchased. Withdrawals and Policy loans may significantly affect current and
future Policy Accumulation Value, Surrender Value, or Death Benefit Proceeds.
Depending upon Subaccount investment performance and the amount of a Policy
loan, a loan may cause a Policy to lapse. Because the Policy is designed to
provide benefits on a long-term basis, a purchaser should consider whether the
nature of the Policy is consistent with a specialized purpose before purchasing
a Policy. Using a Policy for a specialized purpose may have tax consequences.
(See "FEDERAL TAX MATTERS" on page 23.)
Policy Application and Issuance
Individuals wishing to purchase a Policy must complete an application and submit
it to American National's Home Office, American National Building, One Moody
Plaza, Galveston, Texas 77550. A Policy will generally be issued only to
individuals 90 years of age or less on their last birthday who supply
satisfactory evidence of insurability to American National. Before accepting an
application, we conduct underwriting to determine insurability. We reserve the
right to reject an application or premium for any reason. If a Policy is not
issued, we will return any submitted premium payment.
Premium Payments
The minimum initial premium for a Policy is $10,000. Except with respect to
additional payments required in a grace period, any additional payment must be
at least $5,000. No additional premium payments may be made after age 90 of the
Insured, except as may be required in a grace period. Unless you designate
otherwise in writing when submitting the payment to us, a payment received while
a loan is outstanding generally is treated first as repayment of Policy loan
interest, second as repayment of the Policy loan, and last as additional
premium.
If additional payments would cause the Policy to violate the maximum premium
limitations required by federal tax law, at the Policyowner's election, the
Premium may be returned or the Specified Amount may be increased subject to
underwriting requirements. (See "Increase in Specified Amount" on page 16.) We
reserve the right to reject additional payments for any reason.
Policy Lapse and the Grace Period
The Policy will lapse when the Surrender Value is insufficient to cover the
Monthly Deduction due on that date and a grace period expires without a
sufficient premium payment. The grace period is 61 days from the date American
National mails a notice that the grace period has begun. The notice will be
addressed to the last known address on file with American National and will
specify the premium required to keep the Policy in force.
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Failure to pay the required amount within the grace period will result in lapse
of the Policy as of the first day of the grace period. A lapse of the Policy may
result in adverse tax consequences. If the Insured dies during the grace period,
any overdue Monthly Deductions and Policy Debt will be deducted from the Death
Benefit.
Reinstatement
A lapsed Policy may be reinstated at any time within five years after the end of
the grace period if the Policy was not surrendered for its Surrender Value.
Reinstatement will be effected based on the Insured's underwriting
classification at the time of the reinstatement.
Reinstatement is subject to the following:
a. Evidence of insurability of the Insured satisfactory to American National
b. Reinstatement or repayment of any Policy Debt;
c. Payment of Premium sufficient to pay the following:
1) the amount of any Monthly Deductions not paid during the grace period; and
2) the amount of the Monthly Deductions for the next three months; and
3) the amount necessary to pay the Premium tax expense charge.
The original Date of Issue, and the Dates of Issue of increases in Specified
Amount (if applicable), will be used for purposes of calculating the surrender
charges for the reinstated Policy. If any Policy Debt is reinstated, the amount
thereof will be held in American National's General Account. Accumulation Value
calculations will then proceed as described under "Determination of Accumulation
Value" below. The Policy Date of reinstatement will be the first Monthly
Deduction Date on or next following the date of approval by American National of
the application for reinstatement.
ALLOCATION OF PREMIUM AND ACCUMULATION VALUE
Allocation of Premium
The Policyowner indicates in the application one or more Subaccounts and/or the
Fixed Account to which a specified portion of the Net Premium should be applied.
No allocation will be permitted which would result in less than 1% of the Net
Premium being allocated to any one Subaccount and/or the Fixed Account. The
minimum initial allocation to any Subaccount and/or the Fixed Account is $500.
Changes in allocation of future Net Premiums (with the same 1% minimum) may be
made at any time by written instruction to the Home Office or by telephone
instruction, provided that a properly completed Telephone Transfer Authorization
Form is on file with American National.
The initial Net Premium payment will be allocated to the Subaccount of the
American National Money Market Portfolio, as of the Date of Issue, for 15 days.
After the expiration of this period, the Accumulation Value will be allocated to
the Subaccounts and/or the Fixed Account as selected by the Policyowner. If
additional Premium is accepted, we will credit it to your Policy's Accumulation
Value pursuant to your current allocation selections, unless you provide other
instructions as of the date of payment.
Determination of Accumulation Value
Accumulation Value is determined on each Valuation Date. On the Date of Issue,
Accumulation Value will equal the Net Premium, reduced by the Monthly Deduction.
Thereafter, on each Valuation Date, the Accumulation Value of a Policy will
equal:
a) The sum of the values attributable to the Policy in each of the
Subaccounts on that Valuation Date, determined for each Subaccount by
multiplying the Subaccount's Accumulation Unit Value by the number of
Accumulation Units allocated to the Policy; plus
b) The value attributable to the Policy in the Fixed Account; plus
c) Any Accumulation Value impaired by Policy Debt held in the General
Account; plus
d) Any Net Premiums received on that Valuation Date; less Any partial
surrender, and its charge, made on that Valuation Date; less Any Monthly
Deduction to be made on that Valuation Date; less Any federal or state
income taxes charged against the Accumulation Value.
In computing the Policy's Accumulation Value, the number of Subaccount
Accumulation Units allocated to the Policy is determined after any transfers
among the Subaccounts or the Fixed Account and after deduction of transfer
charges but before any other Policy transactions, such as receipt of Net
Premiums and partial surrenders, on the Valuation Date.
Crediting of Accumulation Units
All Net Premiums allocated to and Accumulation Value transferred to a Subaccount
will purchase Accumulation Units in the Subaccount. The number of Accumulation
Units purchased is determined by dividing the dollar amount of the Net Premium
allocated to the Subaccount by the Subaccount's Accumulation Unit Value next
computed following allocation of the Net Premium.
Determining the Accumulation Unit Values
The Accumulation Unit Value of each Subaccount reflects the investment
performance of that Subaccount. The Accumulation Unit Value of each Subaccount
shall be calculated by: (i) multiplying the per share net asset value of the
corresponding Eligible Portfolio on the Valuation Date times the number of
shares held by the Subaccount, after the purchase or redemption of any shares on
that date; (ii) subtracting therefrom a charge for the administrative fee and
the mortality and expense risk fee for that Subaccount and (iii) dividing the
result by the total number of Accumulation Units
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held in the Subaccount on the Valuation Date, before the purchase or redemption
of any units on that date. The Accumulation Unit Value for each Subaccount shall
be calculated at the end of each Valuation Period. Investment performance of the
Eligible Portfolio companies, Eligible Portfolio company expenses, and the
deduction of certain charges affect the Accumulation Unit Value for each
Subaccount.
Transfers
Accumulation Value may be transferred among the Subaccounts and/or the Fixed
Account subject to the following limits. The total amount transferred from each
Subaccount must be at least $250, or the balance of the Subaccount, if less. The
minimum amount that may remain in a Subaccount after a transfer is $100.
Transfers may be requested in person, by mail, or by telephone. A Telephone
Transfer Authorization Form must be on file at American National's Home Office
before any telephone instructions will be allowed. American National will
effectuate transfers and determine all values in connection with transfers on
the later of the date designated in the request or at the end of the Valuation
Period during which the transfer request is received. The maximum amount which
may be transferred from the Fixed Account to the Subaccounts during a Policy
Month is the greater of (a) ten percent of the amount in the Fixed Account, or
(b) $1,000.
The first twelve transfers per Policy Year will be permitted free of charge. Any
additional transfers will be charged a $10.00 transfer fee at the time of the
transfer which, will be deducted from the amount transferred. (See "Transfer
Fee" on page 21). American National may at any time revoke or modify the
transfer privilege, including the number of free transfers and the minimum
amount transferable.
American National will employ reasonable procedures to confirm that the transfer
instructions communicated by telephone are genuine, and if American National
follows those procedures it will not be liable for any losses due to
unauthorized or fraudulent instructions. American National may be liable for
such losses if it does not follow reasonable procedures. The procedures American
National will follow for telephone transfers include some form of personal
identification prior to acting on instructions received by telephone, providing
written confirmation of the transaction, and making a tape recording of the
instructions given by telephone.
Dollar Cost Averaging
Under the dollar cost averaging program, the Policyowner can instruct American
National to automatically transfer, on a periodic basis, a predetermined amount
or percentage specified by the Policyowner from any one Subaccount or the Fixed
Account, to any Subaccount(s) and/or the Fixed Account. The automatic transfers
can occur monthly, quarterly, semi-annually or annually, but the amount
transferred each time must be at least $1,000 in total. The transfer to each
Subaccount must be at least $100. At the time the program begins, there must be
at least $10,000 of Accumulation Value in the Policy. Dollar cost averaging
results in the purchase of more Accumulation Units when the Accumulation Unit
Value is low, and fewer units when the Accumulation Unit Value is high. However,
there is no guarantee that the dollar cost averaging program will result in
higher Accumulation Value or otherwise be successful.
The Policyowner can request participation in the dollar cost averaging program
when purchasing the Policy or at a later date. Transfers will begin as specified
by the Policyowner (or if not a Valuation Period, the next following Valuation
Period). The Policyowner can specify that only a certain number of transfers
will be made, in which case the program will terminate when that number of
transfers has been made. Otherwise, the program will terminate on a transfer
date if the Accumulation Value is less than $5,000 or if there are insufficient
funds for the transfer from an account.
The Policyowner can increase or decrease the amount of the transfers or
discontinue the program by sending written notice to American National or by
telephone, if a Telephone Transfer Authorization Form is on file. There is no
charge for participation in this program. Transfers of Accumulation Value made
pursuant to this program will not be counted in determining whether the transfer
fee applies.
Asset Allocation Program
Under the Asset Allocation Program, the Policyowner can instruct American
National to allocate Premiums and Accumulation Value among the Subaccounts and
the Fixed Account in accordance with allocation instructions specified by the
Policyowner or allocation instructions recommended by American National and
approved by the Policyowner. American National will rebalance a Policyowner's
investment by allocating Net Premiums and transferring Accumulation Value among
the Subaccounts and the Fixed Account to ensure conformity with current
allocation instructions. Rebalancing will be performed on a calendar quarterly,
semi-annual or annual basis as specified by the Policyowner. At the time the
program begins, there must be at least $10,000 of Accumulation Value under the
Policy. The Program will be discontinued if, on a rebalancing date, the
Accumulation Value is less than $5,000.
The Policyowner can request participation in the Asset Allocation Program when
purchasing the Policy or at a later date. The Policyowner can change his
allocation percentage or discontinue the program by sending written notice or by
telephone, if a Telephone Transfer Authorization Form is on file. There is no
charge for participation in this program. Transfers of Accumulation Value made
pursuant to this program will not be counted in determining whether the transfer
fee applies.
DISTRIBUTIONS
Death Benefit
As long as the Policy remains in force, American National will, upon
satisfactory proof of the Insured's death, pay the Death Benefit Proceeds of a
Policy at the time of the Insured's death. The Death Benefit Proceeds may be
paid in a lump sum or under one or more of the payment options set forth in the
Policy. (See "Optional Methods of Payment" on page 19.)
Subject to the rights of any assignee, Death Benefit Proceeds will be paid to
the surviving Beneficiary or Beneficiaries specified in the application
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or as subsequently changed. If no Beneficiary is chosen, the proceeds will be
paid to the Insured's estate.
The amount of the Death Benefit Proceeds payable will be determined at the end
of the Valuation Period during which the Insured's death occurred and is equal
to: (1) the Death Benefit; minus (2) any Policy Debt; minus (3) any overdue
Monthly Deduction when death occurs during a grace period. The Death Benefit
equals the greater of:
a) the initial Specified Amount plus any later increase and less any later
decrease; or
b) the Policy's Accumulation Value on the date of death multiplied by the
corridor percentage for the Insured's attained age from the table shown
below;
<TABLE>
<CAPTION>
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage Age Percentage
<S> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94 101%
52 171% 66 119% 95+ 100%
53 164% 67 118%
</TABLE>
Example. For this purpose, assume that the Insured is under the age of 40, the
specified amount is $100,000, and that there is no outstanding Policy Debt or
any due and unpaid monthly deductions. The Policy will initially provide for a
$100,000 Death Benefit. However, because the Death Benefit cannot be less than
250% (the applicable corridor percentage) of Accumulation Value, any time the
Accumulation Value of this Policy exceeds $40,000, the Death Benefit will exceed
the $100,000 Specified Amount. If the Accumulation Value equals or exceeds
$40,000, each additional dollar added to the Accumulation Value will increase
the Death Benefit by $2.50. Thus, for a Policy with a Specified Amount of
$100,000 and a Accumulation Value of $80,000, the Beneficiary will be entitled
to a Death Benefit of $200,000 (250% x $80,000); Accumulation Value of $120,000
will yield a Death Benefit of $300,000 (250% x $120,000); and a Accumulation
Value of $200,000 will yield a Death Benefit of $500,000 (250% x $200,000).
Similarly, so long as Accumulation Value exceeds $40,000, each dollar decrease
in Accumulation Value will reduce the Death Benefit by $2.50. If at any time,
however, the Accumulation Value multiplied by the corridor percentage is less
than the specified amount, the Death Benefit will equal the specified amount of
the Policy.
The applicable corridor percentage becomes lower as the Insured's Attained Age
increases. If the Attained Age of the Insured in the illustration were, for
example, 50 (rather than under age 40), the applicable corridor percentage would
be 185%. Therefore, the Death Benefit payable would not exceed the $100,000
specified amount unless the Accumulation Value exceeded approximately $54,054
(rather than $40,000), and each $1 increase or decrease in the Accumulation
Value would change the Death Benefit by $1.85 (rather than $2.50).
Increase in Specified Amount
If the Policyowner elects, the Specified Amount may be increased to allow
additional premium payments that would otherwise cause the Policy to violate the
maximum premium limitations required by federal tax law. A written supplemental
application must be submitted with the additional premium payment and American
National may require additional evidence of insurability. An increase in the
Specified Amount will become effective on the Monthly Deduction Date on or
following the date a written request is approved by American National. American
National may limit the number and size of increases in a Policy Year.
Each Policyowner who elects to increase the Specified Amount of a Policy will
have a "free look period", which right will apply only to the Increase in
Specified Amount and not the entire Policy. These rights are comparable to the
rights of a purchaser of a new Policy. (See "Right to Examine" on page 22.) The
Policyowner may cancel the increase in Specified Amount within 10 days (or more
where required by applicable state insurance law) after the Policyowner has
received the Policy as increased. We will return to you the Premiums paid
adjusted by investment gains or losses, unless state insurance law requires
otherwise.
An increase in the Specified Amount may result in certain increased charges,
including the cost of insurance charge and the surrender charge, and may have
Federal tax consequences. (See "CHARGES AND DEDUCTIONS" on page 20 and "FEDERAL
TAX MATTERS" on page 23.)
Decreases in Specified Amount
A partial surrender will decrease the Specified Amount of the Policy. (See "Full
Surrender and Partial Withdrawal" below.)
Full Surrender and Partial Withdrawal
At any time while the Policy is in force during the lifetime of the Insured, the
Policyowner may partially or totally surrender the Policy, subject to the
limitations discussed herein, by sending a written request to American National.
Any surrender or partial withdrawal may be subject to a surrender charge and/or
a federal tax penalty. (See "Surrender Charge" on page 21 and "FEDERAL TAX
MATTERS" on page 23.)
If the Policy is being fully surrendered, the actual Policy form must be
returned to American National along with the request. American National will pay
the Surrender Value. Coverage under the Policy will terminate as of the date of
a full surrender.
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Upon a partial withdrawal, the amount of the partial withdrawal and any
surrender charges will be deducted from the Accumulation Value at the end of the
Valuation Period during which the request is received. If a partial withdrawal
would leave less than $5,000 of Accumulation Value in the Policy, then the
Policy will be fully surrendered. A request for a partial withdrawal should
specify the allocation of that surrender from the Fixed Account and each
Subaccount, as applicable. In the absence of specification, American National
will take amounts as needed to satisfy the surrender in the manner set forth in
"Monthly Deduction" on page 20.
Also upon a partial withdrawal, the Specified Amount generally will be reduced
in the same proportion as the Accumulation Value. If, however, the decrease in
Specified Amount would cause the Policy to violate the maximum premium
limitations required by federal tax law, the withdrawal amount and/or the
decrease in Specified Amount will be limited to the extent necessary to meet
these requirements. Where increases in the Specified Amount occurred previously,
a partial withdrawal will reduce the original Specified Amount first and then
each increase in order, beginning with the least recent increase. Thus, partial
withdrawals may affect the cost of insurance charge and have Federal tax
consequences. (See "Cost of Insurance Charge" on page 20 and "FEDERAL TAX
MATTERS" on page 23.)
Upon receipt of an application for a partial or full surrender of a Policy
signed by the Policyowner, the applicable Accumulation Unit Value for
determining the Accumulation Value will be the Accumulation Unit Value next
determined after such application is received in American National's Home
Office. (See "Determination of Accumulation Value" on page 14.) The Surrender
Value of a Policy may be determined by deducting any surrender charge from the
Accumulation Value. Partial or full surrenders will generally be paid within
seven days of receipt of the written request in proper form. (See "Postponement
of Payments" on page 23.)
If at the time the Policyowner makes a surrender request, he or she has not
provided American National with a written election not to have federal and state
income taxes withheld, American National is required by law to withhold such
taxes from the taxable portion of any surrender, and to remit that amount to the
federal and/or state government.
Systematic Withdrawal Program
Under the Systematic Withdrawal Program, the Policyowner can instruct American
National to make automatic partial withdrawals of a predetermined dollar amount
of Accumulation Value monthly, quarterly, semi-annually or annually from
specified Subaccount(s) and/or the Fixed Account. The minimum systematic
withdrawal payment is $100. The minimum systematic withdrawal from each
Subaccount and/or from the Fixed Account is $50. The maximum amount which may be
withdrawn each month from the Fixed Account is the greater of (a) ten percent of
the amount in the Fixed Account, or (b) $1,000. Systematic withdrawals can be
started at issue or at some date in the future. American National must receive
written notification from the Policyowner specifying the dollar amount and the
mode of payment. The Policyowner may specify systematic withdrawals be made from
any Subaccount(s) and/or the Fixed Account. In the absence of specification,
systematic withdrawals will be taken from each Subaccount and from the Fixed
Account in the proportion that the Accumulation Value in each bears to the total
Accumulation Value of the Policy. Surrender Charges and reductions in Specified
Amount will apply in accordance with Policy provisions for partial withdrawals.
A qualified tax adviser should be consulted before a systematic withdrawal is
requested since distributions may be taxable and subject to a penalty tax. (See
"FEDERAL TAX MATTERS" on page 23.)
Waiver of Surrender Charges
American National will waive the surrender charge upon partial surrenders,
systematic withdrawals and full surrenders in the event the Insured becomes
confined to a hospital, hospice facility or convalescent care facility,
disabled, diagnosed with a terminal illness, or involuntarily unemployed. Those
waivers and any restrictions associated with such waivers are set forth below.
Nursing Home Waiver
The surrender charge will not be imposed as a result of any withdrawal made
pursuant to the Insured's confinement, upon the written proof from a licensed
physician, to the following facilities for 60 or more consecutive days: (a) a
hospital licensed or recognized as a general hospital by the state in which it
is located and is engaged in providing or operating diagnostic and major surgery
facilities for the medical care and treatment of injured and sick persons on an
inpatient basis for which a charge is made and provides 24-hour nursing service
by or under the supervision of a graduate registered nurse(R.N.);
(b) convalescent care facility licensed by the state as a convalescent nursing
facility, a skilled nursing facility, a convalescent hospital, a convalescent
unit of a hospital, an intermediate care facility, or a custodial care facility
and provides continuous nursing service by or under the supervision of a
physician or a graduate registered nurse(R.N.) and maintains a daily record of
each patient which is available for review by American National and administers
a planned program of observation and treatment by a physician which is in
accordance with existing standards of medical practice for the injury or
sickness causing the confinement; and (c) hospice facility which provides a
formal program of care for terminally ill patients whose life expectancy is less
than 6 months, provided on an inpatient basis and directed by a physician and is
licensed, certified or registered in accordance with state law. Proof of
confinement must be provided. This waiver only applies to surrenders and
withdrawals requested no later than 90 days after the last day of confinement to
such facility. The nursing home waiver is not available if the Insured is
confined to a hospital, nursing home or hospice facility on the Date of Issue
and if the application is signed by power of attorney. The Insured must be age
80 or younger on the Date of Issue and must have entered the hospital,
convalescent care facility or hospice facility after 90 days from the Date of
Issue.
Disability Waiver
The surrender charge will not be imposed upon any withdrawal while the Insured
is physically disabled. American National requires proof of such disability,
including written confirmation of receipt and approval of any claim for Social
Security Disability Benefits. Proof of continued disability may be required
through the date of any partial surrender or systematic withdrawal. American
National reserves the right to have any Insured claiming such disability
examined by a licensed physician. The disability waiver is not available if the
Insured is receiving Social Security Disability Benefits on the Date of Issue or
is age 65 or older. American National will not accept any additional Premium
once the Disability Waiver has been
17
<PAGE>
elected. The disability waiver may not be available in all states.
Involuntary Unemployment Waiver
American National will waive the surrender charge for any partial surrender or
systematic withdrawal in the event the Insured becomes involuntarily unemployed.
The involuntary unemployment waiver is available upon submission of a letter
from a state Department of Labor indicating the Insured was employed at least 60
days prior to the election of such waiver. The involuntary unemployment waiver
may be exercised only once and is not available if the Insured is receiving
unemployment benefits on the Date of Issue. The involuntary unemployment waiver
may not be available in all states.
Terminal Illness Waiver
American National will waive the surrender charge for any surrenders or
withdrawals where the Insured is diagnosed with a terminal illness. American
National will require proof of such illness including written confirmation from
a licensed physician. American National reserves the right to have a Insured
diagnosed with such illness examined by a licensed physician. American National
will not accept any additional Premium once the Terminal Illness Waiver has been
elected. The terminal illness waiver may not be available in all states.
Policy Loans
Loan Privileges
So long as the Policy remains in effect, the Policyowner may borrow money from
American National using the Policy as the only security for the loan. The
minimum amount that may be borrowed is $100. The maximum amount that may be
borrowed is 90% of the Policy Surrender Value at the end of the Valuation Period
during which the loan request is received. Policyowners in certain states may
borrow 100% of the Surrender Value. Loans usually are funded within seven days
after receipt of a written request. (See "Postponement of Payments" on page 23.)
Loans may result in adverse tax consequences and/or penalties. (See "FEDERAL TAX
MATTERS" on page 23.)
When a loan is made, some or all of the loan may be borrowed on a preferred
basis. The amount available as a preferred loan is equal to the Accumulation
Value less Policy Debt and less premiums paid. A loan may be classified as
preferred only at the time the loan is made and the loan classifications do not
change.
Loan Interest
Loan interest will accrue on a daily basis at a rate of 5.0% per year and is due
on each Policy Anniversary. If interest is not paid when due, a new loan will be
made on the interest due date equal to the interest due.
Effect of Policy Loans
On the date of the Policy loan, Accumulation Value equal to the loan amount will
be transferred on a pro-rata basis from the Subaccount(s) and/or the Fixed
Account to American National's General Account as security for the indebtedness.
No charge will be imposed for these transfers.
Amounts held in the General Account as security for loans will earn interest at
an annual rate of 5.0%, if the loan is preferred, or 3% otherwise. Interest is
credited on the Policy anniversary. Interest earned on amounts held in the
General Account will be allocated to the Subaccounts and/or the Fixed Account on
each Policy anniversary in the same proportions as Net Premiums are being
allocated to those Subaccounts and/or the Fixed Account at that time.
A Policy loan will permanently affect the Accumulation Value of a Policy, even
if the loan is repaid. The effect could be favorable or unfavorable depending on
whether the investment performance of the Subaccount(s) and/or the Fixed Account
selected by the Policyowner is less than or greater than the interest rate
credited to the Accumulation Value held in the General Account to secure the
loan. In comparison to a Policy under which no loan was made, the Accumulation
Value will be lower if the General Account interest rate is less than the
investment performance of the Subaccount(s) and/or the Fixed Account, and
greater if the General Account interest rate is higher than the investment
performance of the Subaccount(s) and/or the Fixed Account. Also, if not repaid,
the aggregate outstanding loan(s) will reduce the Death Proceeds and Cash
Surrender Value otherwise payable.
Policy Debt
The Policy Debt equals the total of Policy loans and accrued interest on Policy
loans. If the Policy Debt exceeds the Accumulation Value less any surrender
charge, the Policyowner must pay the excess. American National will send a
notice of the amount that must be paid. If the Policyowner does not make the
required payment within the 61 days after American National sends the notice,
the Policy will terminate without value. A lapsed Policy may later be
reinstated. (See "Policy Lapse and the Grace Period" and "Reinstatement" on page
14.)
Repayment of Policy Debt
Loans may be completely or partially repaid at any time while the Insured is
living. Payments received for repayment of Policy Debt are first applied toward
non-preferred loans. Unless you designate otherwise in writing when submitting
the payment to us, a payment received while a loan is outstanding generally is
treated first as repayment of Policy loan interest, second as repayment of the
Policy loan, and last as additional Premium. As Policy Debt is repaid,
Accumulation Value equal to the loan amount repaid will be transferred from the
General Account to the Separate Account and/or the Fixed Account in the same
proportions as Net Premiums are being allocated at the time of repayment. The
transfer will occur at the end of the Valuation Period during which the
repayment is received. If not repaid, American National will deduct Policy Debt
from any amount payable under the Policy.
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Payment of Policy Benefits
Death Benefit proceeds under the Policy will usually be paid within seven days
after American National receives Satisfactory Proof of Death. Accumulation Value
benefits will ordinarily be paid within seven days of receipt of a written
request. American National reserves the right to defer payment of any partial
and full Surrenders, refunds or Policy Loans which would be derived from a
Premium payment made by a check which has not cleared the banking system.
Payments may also be postponed in certain other circumstances. (See
"Postponement of Payments" on page 23.) The Policyowner may decide the form in
which the benefits will be paid. During the Insured's lifetime, the Policyowner
may arrange for the Death Benefit proceeds to be paid in a lump sum or under one
or more of the optional methods of payment described below. These choices are
also available if the Policy is surrendered. If no election is made, American
National will pay the benefits in a lump sum.
When Death Benefits are payable in a lump sum and no election of an optional
method of payment is in force at the death of the Insured, the Beneficiary may
select one or more of the optional methods of payment.
An election or change of method of payment must be in writing. A change in
Beneficiary revokes any previous settlement election. Further, if the Policy is
assigned, any amount due to the assignee will first be paid in one sum. The
balance, if any, may be applied under any payment option. Once payments have
begun, the payment option may not be changed.
Optional Methods of Payment
In addition to a lump sum payment of benefits under the Policy, any proceeds
to be paid under the Policy may be paid in any of four methods. Any amount left
with American National for payment under a settlement option will be transferred
to our General Account and will not be affected by the investment performance
associated with the Separate Account. American National may make other options
available in the future.
When proceeds become payable in accordance with a settlement option, the Policy
will be exchanged for a supplementary contract specifying all rights and
benefits. The effective date will be the date of the Insured's death or other
termination of the Policy.
Should the Beneficiary die before all proceeds have been paid, the remaining
proceeds will be paid either to the estate of the Beneficiary or in any other
manner provided for in the supplementary contract or as otherwise provided for
under applicable law.
The Policyowner may elect to have the proceeds of this Policy paid under any of
the payment options described below.
Option 1. Installments for a Fixed Period. Equal installments will be paid for a
fixed number of years. Installments will include interest at the effective rate
of 2.5% per year. At American National's option, additional interest may be
paid.
Option 2. Installments for a Fixed Period and Life Thereafter. Equal monthly
installments will be paid for as long as the payee lives with installments
certain for a fixed period. The fixed period may be 10 years, 20 years, or until
the sum of all the installments equals the net sum payable.
Option 3. Installments of a Fixed Amount. Equal annual, semiannual, quarterly,
or monthly installments will be paid. The sum of the installments paid in one
year must be at least $40.00 for each $1,000.00 of proceeds. Installments will
be paid until the total of the following amounts is exhausted: (1) the net sum
payable; plus (2) interest at the effective rate of 2.5% per year; plus (3) any
additional interest that American National may elect to pay. The final
installment shall be the balance of the proceeds payable plus interest, and may
be more or less than the other installments.
Option 4. Interest Payment. American National will hold the proceeds at
interest. Interest will be paid at the effective rate of 2.5% per year.
Additional interest may be paid at American National's option. On interest due
dates, an amount of at least $100.00 may be withdrawn from the amount held. If
the amount held falls below $2,000.00, American National will pay the entire
amount held to the payee.
GENERAL PROVISIONS FOR SETTLEMENT OPTIONS
Typically, the first installment under Option l, 2 or 3 will be paid as of the
date the proceeds are available. The first installment may be postponed for up
to ten (10) years, but only with American National's consent. If it is
postponed, the proceeds payable will accumulate with compound interest at the
effective rate of 2.5% per year. Additional interest may be paid at American
National's option.
To avoid paying installments of less than $20.00 each, American National may:
a) change the installments to a quarterly, semi annual or annual basis;
and/or
b) reduce the number of installments.
If the Policyowner elects an option, the Policyowner may restrict the
Beneficiary's right to assign, encumber, or obtain the discounted present value
of any unpaid amount.
Except to the extent permitted by law, unpaid amounts are not subject to any
claims of a Beneficiary's creditors. In no case may a Beneficiary receive the
discounted present value of installments payable under Option 2. At American
National's option, a Beneficiary may be permitted to receive the commuted
present value of installments under the other options. The effective interest
rate used to compute discounted present value is equal to the interest rate used
in computing the settlement option, plus 1%.
If the payee dies after payments have started under Option l or 2, American
National will pay the discounted present value of any unpaid fixed-period
installments to the payee's estate; under Option 3 or 4, American National will
pay any balance held by American National to the payee's estate. With American
National's consent, the option elected may provide for payment in another
manner.
Election of an option where proceeds are to joint or successive payees or
proceeds are payable to other than a natural person may be made only with the
consent of American National.
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CHARGES AND DEDUCTIONS
American National may realize a profit on any charge or deduction under the
Policy. Any such profit may be used for any purpose, including the payment of
distribution costs.
Premium Charges
Tax Expense Charge. After the first Policy Year, Premiums paid will be reduced
by a 4% charge prior to allocation among the Subaccounts or the Fixed Account.
This charge is to reimburse American National for State premium taxes, federal
deferred acquisition cost taxes and related administrative expenses.
Monthly Deduction
On each Monthly Deduction Date, the Monthly Deduction will be deducted from the
Accumulation Value of the Policy to compensate American National for the
insurance provided and for tax related expenses. Each of these charges is
described in more detail below. The Monthly Deduction will be allocated among
the Subaccounts and the Fixed Account in the same proportion as the Accumulation
Value in each Subaccount and the Fixed Account, bears to the total Accumulation
Value on that date. Because portions of the Monthly Deduction, such as the cost
of insurance, can vary from month to month, the Monthly Deduction itself may
vary in amount from month to month.
Cost of Insurance Charge
This charge is deducted from the Policy's Accumulation Value on each Monthly
Deduction Date, as part of the Monthly Deduction. The cost of insurance charge
compensates American National for providing insurance protection under your
Policy. Currently, the cost of insurance charge for a Policy is calculated as a
percentage of the Accumulation Value on the Monthly Deduction Date. The charge
is based on the duration of the insurance, which is determined separately for
the Specified Amount at issue and for any increase in Specified Amount. To
determine the cost of insurance, Accumulation Value will be allocated
proportionately based on Specified Amounts to the original and increase
insurance segments. We may, at our discretion, change the cost of insurance
charges. However, the cost of insurance charge deducted on a Monthly Deduction
Date is guaranteed not to exceed the amount calculated using the guaranteed cost
of insurance rates set forth in the Policy for that date. The guaranteed cost of
insurance rate for a Monthly Deduction Date under a Policy depends on the
Insured's sex and age on the first day of a Policy Year. The maximum cost of
insurance charge for a Monthly Deduction Date is equal to the Policy's net
amount at risk multiplied by the guaranteed cost of insurance rate for that
date. The net amount at risk on any Monthly Deduction Date is the Death Benefit
which would be payable on the Monthly Deduction Date less the Accumulation Value
on the Monthly Deduction Date after deducting the Tax Expense Charge and Annual
Fee.
Tax Expense Charge
This charge is included in the Monthly Deduction to reimburse American National
for tax expenses associated with Premium paid in the first Policy Year. The
annual rate of this charge is guaranteed not to exceed 0.40% of the Accumulation
Value attributable to premium paid in the first Policy Year. The Accumulation
Value attributable to premium paid in the first Policy Year is calculated as the
First Year Premium Percentage times the Accumulation Value on the Monthly
Deduction Date. Currently, there is no tax expense charge after the tenth policy
year.
The First Year Premium Percentage is recalculated every time Premium is paid.
During the first Policy Year and prior to receiving any Premium after the first
Policy Year, the First Year Premium Percentage is one. When Premium is paid
after the first Policy Year, the First Year Premium Percentage is calculated as
(a) multiplied by the result of one minus the quotient of (b) divided by (c),
where (a) is the First Year Premium Percentage immediately before receipt of the
Premium, (b) is the amount of the additional Premium paid, and (c) is the
Policy's total Accumulation Value immediately after receipt of the additional
Premium. For example, assume the Policyowner paid $10,000 of Premium at issue
followed by $5,000 in on Policy Anniversaries 2 and 3 and the Accumulation Value
grows by 5% each year. The First Year Premium Percentage would change as
follows:
(c) Accumulation First Year
(a) Prior First Year (b) Premium Value Immediately Premium
Year Premium Percentage Amount after Premium Percentage
1 100.00% $10,000 $10,000 100.00%
2 100.00% $ 5,000 $15,500 67.74%
3 67.74% $ 5,000 $21,275 51.82%
Asset Charge
An asset charge will be deducted from the Accumulation Value at an annual rate
of 1.25%. Such is to compensate American National for administrative and
distribution expenses and for mortality and expense risks assumed in connection
with the Policy. The mortality risk assumed by American National is that
Insureds as a class may live for a shorter time than assumed (necessitating a
greater amount of Death Benefit payments) and that fees deducted may not prove
sufficient to cover actual costs. The expense risk assumed is that expenses
incurred in issuing and administering the Policies will exceed the charges
provided for in the Policies.
For Accumulation Value held in the Fixed Account or the General Account, the
asset charge will be deducted on each Monthly Deduction Date. For Accumulation
Value held in the Separate Account, the asset charge will be deducted on each
Valuation Date that American National is open for business. The daily charge
will be deducted from the net asset value of each Subaccount, on each Valuation
Date. Where the previous day or days was not a Valuation Date, the deduction on
the Valuation Date will be calculated as (a) raised to the (b) power, minus one,
where (a) is one plus the annual rate and (b) is the number of days since the
last Valuation Date divided by 365.
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Annual Fee
A $35.00 annual fee will be assessed on the first Monthly Deduction Date of each
Policy Year. Currently, the annual fee is waived when the Accumulation Value
exceeds $50,000 on the Monthly Deduction Date.
Portfolio Company Annual Expenses
Amounts invested in the Subaccounts will be subject to the Eligible Portfolio
annual expenses shown on page 7.
Surrender Charge
If a Policy is totally surrendered or lapses or a partial withdrawal is made,
American National may assess a surrender charge based upon the amount of Premium
withdrawn and the amount of the Surrender Premium shown on the Policy Data Page.
Surrender Premiums are calculated separately for the original Specified Amount
and for each increase in Specified Amount.
Withdrawals of Accumulation Value are made in the following order. First, the
Free Withdrawal Amount as defined below is withdrawn. Once withdrawals exceed
the Free Withdrawal Amount, then withdrawals are made from Surrender Premiums,
on a first paid, first withdrawn basis. Finally, when withdrawals exceed both
earnings and Surrender Premiums, then withdrawals are made from Premiums paid in
excess of the total Surrender Premium, on a first paid, first withdrawn basis.
At any time, the Free Withdrawal Amount, equal to the greater of (i)
Accumulation Value less the sum of Premiums not previously withdrawn plus
outstanding Policy Debt, or (ii) Accumulation Value multiplied by the Free
Withdrawal Percentage, may be withdrawn without a Surrender Charge. The Free
Withdrawal Percentage is reset at the beginning of each Policy Year to 10%. Each
time a withdrawal is made, the Free Withdrawal Percentage is reduced by the
percentage withdrawn, which is the amount of the withdrawal divided by the
Accumulation Value immediately prior to the withdrawal.
Surrenders of amounts in excess of the Free Withdrawal Amount include a return
of Premium that may be subject to a surrender charge. For any Surrender Premium
returned, a Surrender Charge is imposed based upon the number of years since the
Surrender Premium was paid. The Policy's Surrender Premium will be reduced to
reflect any Surrender Premium on which a Surrender Charge is paid. The Surrender
Charge is a percentage of the Surrender Premium withdrawn. There are no
Surrender Charges for withdrawals of Premiums in excess of the total Surrender
Premium. The Surrender Charge period and the Surrender Charge percentages are
shown in the following table:
Number of Years Since Surrender Charge
Surrender Premium Was Paid Percentage
1 9.00%
2 8.50%
3 8.00%
4 7.00%
5 6.00%
6 5.00%
7 4.00%
8 3.00%
9 2.00%
10 or more 0.00%
Other Charges
Transfer Fee
A transfer fee of $10.00 will be imposed for each additional transfer among the
Subaccounts and Fixed Account after twelve transfers per Policy Year to
compensate American National for the costs of effecting the transfer. This fee
will be deducted from the amount transferred. The amount of the transfer fee
will not be increased.
Charges for Taxes
Currently, no charge will be made against the Separate Account for federal,
state or local income taxes. American National may, however, make such a charge
in the future if income or gains within the Separate Account will incur any
federal, or any significant state or local tax treatment or if tax treatment of
American National changes. Charges for such taxes if any, would be deducted from
the Separate Account and/or the Fixed Account. American National would not
realize a profit on such taxes with respect to the Policies.
Exceptions to Charges
Policy charges and deductions may be reduced for, or additional amounts credited
on, sales of Policies to a trustee, employer, or similar entity representing a
group where American National determines that such sales result in savings of
sales or administrative expenses. In addition, directors, officers and bona fide
full-time employees (and their spouses and minor children) of SM&R and American
National are permitted to purchase Policies with substantial reduction of the
surrender charges, mortality and expense risk fees, or administrative charges.
The Policies may be sold directly, without compensation, to a registered
representative, to employees, officers, directors, and trustees of American
National and its affiliated companies, and spouses and immediate family members
(i.e., children, siblings, parents and grandparents) of the foregoing, and to
employees, officers, directors, trustees and registered representatives of any
broker-dealer authorized to sell the Policies, and spouses and immediate family
members of the foregoing. If sold under these circumstances, a Policy may be
credited, in part or in whole, with any cost savings resulting from the Policy
being sold directly, rather than through an agent with an associated commission,
but only if such credit will not be unfairly discriminatory to any person.
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GENERAL PROVISIONS
The Contract
The Policy, the application, any supplemental applications, and any riders,
amendments or endorsements make up the entire contract. All statements made by
the Insured in the application, in the absence of fraud, are considered
representations and not warranties. Only statements in the application that is
attached to the Policy and any supplemental applications made a part of the
Policy when a change in coverage went into effect can be used to contest a claim
or the validity of the Policy. The President, Vice President or Secretary of
American National must approve any changes in writing. No agent has the
authority to alter or modify any of the terms, conditions or agreements of the
Policy or to waive any of its provisions.
Right to Examine
If you are not satisfied with your Policy, you may return it to our agent or us
within 10 days (or more where required by applicable State insurance law) after
you receive the Policy. We will cancel your Policy as of the date any insurance
became effective and return to you the Premiums paid adjusted by investment
gains or losses, unless state insurance law requires otherwise.
To cancel the Policy, the Policyowner should mail or deliver the actual Policy
form to American National at the Home Office or to the office of one of its
agents. A refund of premiums paid by check may be delayed until the check has
cleared the Policyowner's bank. (See "Postponement of Payments" on page 23.)
Control of Policy
The Policyowner is as shown in the application or subsequent written
endorsement. Subject to the rights of any irrevocable Beneficiary and any
assignee of record, all rights, options, and privileges belong to the
Policyowner, if living; otherwise to any contingent owner or owners, if living;
otherwise to the estate of the last Policyowner to die. If the Policyowner is a
minor, first the Applicant, then the Beneficiary, if living and legally
competent may exercise all rights of ownership.
Beneficiary
The Policyowner may name both primary and contingent Beneficiaries. The
Beneficiary(ies) and their designated class are specified in the application.
Payments will be shared equally among Beneficiaries of the same class unless
otherwise stated. If a Beneficiary dies before the Insured, payments will be
made to any surviving Beneficiaries of the same class; otherwise to any
Beneficiary(ies) of the next class; otherwise to the estate of the Insured.
Change of Beneficiary
The Policyowner may change the Beneficiary by written request on a Change of
Beneficiary form at any time during the Insured's lifetime unless otherwise
provided in the previous designation of Beneficiary. American National, at its
option, may require that the actual Policy form be returned to the Home Office
for endorsement of any change, or that other forms be completed. The change will
take effect as of the date the change is recorded at the Home Office. American
National will not be liable for any payment made or action taken before the
change is recorded. No limit is placed on the number of changes that may be
made.
Change in Policyowner or Assignment
In order to change the owner of the Policy or assign Policy rights, an
assignment of the Policy must be made in writing and filed with American
National at its Home Office. The change will take effect as of the date the
change is recorded at the Home Office, and American National will not be liable
for any payment made or action taken before the change is recorded. Payment of
proceeds is subject to the rights of any assignee of record. No partial or
contingent assignment of the Policy will be permitted. A collateral assignment
is not a change of ownership.
Payment of Proceeds
The proceeds are subject first to any Policy Debt and then to the interest of
any assignee of record. Payments to satisfy any such Policy Debt and to any
assignee shall each be paid in one sum. The balance of any Death Benefit
proceeds shall be paid in one sum to the designated Beneficiary unless an
optional method of payment is selected. If no beneficiary survives the Insured,
the proceeds shall be paid in one sum to the estate of the Insured. Any proceeds
payable on the Maturity Date or upon full surrender shall be paid in one sum
unless an Optional Method of Payment is elected.
Incontestability
The Policy is incontestable after it has been in force during the lifetime of
the Insured for two years from the Date of Issue. An increase in the Specified
Amount after the Date of Issue shall be incontestable after such increase has
been in force during the lifetime of the Insured for two years from its Policy
Date. Any reinstatement of a Policy shall be incontestable only after having
been in force during the lifetime of the Insured for two years after the Policy
Date of the reinstatement.
Misstatement of Age or Sex
If the age or sex of the Insured has been misstated, the amount of the Death
Benefit will be adjusted. The Death Benefit will be adjusted in proportion to
the correct and incorrect cost of insurance rates.
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Suicide
Suicide within two years of the Date of Issue is not covered by the Policy
unless otherwise provided by a state's insurance law. If the Insured, while sane
or insane, commits suicide within two years after the Date of Issue, American
National will pay only the premiums received less any partial surrenders and
Policy Debt. If the Insured, while sane or insane, commits suicide within two
years after the Policy Date of any increase in the Specified Amount, American
National's liability with respect to such increase will only be the total cost
of insurance and expenses paid to date for the increase. If the Insured, while
sane or insane, commits suicide within two years from the Policy Date of
reinstatement, American National's liability with respect to such reinstatement
will only be for the return of cost of insurance and expenses, if any, paid on
or after the reinstatement.
Postponement of Payments
Payment of any amount upon full surrender, partial surrender, Policy loans,
benefits payable at death or maturity, and transfers may be postponed whenever:
(i) the New York Stock Exchange is closed, other than customary week-end and
holiday closings, or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission ("Commission"); (ii) the
Commission, by order, permits postponement for the protection of Policyowners;
or (iii) an emergency exists, as determined by the Commission, as a result of
which, disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's net
assets. Surrenders, loans or partial surrenders from the Fixed Account may be
deferred for up to 6 months from the date of written request.
Dividends
The Policy is non-participating. This means the Policy is not eligible for
dividends and does not participate in any distribution of American National's
surplus.
DISTRIBUTOR OF THE POLICIES
SM&R, One Moody Plaza, Galveston, Texas 77550-7999, a wholly-owned subsidiary of
American National, will act as the principal underwriter of the Policies
pursuant to a Distribution and Administrative Services Agreement between itself
and American National. SM&R was organized under the laws of the State of Florida
in 1964, and is a registered broker/dealer pursuant to the Securities Exchange
Act of 1934 and a member of the National Association of Securities Dealers. (See
the American National Fund's Prospectus.)
Registered representatives of SM&R who sell the Policy will receive commissions
from SM&R based upon a commission schedule. After issuance of the Policy,
broker/dealers will receive sales commissions aggregating to no more than 9.0%
of the Surrender Premiums. Upon any subsequent increase in Specified Amount,
commissions will be paid based on the amount of the increase in Surrender
Premium. SM&R and American National may authorize other registered
broker/dealers and their Registered Representatives to sell the Policies subject
to applicable law.
FEDERAL TAX MATTERS
The following summary provides a general description of the Federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon American National's understanding of
the present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service (the "Service"). No representation is made as to the
likelihood of continuation of the present Federal income tax laws or of the
current interpretations by the Internal Revenue Service. Moreover, no attempt
has been made to consider in detail any applicable state (except premium taxes,
see "CHARGES AND DEDUCTIONS" on page 20) or other tax laws.
If you are contemplating a Policy in connection with a qualified retirement
plan, you should consult a qualified tax adviser.
Tax Status of the Policy
Definition of Life Insurance
Section 7702 of the Internal Revenue Code of 1986, as amended ("Code") defines a
life insurance contract for Federal income tax purposes.
The Section 7702 definition can be met if a life insurance contract satisfies
either one of two tests set forth in that section. The manner in which these
tests should be applied to certain features of the Policy is not directly
addressed by Section 7702 or proposed regulations issued under that section. The
presence of these Policy features, the absence of final regulations, and the
lack of other pertinent interpretations of Section 7702, thus create some
uncertainty about the application of Section 7702 to the Policy.
Nevertheless, American National believes that it is reasonable to conclude that
the Policy qualifies as a life insurance contract for federal tax purposes, so
that the death benefit should be fully excludible from the gross income of the
beneficiary under Section 101(a)(1) of the Code and the Policyowner should not
be considered in constructive receipt of the Surrender Value, including any
increases, unless and until they are distributed from the Policy.
If a Policy were determined not to be a life insurance contract for purposes of
Section 7702, such Policy would not provide most of the tax advantages normally
provided by a life insurance contract. American National thus reserves the right
to make changes in the Policy if such changes are deemed necessary to attempt to
assure its qualification as a life insurance contract for tax purposes.
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Diversification and Investor Control
Section 817(h) of the Code requires that the investments of each of the Sub-
Accounts must be "adequately diversified" in accordance with Treasury
regulations in order for the Policy to qualify as a life insurance contract
under the Code. The Subaccounts, through the Eligible Portfolios, intend to
comply with the diversification requirements prescribed in Treas. Reg. (S)
1.817-5, which affect how an Eligible Portfolio's assets are to be invested.
American National believes that the Subaccounts will, therefore, meet the
diversification requirements, and American National will monitor continued
compliance with this requirement.
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
subaccounts used to support their contracts. In those circumstances, income and
gains from the subaccount assets would be includible in the variable contract
owner's gross income. The IRS has stated in published rulings that a variable
contract owner will be considered the owner of subaccount assets if the contract
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury Department has also
announced, in connection with the issuance of regulations concerning
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor (i.e., the Policyowner), rather than the
insurance company, to be treated as the owner of the assets in the account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts without being treated as owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of subaccount assets. For example, the
investment objective of certain Eligible Portfolios may be narrower and a
Policyowner has additional flexibility in allocating purchase payments and
Policy values. These differences could result in a Policyowner being treated as
the owner of a pro rata portion of the assets of the Subaccounts. In addition,
American National does not know what standards will be set forth, if any, in the
regulations or rulings that the Treasury Department has stated it expects to
issue. American National therefore reserves the right to modify the Policy as
necessary to attempt to prevent a Policyowner from being considered the owner of
a pro rata share of the assets of the Subaccounts.
Tax Treatment of Policy Benefits
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
General
American National Life believes that the proceeds and Policy Accumulation Value
increases of a Policy should be treated in manner consistent with a fixed-
benefit life insurance contract for Federal income tax purposes. Thus, the death
benefit under the Policy should be excludable from the gross income of the
beneficiary under Section 101(a)(1) of the Code.
Depending on the circumstances, the exchange of a Policy, a Policy loan, a
partial surrender, a surrender, a change in ownership, or an assignment of the
Policy may have Federal income tax consequences. In addition, Federal, state and
local estate, transfer, and other tax consequences of ownership or receipt of
Policy proceeds depend on the circumstances of each Policyowner or Beneficiary.
If the Policy is used in connection with tax-qualified retirement plans, certain
limitations prescribed by the Service on, and rules with respect to the taxation
of, life insurance protection provided through such plans may apply.
The Policy may continue after the Insured attains age 100. The tax consequences
associated with continuing a Policy beyond age 100 are unclear. A qualified tax
adviser should be consulted on this issue.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuance plans, split dollar insurance plans,
executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement. Moreover, in
recent years, Congress has adopted new rules relating to corporate owned life
insurance. Any business contemplating the purchase of a new life insurance
contract or a change in an existing contract should consult a qualified tax
adviser.
Generally, the Policyowner will not be deemed to be in constructive receipt of
the Policy Accumulation Value, including increments thereof, until there is a
distribution. Upon a full surrender or lapse of a Policy, the excess, if any, of
the amount received plus the amount of indebtedness over the total investment in
the contract will generally be taxed as ordinary income. The tax consequences of
other distributions from, and loans taken from or secured by, a Policy depend on
whether the Policy is classified as a "Modified Endowment Contract'' ("MEC").
You should be aware that, in almost all cases, the Policy will be a MEC.
Modified Endowment Contracts
Section 7702A establishes a class of life insurance contracts designated as
"Modified Endowment Contracts." In general, a Policy will be a MEC if at any
time during the first seven Policy Years the sum of Premiums paid exceeds the
sum of the net level premiums that would have been paid on or before such time
if the Policy provided for paid-up future benefits after the payment of seven
level annual premiums. While classification as a MEC will depend on the
individual circumstances of each Policy, in almost all cases the Policy is
expected to be a MEC. The determination of whether a Policy will be a MEC after
a material change generally depends upon the relationship of the Death Benefit
and Policy Accumulation Value at the time of such change and the additional
premiums paid in the seven years following the material change. If a Policy is
not a MEC, since the rules relating to whether that Policy could become a MEC as
the result of a proposed Policy transaction are complex and cannot be fully
described in the limited confines of this summary, Policyowners should consult
with a qualified tax adviser to determine whether such a Policy transaction will
cause the Policy to be treated as a MEC.
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Distributions from Policies Classified as Modified Endowment Contracts
Policies classified as MECs will be subject to the following tax rules: First,
all distributions, including distributions upon surrender and withdrawal, up to
the excess, if any, of the Policy Accumulation Value immediately before the
distribution over the investment in the contract (described below) at such time
are treated as ordinary income subject to tax. Second, a 10 percent additional
income tax is imposed on the portion of any distribution from a MEC that is
included in income except where the distribution is made on or after the
Policyowner attains age 59 1/2, is attributable to the Policyowner's becoming
disabled, or is part of a series of substantially equal periodic payments for
the life (or life expectancy) of the Policyowner or the joint lives (or joint
life expectancies) of the Policyowner and the Policyowner's beneficiary. Third,
loans taken from or secured by a MEC are treated as distributions and taxed
accordingly. Past due loan interest that is added to the loan amount is treated
as a loan.
If a Policy becomes a MEC after it is issued, distributions made during the
Policy Year in which it becomes a MEC, distributions in any subsequent Policy
Year and distributions within two years before the Policy becomes a MEC will be
subject to the tax treatment described above. This means that a distribution
from a Policy that is not a MEC could later become taxable as a distribution
from a MEC.
Distributions From Policies Not Classified as Modified Endowment Contracts
Any Policy issued in exchange for a MEC will be subject to the tax treatment
accorded to a MEC. However, American National believes that any Policy issued in
exchange for a life insurance contract that is not a MEC generally will not be
treated as a MEC if the Death Benefit of the Policy is greater than or equal to
the death benefit of the contract being exchanged. The payment of any premiums
at the time of or after the exchange may, however, cause the Policy to become a
MEC. A Policyowner may, of course, choose not to exercise the right to make
additional payments in order to prevent a Policy from being treated as a MEC.
If your Policy is not a MEC, distributions from the Policy are generally treated
as first recovering the investment in the contract (described below) and then,
only after the return of all such investment in the contract, as distributing
taxable income. In the first 15 years after the Policy is issued, an exception
to this general rule occurs when there is a decrease in the Policy's death
benefit or any other change that reduces future benefits under the Policy and
that results in a cash distribution to the Policyowner in order for the Policy
to continue complying with the Section 7702 definitional limits. Such a cash
distribution will be taxed in whole or in part as ordinary income (to the extent
of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a MEC are not treated as
distributions. Instead, such loans are treated as indebtedness of the
Policyowner.
Finally, the 10 percent additional tax is not imposed on distributions from
(including distributions upon surrender) nor loans from, or secured by, a Policy
that is not a MEC.
Policy Loan Interest
Interest paid on any loan under a Policy generally is not deductible. A
Policyowner should consult a tax adviser before deducting any Policy loan
interest.
Investment in the Contract
Investment in the contract means: (i) the aggregate amount of any premiums or
other consideration paid for a Policy, minus (ii) the aggregate amount received
under the Policy that is excluded from gross income of the Policyowner (except
that the amount of any loan from, or secured by, a Policy that is a MEC will be
disregarded to the extent such amount is excluded from gross income), plus (iii)
the amount of any loan from, or secured by, a Policy that is a MEC to the extent
that such amount is included in the gross income of the Policyowner.
Multiple Policies
All MEC that are issued by American National (or its affiliates) to the same
Policyowner during any calendar year are treated as one MEC for purposes of
determining the amount includible in the gross income under Section 72(e) of the
Code.
Possible Legislative Changes
The President's Budget Proposal has recommended legislation in 1998 that, if
enacted, would adversely modify the federal taxation of certain insurance and
annuity contracts. For example, one proposal would tax transfers among
investment options and tax exchanges involving variable contracts. A second
proposal would reduce the "investment in the contract" under cash value life
insurance and certain annuity contracts, thereby increasing the amount of income
for purposes of computing gain. Although the likelihood of legislative changes
is uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or other means. Moreover, it is also possible
that any change could be retroactive (that is, effective prior to the date of
the change). You should consult a qualified tax adviser with respect to
legislative developments and their effect on the Policy.
Taxation of American National
At the present time, American National makes no charge for any Federal, state or
local taxes that it incurs that may be attributable to the Subaccounts or to the
Policies. American National, however, reserves the right in the future to make
additional charges for any such tax or other
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economic burden resulting from the application of the tax laws that it
determines to be properly attributable to the Subaccounts or to the Policies. If
any tax charges are made in the future, they will be accumulated daily and
transferred from the applicable Subaccount to American National's General
Account. Any investment earnings on tax charges accumulated in a Subaccount will
be retained by American National.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
American National holds the assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from the General Account
assets, except for the Fixed Account and assets securing Policy loans. American
National maintains records of all purchases and redemptions of shares of
Eligible Portfolios by each of the Subaccounts.
VOTING RIGHTS
All of the assets held in the Subaccounts of the Separate Account will be
invested in shares of the corresponding Eligible Portfolios. American National
is the legal holder of those shares and as such has the right to vote to elect
the Board of Directors of the Eligible Portfolio, to vote upon certain matters
that are required by the 1940 Act to be approved or ratified by the shareholders
of a mutual fund, and to vote upon any other matter that may be voted upon at a
shareholders' meeting. To the extent required by law, American National will
vote all shares of Eligible Portfolios held in the Separate Account at regular
and special shareholder meetings in accordance with instructions received from
Policyowners. The number of votes for which each Policyowner has the right to
provide instructions will be determined as of the record date selected by the
Board of Directors of the American National Fund, the Fidelity Funds, the MFS
Fund, the T. Rowe Price Funds, the Van Eck Fund, the Federated Fund or the
Lazard Fund, as the case may be. American National will furnish Policyowners
with the proper forms, materials and reports to enable them to give it these
instructions.
The number of shares of an Eligible Portfolio in a Subaccount for which
instructions may be given by a Policyowner is determined by dividing the
Accumulation Value held in that Subaccount by the net asset value of one share
in the corresponding Eligible Portfolio. Fractional shares will be counted.
Shares of an Eligible Portfolio held in each Subaccount for which no timely
instructions from Policyowners are received and shares of an Eligible Portfolio
held in each Subaccount which do not support Policyowner interests will be voted
by American National in the same proportion as those shares in that Subaccount
for which timely instructions are received. Voting instructions to abstain on
any item to be voted will be applied on a pro rata basis to reduce the votes
eligible to be cast. Should applicable federal securities laws or regulations
permit, American National may elect to vote shares of the Eligible Portfolios in
its own right.
Matters on which Policyowners may give voting instructions include the
following: (1) election of the Board of Directors of the American National Fund,
the Fidelity Funds, the T. Rowe Price Series, the MFS Variable Insurance Trust,
the Van Eck Worldwide Insurance Trust, the Federated Insurance Series or the
Lazard Retirement Series; (2) ratification of the independent accountant of the
American National Fund, the Fidelity Funds, the T. Rowe Price Series, the MFS
Variable Insurance Trust, the Van Eck Worldwide Insurance Trust, the Federated
Insurance Series or the Lazard Retirement Series; (3) approval of the Investment
Advisory Agreement for the Eligible Portfolio(s) corresponding to the
Policyowner's selected Subaccount(s); (4) any change in the fundamental
investment Policies of the Eligible Portfolio(s) corresponding to the
Policyowner's selected Subaccount(s); and (5) any other matter requiring a vote
of the shareholders of the American National Fund, the Fidelity Funds, the T.
Rowe Price Series, the MFS Variable Insurance Trust, the Van Eck Worldwide
Insurance Trust, the Federated Insurance Series or the Lazard Retirement Series
under the 1940 Act.
Disregard of Voting Instruction. American National may, if required by state
insurance officials, disregard voting instructions if those instructions would
require shares to be voted to cause a change in the subclassification or
investment objectives or policies of one or more of the Eligible Portfolios, or
to approve or disapprove an investment adviser or principal underwriter for the
Eligible Portfolios. In addition, American National itself may disregard voting
instructions that would require changes in the investment objectives or policies
of any Eligible Portfolio or in an investment adviser or principal underwriter
for the Eligible Portfolios, if American National reasonably disapproves those
changes in accordance with applicable federal regulations. If American National
does disregard voting instructions, it will advise Policyowners of that action
and its reasons for the action in the next annual report or proxy statement to
Policyowners.
STATE REGULATIONS OF AMERICAN NATIONAL
American National, a stock life insurance company organized under the laws of
Texas, is subject to regulation by the Texas Department of Insurance. On or
before March 1 of each year an NAIC convention blank covering the operations and
reporting on the financial condition of American National and the Separate
Account as of December 31 of the preceding year must be filed with the Texas
Department of Insurance.
Periodically, the Texas Department of Insurance examines the liabilities and
reserves of American National and the Separate Account and certifies their
adequacy. A full examination of American National's operations is also conducted
periodically by the National Association of Insurance Commissioners.
In addition, American National is subject to the insurance laws and regulations
of other states within which it is licensed or may become licensed to operate.
The Policies offered by the Prospectus are available in the various states as
approved. Generally, the Insurance Department of any other state applies the
laws of the state of domicile in determining permissible investment. However,
differences in state laws may require American
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National to offer a Policy in one or more states which has suicide,
incontestability, refund provisions and surrender charges which are more
favorable to a Policyowner than provisions in a Policy offered in other states.
PREPARING FOR YEAR 2000
Like all financial services providers, American National utilizes systems and
relies on service providers, including the Eligible Portfolios, that may be
affected by Year 2000 transition issues. American National has developed, and is
in the process of implementing, a Year 2000 transition plan, and is confirming
that its service providers are also so engaged. The resources that are being
devoted to this effort are substantial. It is difficult to predict with
precision whether the amount of resources ultimately devoted, or the outcome of
these efforts, will have any negative impact on American National. However, as
of the date of this prospectus, it is not anticipated that Policyowners will
experience negative effects on their Accumulation Value, or on the services
provided in connection therewith, as a result of Year 2000 transition
implementation. American National currently anticipates that its systems will be
Year 2000 compliant on or about [January 1, 1999], but there can be no assurance
that American National will be successful, or that interaction with other
service providers will not impair American National's services at that time.
LEGAL MATTERS
All matters of Texas law pertaining to the Policy, including the validity of the
Policy and American National's right to issue the Policy under Texas Insurance
Law, have been passed upon by Greer, Herz and Adams, L.L.P., General Counsel.
LEGAL PROCEEDINGS
American National and its affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, American National believes that
at the present time there are not pending or threatened lawsuits that are
reasonably likely to have a material adverse impact on the Separate Account or
American National.
EXPERTS
The consolidated financial statements of American National Insurance Company and
subsidiaries as of December 31, 1996 and December 31, 1995 and for the year then
ended, included in the registration statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said report.
Actuarial matters included in the Prospectus have been examined by Rex D. Hemme,
as stated in the opinion filed as an exhibit to the registration statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Account, American National and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the Policy
and other legal instruments are summaries. For a complete statement of the terms
thereof reference is made to such instruments as filed.
FINANCIAL STATEMENTS
The financial statements of American National should be considered only as
bearing on the ability of American National to meet its obligations under the
Policies. They should not be considered as bearing on the investment performance
of the assets held in the Separate Account. No financial statements of the
Separate Account have been included in this Prospectus because, as of the date
of this Prospectus, the Subaccounts funding the Polices had no assets or
liabilities.
27
<PAGE>
MANAGEMENT OF AMERICAN NATIONAL INSURANCE COMPANY
NAME AND POSITION(S) WITH PRINCIPAL OCCUPATIONS LAST FIVE YEARS
AMERICAN NATIONAL INSURANCE COMPANY AND OTHER POSITIONS HELD
- --------------------------------------------------------------------------------
ROBERT L. MOODY President, January 1996 to present,
Chairman of the Board, Director, Chairman of the Board, April 1982 to
President and present, Chief Executive Officer,
Chief Executive Officer July 1991 to present, and Director,
March 1960 to present, American
National. Director, September 1985 to
present, ANREM Corporation. Director
and President, 1982 to present, Moody
Bancshares, Inc. Director and
President, 1988 to present, Moody
Bank Holding Company, Inc. President,
1980 to 1993, Chairman of the Board,
Director and Chief Executive Officer,
1980 to present, The Moody National
Bank of Galveston. Chairman of the
Board and Director, 1971 to present,
National Western Life Insurance
Company. Trustee, 1955 to present,
The Moody Foundation. Director, 1954
to present, Gal-Tex Hotel
Corporation. Chairman of the Board
and Director of Transitional Learning
Community at Galveston; Chairman of
the Board and Director of The Moody
Endowment.
G.R. FERDINANDTSEN Senior Executive Vice President and
Senior Executive Vice President Chief Operating Officer, April 1997
and Chief Operating Officer to present, Senior Executive Vice
President and Chief Administrative
Officer, April 1996 to April 1997. Senior
Vice President, Health Insurance
Operations, April 1993 to April 1996,
Senior Vice President, Director of Group
Insurance, July 1990 to April 1993,
American National. Vice President, Health
Insurance Operations, April 1993 to
present, American National Life Insurance
Company of Texas. Director, November 1992
to present, American National Property
and Casualty Company. Director, November
1992 to present, American National
General Insurance Company. Director,
April 1978 to present, McMarr Properties
(formerly American Securities Company).
Director, April 1992 to present,
McCreless Foundation. Director, January
1985 to present, United Land. Director,
June 1993 until company was merged in
December 1994, Commonwealth Life and
Accident Insurance Company. Underwriter,
March 1994 to present, American National
Lloyds Insurance Company. Director, 1995
to present, Pacific P & C, Inc. Director,
January 1996 to present, Standard Life
and Accident Insurance Company.Senior
Executive Vice President and Chief
Operating Officer
IRWIN M. HERZ, JR. Director, 1984 to present, American
Director National. Partner, March 1980 to
present, Greer, Herz & Adams, L.L.P.,
General Counsel to American National.
Trustee, April 1971 to present, Three
R Trusts. Director, April 1983 until
company was merged in December 1994,
Commonwealth Life and Accident
Insurance Company. Director, June
1992 to present, Garden State Life
Insurance Company. Director of
American National Property and
Casualty Company.
R. EUGENE LUCAS Director, April 1981 to present,
Director American National. President and
Director, March 1971 to present, Gal-Tex
Hotel Corporation. President and
Director, March 1971 to present, Gal-
Tenn Hotel Corporation. President and
Director, May 1985 to present, Gal-Tex
Management Company. President and
Director, November 1995 to present, Gal-
Tex Woodstock, Inc. Director, November
1982 to present, Securities Management
and Research, Inc. Director, September
1982 to present, ANREM Corporation.
Director, March 1985 to present, Colonel
Museum, Inc.
HAROLD C. MacDONALD Director, April 1982 to present,
Director American National. Comptroller,
December 1962 to present, The Moody
Foundation. Director, November 1982
to present, American National
Property and Casualty Company.
Director, November 1982 to present,
American National General Insurance
Company. Director, March 1981 to
August 1996, Seal Fleet, Inc.
Director, 1995 to present, Pacific
Property and Casualty, Inc.
E. DOUGLAS McLEOD Director, April 1984 to present,
Director American National. Director, 1986 to
present, ANREM Corporation.
Director, October 1979 to present,
National Western Life Insurance
Company. Director, June 1984 to
present, Independent County Mutual
Fire Insurance Company of Texas.
Attorney. Director of Development,
May 1982 to present, The Moody
Foundation. Owner of McLeod
Properties. Past Member of State
House of Representatives of the
State of Texas. Chairman and
Director, 1988 to present, Moody
Gardens, Inc. Vice President and
Director, 1985 to present, Colonel
Museum, Inc. Director, 1983 to
present, Center for Transportation
and Commerce.
FRANCES ANNE MOODY Director, April 1987 to present,
Director American National. Executive
Director, January 1998 to present,
and Regional Grants Advisor,
September 1996 to present, The Moody
Foundation. Director, 1990 to
present, National Western Life
Insurance Company. Executive
Director, 1991 to present, The Moody
Endowment. Investments, Dallas, Texas.
RUSSELL S. MOODY Director, April 1986 to present,
Director American National. Director, 1988 to
March 1996, National Western Life
Insurance Company. Director, 1981 to
present, Gal-Tex Hotel Corporation.
Director, 1982 to 1996, Seal Fleet,
Inc.
28
<PAGE>
WILLIAM L. MOODY IV Director, March 1951 to present,
Director American National. Director, January
1969 to March 1996, Advisory
Director, March 1996 to present, The
Moody National Bank of Galveston.
President and Director, May 1959 to
present, Moody Ranches, Inc.
Director, November 1969 to present,
American National Life Insurance
Company of Texas. Board of Trustees,
1970 to present, Rosenberg Library.
Director, 1970 to present,
University of Texas Medical Branch
Development Board.
JOE MAX TAYLOR Director, April 1992 to present,
Director American National. Sheriff, 1980 to
present, Galveston County, Texas.
Director and President, 1988 to present,
Moody Gardens, Inc. Director, 1985 to
present, Transitional Learning Community
at Galveston. President, 1981 to present,
Galveston County Bail-Bond Board.
Director, 1981 to present, Fifty Club
Board of Galveston. Director, 1992 to
present, Landry's Seafood Restaurants,
Inc. Pre-Trial Release Board of Galveston
County 1982 to present. Chairman, 1993 to
present, Juvenile Crime Prevention-
Intervention Task Force. President's
Cabinet, 1994 to present, University of
Texas Medical Branch.
R.A. FRUEND Executive Vice President, Director of
Executive Vice President Ordinary Agencies, April 1989 to
present, American National. Director
and Vice President, April 1989 to
present, American National Life
Insurance Company of Texas.
Director, November 1979 to present,
American National Property and
Casualty Insurance Company.
Director, November 1981 to present,
American National General Insurance
Company. Director, November 1988 to
present, Securities Management and
Research, Inc. Director, 1995 to
present, Pacific P & C, Inc.
Director, November 1988 to present,
American National Insurance Service
Company. Director, December 1995 to
present, ANPAC Lloyds Insurance
Management, Inc. Director, December
1995 to present, American National
Lloyds Insurance Company.
B.J. GARRISON Executive Vice President, Director of
Executive Vice President Home Service Division, April 1991 to
present, American National. Director,
February 1993 until company was
merged in December 1994, Commonwealth
Life and Accident Insurance Company.
M.W. McCROSKEY Executive Vice President-Investments,
Executive Vice President 1995 to present, and Senior Vice
President-Real Estate and Mortgage
Loans, 1986 to 1995, American
National. Director, June 1977 to
present, and President, October 1986
to present, ANREM Corporation.
Assistant Secretary, December 1986
to present, American National Life
Insurance Company of Texas. Vice
President, May 1988 to present,
Standard Life and Accident Insurance
Company. President and Director,
1995 to present, ANTAC, Inc.
President, Chief Executive Officer
and Director, 1994 to present,
Securities Management and Research,
Inc. President and Director, 1994 to
present, American National Funds
Group. President and Director, 1994
to present, SM&R Capital Funds, Inc.
President and Director, 1994 to
present, American National
Investment Accounts, Inc. Vice
President, 1995 to present, Pacific
P & C, Inc. Vice President, May 1994
to present, Garden State Life
Insurance Company. Vice President,
June 1994 to present, American
National Property and Casualty
Company. Vice President, June 1994
to present, American National
General Insurance Company.
J.E. POZZI Executive Vice President, Independent
Executive Vice President Markets, April 1996 to present.
Senior Vice President, Corporate Planning
and Development, June 1992 to April 1996,
American National. Vice President, April
1993 to present, American National Life
Insurance Company of Texas.
R.J. WELCH Executive Vice President and Chief
Executive Vice President Actuary, April 1996 to present.
Senior Vice President and Chief
Actuary, April 1986 to April 1996,
American National. Director,
December 1987 to present, Standard
Life and Accident Insurance Company.
Director, November 1987 to present,
American National Property and
Casualty Company. Director, November
1987 to present, American National
General Insurance Company. Director,
November 1986 to present, Actuary,
April 1980 to present, and Senior
Vice President, April 1990 to
present, American National Life
Insurance Company of Texas. Vice
President, until company was merged
in December 1994, Commonwealth Life
and Accident Insurance Company.
Chairman of the Board and Director,
June 1992 to present, Garden State
Life Insurance Company. Director,
1995 to present, Pacific P & C, Inc.
Director, December 1995 to present,
American National Insurance Service
Company.
C.H. ADDISON Senior Vice President, Systems Planning
Senior Vice President and Computing, April 1978 to present,
American National. Director, November
1981 to present, American National
Property and Casualty Company. Director,
November 1981 to present, American
National General Insurance Company.
Director, 1995 to present, Pacific P & C,
Inc. Director, January 1996 to present,
Standard Life and Accident Insurance
Company.
A.L. AMATO Senior Vice President, Life Policy
Senior Vice President Administration, April 1994 to
present, Vice President, Life Policy
Administration, April 1984 to April
1994, American National. Vice
President, May 1984 to present,
American National Life Insurance
Company of Texas. Vice President,
August 1992 to present, Director,
August 1992 to December 1993, and
Advisory Director, December 1993 to
present, Garden State Life Insurance
Company. Director, August 1992 until
company was merged in December 1994,
Commonwealth Life and Accident
Insurance Company.
29
<PAGE>
G.C. LANGLEY Senior Vice President, Human
Senior Vice President Resources, November 1995 to present.
Vice President, Assistant Personnel
Director, April 1983 to November
1995. Assistant Vice President, Equal
Employment Opportunity/Affirmative
Action Program Coordinator, April
1976 to April 1983, and Assistant
Vice President, Personnel Placement
Director, April 1969 to April 1976,
American National.
G.L. NOELLE Senior Vice President, Health
Senior Vice President Operations, April 1996 to present,
American National. Executive Vice
President, February 1994 to April
1996, Philadelphia American Life
Insurance Company. Senior Vice
President, October 1992 to January
1994, Accel International.
S.E. PAVLICEK Senior Vice President and Controller,
Senior Vice President and April 1996 to present, Vice President
Controller and Controller, 1994 to April 1996,
and Assistant Vice President -
Financial Reports, 1983 to 1994,
American National. Assistant
Treasurer, 1995 to present, ANTAC,
Inc. Controller, June 1992 to
present, Garden State Life Insurance
Company. Controller, August 1994 to
present, American National Life
Insurance Company of Texas.
J.R. THOMASON Senior Vice President, Credit
Senior Vice President Insurance Services, April 1987 to
present, American National.
G.W. TOLMAN Senior Vice President, Corporate
Senior Vice President Affairs, April 1996 to present, and
Vice President, Corporate Affairs,
April 1976 to April 1996, American
National.
V.E. SOLER, JR. Vice President, Secretary and
Vice President, Secretary and Treasurer, 1994 to present, and Vice
Treasurer President and Controller, March,
1984 to 1994, American National.
Treasurer, October 1984 to present,
ANREM Corporation. Treasurer, April
1984 to present, Controller, April
1984 to August 1994, and Secretary,
August 1994 to present, American
National Life Insurance Company of
Texas. Assistant Secretary, January
1996 to present, Standard Life and
Accident Insurance Company.
Secretary, 1995 to present, ANTAC,
Inc. Secretary and Treasurer, August
1994 to present, Garden State Life
Insurance Company. Assistant
Secretary, August 1994 to present,
American National Property and
Casualty Company. Assistant
Secretary, American National General
Insurance Company.
The principal business address of
each person listed above is American
National Insurance Company, One
Moody Plaza, Galveston, Texas
77550-7999.
30
<PAGE>
APPENDIX A
Illustrations of Death Benefits and Policy Values
The tables in Appendix A illustrate the way in which a Policy operates. The
tables show how the Accumulation Values, Surrender Values and Death Benefits of
a Policy issued to an Insured of a given age and specified underwriting risk
classification who pays the given premium would vary over time if the investment
return on the assets held in each Eligible Portfolio of the Separate Account was
a uniform, gross, after-tax annual rate of 0%, 6% or 12%. The tables on pages 68
through 71 illustrate a Policy issued to an age 45 male under a standard tobacco
non-user underwriting risk classification. The Accumulation Values, Surrender
Values and Death Benefits would be different from those shown if the gross
annual investment rates of return averaged 0%, 6% and 12% over a period of
years, but fluctuated above and below those averages for individual Policy
Years, or if the Insured were assigned to a different underwriting risk
classification, or if the Policyowner makes additional premium payments.
The amounts shown for the Death Benefits, Surrender Values and Accumulation
Values take into account an estimated average daily charge for investment
advisory and other expenses of the Eligible Portfolios at an annual rate of
0.90% of the net assets of the Separate Account. The illustrated gross annual
investment rates of return of 0%, 6% and 12% were computed after deducting these
amounts and correspond to approximate net annual rates of -0.90%, 5.10% and
11.10%.
In addition, the Death Benefits, Surrender Values and Accumulation Values take
into account the (1) tax expense charge equal to an annual rate of 0.40% for the
first ten Policy Years; (2) daily asset charge equal to an annual rate of 1.25%
of Account Value attributable to the Separate Account; (3) any Surrender Charge
which may be applicable in the first nine Contract Years.
The second column of the tables shows the accumulated value of the premiums paid
at five percent. The following columns show the Death Benefits, Surrender Values
and the Accumulation Values for uniform hypothetical rates of return shown in
these tables. The tables on pages 68 and 70 are based on the current cost of
insurance rates in addition to the charges mentioned above. These reflect the
basis on which American National currently sells its policies. The maximum cost
of insurance rates allowable under the Policy are based upon the 1980
Commissioner's Standard Ordinary Smoker and Non-smoker, Male and Female
Mortality Tables. The Death Benefits, Surrender Values and Accumulation Values
shown in the tables on pages 69 and 71 are based on the assumption that the
maximum allowable cost of insurance rates are charged throughout the life of the
Policy.
The hypothetical values shown in the tables do not reflect any tax charges
attributable to the Separate Account, since American National is not currently
making such charges. However, such charges may be made in the future, and in
that event, the gross annual investment rate of return would have to exceed 0%,
6% or 12% by an amount sufficient to cover the tax charges in order to produce
the Death Benefits and values demonstrated. (See "FEDERAL TAX MATTERS" on page
23.)
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all Net Premiums are allocated to the Separate Account, and if no Policy loans
have been made. The tables are also based on the assumptions that the Specified
Amount has not been changed, that no partial Surrenders have been made, and that
no transfer charges have been incurred. Illustrated values would be different if
the proposed Insured were female, a smoker, in substandard risk classification,
or were another age, or if a higher or lower premium was illustrated.
Upon request, American National will provide a comparable illustration based
upon the proposed Insured's age, sex and underwriting classification, the
Specified Amount, and the Premium requested.
31
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE LIFE INSURANCE
ILLUSTRATION OF DEATH BENEFITS AND POLICY VALUES
CURRENT CHARGES AND DEDUCTIONS *
Male Issue Age 65
Initial Premium at Issue = $10,000
<TABLE>
<CAPTION>
VALUES ASSUMING A HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
--------------------------------------------------------------------------------------------------
0% (-0.90% NET) 6% (5.10% NET) 12% (11.10% NET)
- ------------------------------------------------------------------------------------------------------------------------------------
End of Premiums
Policy Accumulated Accumulation Surrender Death Accumulation Surrender Death Accumulation Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
2 11,025 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
3 11,576 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
4 12,155 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
5 12,763 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
6 13,401 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
7 14,071 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
8 14,775 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
9 15,513 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
10 16,289 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
11 17,103 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
12 17,959 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
13 18,856 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
14 19,799 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
15 20,789 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
16 21,829 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
17 22,920 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
18 24,066 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
19 25,270 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
20 26,533 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
25 33,864 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
30 43,219 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
</TABLE>
* (See "CHARGES AND DEDUCTIONS" on page 20)
** The Policy is lapsed.
The Death Benefit at age 100 and thereafter equals the Accumulation Value.
The illustration assumes no Policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN NOR A SUGGESTION THAT SUCH RESULTS WILL BE ACHIEVED. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, DIFFERENT
RETURNS OF ELIGIBLE PORTFOLIOS, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6% OR
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS THE ACCUMULATION VALUE, DEATH BENEFIT AND
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE.
32
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE LIFE INSURANCE
ILLUSTRATION OF DEATH BENEFITS AND POLICY VALUES
GUARANTEED CHARGES AND DEDUCTIONS*
Male Issue Age 65
Initial Premium at Issue = $10,000
<TABLE>
<CAPTION>
VALUES ASSUMING A HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
--------------------------------------------------------------------------------------------------
0% (-0.90% NET) 6% (5.10% NET) 12% (11.10% NET)
- ------------------------------------------------------------------------------------------------------------------------------------
End of Premiums
Policy Accumulated Accumulation Surrender Death Accumulation Surrender Death Accumulation Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
2 11,025 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
3 11,576 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
4 12,155 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
5 12,763 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
6 13,401 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
7 14,071 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
8 14,775 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
9 15,513 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
10 16,289 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
11 17,103 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
12 17,959 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
13 18,856 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
14 19,799 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
15 20,789 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
16 21,829 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
17 22,920 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
18 24,066 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
19 25,270 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
20 26,533 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
25 33,864 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
30 43,219 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
</TABLE>
* (See "CHARGES AND DEDUCTIONS" on page 20)
** The Policy is lapsed.
The Death Benefit at age 100 and thereafter equals the Accumulation Value.
The illustration assumes no Policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN NOR A SUGGESTION THAT SUCH RESULTS WILL BE ACHIEVED. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, DIFFERENT
RETURNS OF ELIGIBLE PORTFOLIOS, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6% OR
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS THE ACCUMULATION VALUE, DEATH BENEFIT AND
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE.
33
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE LIFE INSURANCE
ILLUSTRATION OF DEATH BENEFITS AND POLICY VALUES
CURRENT CHARGES AND DEDUCTIONS *
Female Issue Age 65
Initial Premium at Issue = $10,000
<TABLE>
<CAPTION>
VALUES ASSUMING A HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
--------------------------------------------------------------------------------------------------
0% (-0.90% NET) 6% (5.10% NET) 12% (11.10% NET)
- ------------------------------------------------------------------------------------------------------------------------------------
End of Premiums
Policy Accumulated Accumulation Surrender Death Accumulation Surrender Death Accumulation Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
2 11,025 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
3 11,576 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
4 12,155 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
5 12,763 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
6 13,401 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
7 14,071 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
8 14,775 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
9 15,513 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
10 16,289 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
11 17,103 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
12 17,959 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
13 18,856 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
14 19,799 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
15 20,789 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
16 21,829 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
17 22,920 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
18 24,066 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
19 25,270 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
20 26,533 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
25 33,864 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
30 43,219 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
</TABLE>
* (See "CHARGES AND DEDUCTIONS" on page 20)
** The Policy is lapsed.
The Death Benefit at age 100 and thereafter equals the Accumulation Value.
The illustration assumes no Policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN NOR A SUGGESTION THAT SUCH RESULTS WILL BE ACHIEVED. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, DIFFERENT
RETURNS OF ELIGIBLE PORTFOLIOS, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6% OR
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS THE ACCUMULATION VALUE, DEATH BENEFIT AND
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE.
34
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE LIFE INSURANCE
ILLUSTRATION OF DEATH BENEFITS AND POLICY VALUES
GUARANTEED CHARGES AND DEDUCTIONS*
Female Issue Age 65
Initial Premium at Issue = $10,000
<TABLE>
<CAPTION>
VALUES ASSUMING A HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF
--------------------------------------------------------------------------------------------------
0% (-0.90% NET) 6% (5.10% NET) 12% (11.10% NET)
- ------------------------------------------------------------------------------------------------------------------------------------
End of Premiums
Policy Accumulated Accumulation Surrender Death Accumulation Surrender Death Accumulation Surrender Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
2 11,025 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
3 11,576 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
4 12,155 Xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
5 12,763 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
6 13,401 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
7 14,071 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
8 14,775 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
9 15,513 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
10 16,289 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
11 17,103 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
12 17,959 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
13 18,856 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
14 19,799 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
15 20,789 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
16 21,829 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
17 22,920 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
18 24,066 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
19 25,270 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
20 26,533 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
25 33,864 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
30 43,219 xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx xx,xxx
</TABLE>
* (See "CHARGES AND DEDUCTIONS" on page 20)
** The Policy is lapsed.
The Death Benefit at age 100 and thereafter equals the Accumulation Value.
The illustration assumes no Policy loan or partial withdrawal has been made.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF
RETURN NOR A SUGGESTION THAT SUCH RESULTS WILL BE ACHIEVED. ACTUAL RATES OF
RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF
FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICYOWNER, DIFFERENT
RETURNS OF ELIGIBLE PORTFOLIOS, PREVAILING INTEREST RATES AND RATES OF
INFLATION. NO REPRESENTATIONS CAN BE MADE BY AMERICAN NATIONAL THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME. ALTHOUGH THE ACTUAL RATES OF RETURN MAY AVERAGE 0%, 6% OR
12% OVER A PERIOD OF YEARS, IF THEY HAVE FLUCTUATED ABOVE OR BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS THE ACCUMULATION VALUE, DEATH BENEFIT AND
SURRENDER VALUE WOULD BE DIFFERENT FROM THOSE SHOWN ABOVE.
35
<PAGE>
Exhibit 99.B6a
AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN NATIONAL INSURANCE COMPANY
Pursuant to the applicable provision of the Texas Business Corporation Act
and the Texas Insurance Code, American National Insurance Company adopts the
following Articles of Amendment to its Restated Articles of Incorporation:
ARTICLE ONE
The name of the corporation is AMERICAN NATIONAL INSURANCE COMPANY.
ARTICLE TWO
A new Article, to be numbered ARTICLE X of the Restated Articles of
Incorporation, was adopted by the shareholders of the corporation on April 29,
1988. The full text of the new ARTICLE X being added to the Restated Articles
of Incorporation reads as follows:
"ARTICLE X
"A director of the Company shall not abe personally liable to the Company
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except for liability:
"(i) for any breach of director's duty of loyalty to the Company or
its shareholders,
"(ii) for acts or omissions not in good faith or that involves
intentional misconduct or a knowing violation of the laws,
"(iii) for any transaction from which a director received an
improper benefit, whether or not the benefit resulted from an
action taken within the scope of the director's office,
"(iv) for any act or omission for which the liability of a director
is expressly provided for by statute, or
"(v) for an act related to an unlawful stock repurchase or
payment of a dividend."
ARTICLE THREE
<PAGE>
The number of shares of the corporation outstanding at the time of such
adoption was 28,267,340; and the number of shares entitled to vote thereon was
28,267,340.
ARTICLE FOUR
The number of shares voted for such amendment was 21,471,433; and the
number of shares voted against such amendment was 89,944.
DATED: May 27, 1988.
AMERICAN NATIONAL INSURANCE COMPANY
By: Orson C Clay
_____________________
Orson C. Clay
President
By: Jean N. Bell
---------------------
Jean N. Bell
Assistant Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF GALVESTON (S)
I, Cheri Brown, a Notary Public, do hereby certify that on the 27th day of
May, 1988, personally appeared before me ORSON C CLAY, known to me to be the
person whose name is subscribed to the foregoing document and, being by me first
duly sworn, declared to me that he is President of the corporation and that he
executed the foregoing document in the capacity therein stated, and he declared
that the statements therein contained are true and correct.
IN WITNESS WHEREOF I have hereunto set my hand and seal of office this 27th
day of May, 1988.
Cheri Brown
-------------------------
Notary Public in and for
The State of Texas
2
<PAGE>
Cheri Brown
Printed or Typed Name of Notary
My commission expires: 2-21-89
3
<PAGE>
RESTATED ARTICLES OF INCORPORATION
(with Amendments)
OF
AMERICAN NATIONAL INSURANCE COMPANY
1. American National Insurance Company (the "Corporation") hereby
restates and amends its previously filed Restated Articles of Incorporation,
restating the entire text of its Restated Articles of Incorporation, and
amending such Restated Articles of Incorporation as set forth herein (such
Restated and amended Restated Articles of Incorporation, all prior amendments,
and the amendments effected hereby being called the "Restated Articles").
2. These Restated Articles accurately copy the Articles of Incorporation
and all amendments thereto that are in effect to date and as further amended by
these Restated Articles, and contain no other changes of a substantive nature in
any provision thereof, except for the following:
(a) Article VI of the previously filed Restated Articles of Incorporation
is hereby amended by these Restated Articles to decrease and reclassify
the authorized capital stock of the Corporation from 62,000,000 common
shares (such 62,000,000 common shares being previously classified into
50,000,000 shares of Class A Common Stock with a par value of $1 per
share and 12,000,000 shares of nonvoting Class B Common Stock with a
par value of $1 per share) to 50,000,000 shares of voting common stock
having a par value of $1 per share (of which at least 50% has been
fully subscribed and fully paid for), and deleting all of the
previously authorized 12,000,000 shares of nonvoting Class B Common
Stock (none of which has been issued), as more fully described in such
Article VI.
(b) The amendment made by these Restated Articles has been effected in
conformity with the applicable provisions of the Texas Business
Corporation Act and the Texas Insurance Code.
3. These Restated Articles were duly adopted by the shareholders of the
Corporation at a special stockholder's meeting held on January 3, 1979.
4. The number of shares of the Corporation outstanding and entitled to
vote on these Restated Articles was 32,793,416; the number of such shares voted
FOR and the number of such shares voted AGAINST such Restated Articles was as
follows:
Percentage Percent of Total
FOR AGAINST for Adoption Outstanding Shares
--- ------- ------------ ------------------
32,793,416 -0- 100% 100%
4
<PAGE>
5. The previously filed Restated Articles of Incorporation, are hereby
superseded in their entirety by the following Restated Articles:
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN NATIONAL INSURANCE COMPANY
ARTICLE I
The name of the Corporation is AMERICAN NATIONAL INSURANCE COMPANY.
ARTICLE II
The names of the initial incorporators, all of Galveston, Texas, are shown
below:
W.L. Moody, Jr.
I.H. Kempner
M.O. Kopperl
ARTICLE III
The location of the Home Office of the Corporation shall be Galveston,
Galveston County, Texas.
ARTICLE IV
The purpose for which the Corporation is formed is to transact the
following types of insurance business:
A. Life insurance business, involving the payment of money or other thing
of value, conditioned on the continuance or cessation of human life, or
involving an insurance, guaranty, contract or pledge for the payment of
endowments or annuities.
B. Accident insurance business, involving the payment of money or other
thing of value, conditioned upon the injury, disablement or death of
persons resulting from general accident or from traveling by land, air,
or water.
C. Health insurance business, involving the payment of any amount of money,
or other thing of value, conditioned upon loss by reason of disability
caused by sickness or ill health.
5
<PAGE>
D. Legal services insurance, involving the issuance of legal services
contracts on individual, group, or franchise bases.
ARTICLE V
The period of duration of the Corporation is five hundred (500) years.
ARTICLE VI
The total number of shares of stock which the Corporation shall have
authority to issue is 50,000,000 shares of voting common stock with a par value
of $1 each.
ARTICLE VII
32,793,416 shares of common stock of the Corporation having full voting
rights have been fully subscribed, are fully paid for and are presently
outstanding. All of such outstanding shares are hereby designated and shall
continue to constitute shares of the voting common stock of the Corporation.
ARTICLE VIII
No holder of any of the voting common stock of the corporation, whether now
or hereafter authorized and issued, shall be entitled as a matter of right to
purchase or subscribe for (1) any unissued shares of stock of any class, or (2)
any additional shares of any class, common or preferred, authorized to be
issued, or (3) any bonds, certificates of indebtedness, debentures, or other
securities convertible into stock of the Corporation, or carrying any right to
purchase stock of any class, but any such unissued stock or such additional
authorized issue of any stock or of other securities convertible into stock, or
carrying any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors of the Corporation to such persons, firms,
corporations or associations and upon such terms as may be deemed advisable by
such Board of Directors in the exercise of its discretion.
ARTICLE IX
At each election for Directors every holder of voting common stock entitled
to vote at such election shall have the right to vote, in person or by proxy,
the number of shares owned by him for as many persons as there are Directors to
be elected and for whose election the stockholder has a right to vote. It is
expressly prohibited for any stockholder to cumulate his votes in any election
of Directors.
DATED 1/3/79
AMERICAN NATIONAL INSURANCE COMPANY
6
<PAGE>
By: Orson C Clay
--------------------------------
Orson C Clay, President
C.D. Thompson
--------------------------------
C. D. Thompson, Secretary
THE STATE OF TEXAS (S)
(S)
COUNTY OF GALVESTON (S)
I, Mildred Jones, a Notary Public, do hereby certify that on this 3rd day
of January, 1979, personally appeared before me ORSON C. CLAY, who declared he
is the President of the Corporation executing the foregoing document, and being
first duly sworn, acknowledged that he had signed the foregoing document in the
capacity therein set forth, and declared that the statements therein contained
are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this day and year
before written.
Mildred Jones
----------------------------
Notary Public in and for
Galveston County, Texas
My Commission Expires:
November 30, 1980
7
<PAGE>
Exhibit 99.B6b
AMERICAN NATIONAL INSURANCE COMPANY
GALVESTON, TEXAS
BYLAWS
ARTICLE I
Name and Object
Section 1. The name of this corporation shall be American National Insurance
Company (the "Company"), and its object shall be to transact a life insurance
business, making contracts upon any and all conditions appertaining to or
connected with life risks. The Company shall also transact the business of
issuing accident and health insurance and credit insurance, conditioned upon the
injury, disablement, or death of the insured resulting from accident or illness,
and the business of issuing legal services contracts on an individual, group, or
franchise basis. The Company may also reinsure any risk insured by the Company
with any other solvent life, accident and health company, and it may also
reinsure the risks insured of other life, health and accident companies or
purchase and take over all or part of the risks of such companies.
ARTICLE II
Home Office
Section 1. The general Home Office of the Company shall be in the City of
Galveston, Galveston County, Texas.
ARTICLE III
Stockholders
Section 1. The Annual Meeting of the Stockholders shall be held in the City of
Galveston, Texas, or at such other place within or without the State of Texas as
may be, from time to time determined by the Board of Directors, on April 30 of
each year (provided that if April 30 is a legal holiday, then such meeting shall
be held on Friday immediately preceding such legal holiday) or on such other day
prior to April 30 as shall be determined from time to time by the Board of
Directors.
Each Stockholder shall be entitled to one vote for each share of the subscribed
Capital Stock standing in his name on the books of the Company, which vote may
be cast in person or by proxy.
A majority of the subscribed Capital Stock represented at any meeting of the
Stockholders shall constitute a quorum.
<PAGE>
At said Annual Meeting the Stockholders shall elect fourteen (14) Directors, or
such other number of Directors not less than seven (7), nor more than fifteen
(15), as the Board of Director shall, from time to time, determined, who shall
hold their office for one year, and until their successors are elected. It
shall require a majority vote of the Capital Stock represented at such meeting
to elect a Director, and such Director need not be a citizen of Texas or a
Stockholder of the Company.
The Chairman of the Board or President shall call special meetings of the
Stockholders whenever, in his judgment, it is necessary and shall call a special
meeting when requested to do so by a majority of the Directors, or by
Stockholders holding or representing not less than thirty-five percent (35%) of
the outstanding stock.
Notice of special meetings shall be given by the Secretary to all Stockholders,
in person, or by mailing such notice to the last known address of the
Stockholders, at least ten (10) days in advance of the date for such meeting.
ARTICLE IV
Officers
Section 1. The officers of this corporation shall consist of a Chairman of the
Board, a President, one or more Senior Executive Vice Presidents, one or more
Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, a
Controller, one or more Assistant Controllers, one or more Actuaries, one or
more Assistant Actuaries, a Medical Director, and General Counsel, all of whom
shall be elected by the Board of Directors. One person may hold more than one
office, except that the offices of President and Secretary may not be held by
the same person.
Section 2. The Board of Directors may from time to time create additional
offices and elect persons to fill such posts, and the Board may appoint such
committees as it may deem appropriate or necessary. The Board may delegate to
any officer or committee such duties as it may deem appropriate.
Section 3. The employment and salary of all officers shall be from month to
month.
ARTICLE V
Directors
Section 1. The Directors shall hold an Annual Meeting for the election of
officers and such other business that may come before them immediately upon the
adjournment of the Annual Stockholders' Meeting, and they shall also have four
(4) regular meetings, and the first three (3) of which shall be held on the last
Thursday of the months of February, July and October and the fourth of which
shall
2
<PAGE>
be held on the second or third Friday of December as the Directors shall
determine; provided that if any of such last Thursdays shall fall on a holiday
observed by the Company, then such meeting shall be held on the weekday
immediately preceding such holiday; and provided further that the Board may, at
any special or regular meeting, cancel one or more subsequent regular meetings
or it may reschedule the date of one or more subsequent regular meetings, and
the Chairman of the Board and the President, acting jointly between meetings,
may cancel or reschedule not more than two (2) successive regular meetings; but
in any event, the Secretary shall give notice to all Directors that one or more
specified regular meetings have been canceled or rescheduled for stated dates;
and such notice shall be given by the Secretary to each Director, in person, by
telephone or by mailing such notice to the last address of the Director, such
notice to be given as soon as practicable after cancellation or rescheduling of
one or more such regular meetings.
A special meeting of the Directors may be held at any time, upon call of the
Chairman of the Board, the President, or upon call of a majority of the members
of the Board of Directors. Notice of such special meeting shall be given by the
Secretary to each Director, in person, by telephone, or by mailing such notice
to the last address of the Director at least four (4) days in advance of the
date of such meeting.
Quorum
Section 2. A majority of the duly elected Directors shall constitute a quorum
for the transaction of business.
Place of Meeting
Section 3. All meetings of the Directors shall be held at the office of the
Company in the City of Galveston, or at such other place designated by the Board
of Directors.
Filling of Vacancies
Section 4. Should any vacancy occur in the Directorship, the same may be filled
for the unexpired term by a majority of the remaining Directors.
Finance Committee
Section 5. The Board of Directors may appoint a Finance Committee consisting of
not less than five (5) officers or directors of the Company. The members of
such Finance Committee shall serve at the pleasure of the Board of Directors.
Such Finance Committee shall have the authority to approve and authorize for and
on the Company's behalf (1) investments and loans permitted by the Texas
Insurance Code and regulations thereunder, and (2) all purchases, sales and
other transactions of any kind including or relating to real estate or interest
in real estate. Such Finance Committee shall also be charged with the duty of
supervising all of the Company's investments and loans.
3
<PAGE>
It shall require three (3) or more members of the Finance Committee to
constitute a quorum at any meeting of the Finance Committee, and its every
decision must receive a majority vote of those present, and in no case less than
three (3) affirmative votes. Such Finance Committee shall keep minutes of all
of its meetings, fully reflecting all actions taken by it, which shall be
recorded in a permanent minute book.
In the exercise of its authority and the discharge of its duty, such Finance
Committee shall have the right to appoint one or more subcommittees and to
delegate to such subcommittees authority to make minor investments and small
loans, not to exceed a predetermined dollar amount, and to act on matters not
involving material investment decisions without prior approval of the Finance
Committee.
The Finance Committee shall determine the number and appoint the membership of
each such subcommittee, and the detailed authority of each shall be fully set
forth in the resolutions creating each and amendments thereto. There shall be
included in such resolutions requirements that:
(a) at least one member of each subcommittee shall also be a member of
the Finance Committee; (b) that the presence of at least four (4)
members of each subcommittee shall be necessary to constitute a
quorum at any meeting thereof; and (c) that no affirmative action
shall be authorized without at least three (3) affirmative votes.
The Finance Committee shall carefully supervise all operations of its
subcommittees and shall periodically review all actions taken by them.
Executive Committee
Section 6. The Board of Directors may, by resolution adopted by a majority of
the whole Board, create an Executive Committee and designate the members
thereof. All members of such Committee shall serve at the pleasure of the Board.
The Executive Committee shall have such powers and shall perform such duties as
the Board may delegate to it by resolution from time to time; provided, however
that such Committee shall have no authority with respect to matters where action
of the Board of Directors is required to be taken by the provisions of the Texas
Business Corporation Act or other applicable law.
The Executive Committee shall be organized and shall perform its functions as
directed by the Board of Directors, and minutes of all meetings of the Executive
Committee shall be kept in a book provided for such purpose. Any action taken
by the Executive Committee within the course and scope of its authority shall be
binding on the Company.
The membership of the Executive Committee may, from time to time, be increased
or decreased and the powers and duties of the Committee may, from time to time,
be changed by the Board of
4
<PAGE>
Directors as it may deem appropriate. The Executive Committee may be abolished
at any time by the vote of a majority of the whole Board of Directors.
Dividends
Section 7. The Board of Directors may, from time to time, declare and order
paid out of the Company's current earnings or surplus or both, dividends, either
in cash or stock, as it may determine to be in the best interest of the Company.
ARTICLE VI
Duties of Officers
Chairman of the Board
Section 1. The Chairman of the Board shall be the Chief Executive Officer of
the Company and shall preside at all meetings of the Stockholders and Board of
Directors. He shall have general and active management responsibilities for the
b usiness and affairs of the Company, and shall see that all orders and
resolutions of the Board are carried into effect. He shall also do such other
things, perform such other duties and have such other powers as the bylaws, the
Board of Directors or Executive Committee may from time to time prescribe.
President
Section 2. The President shall be the Chief Administrative Officer of the
Company, his activities as such subject to the direction and approval of the
Chief Executive Officer, and shall be responsible for the implementation of the
details of managing the administrative affairs of the Company. He shall also do
such other things, perform such other duties and have such other powers as the
bylaws, the Board of Directors or Executive Committee may from time to time
prescribe. The President, in the absence and/or disability of the Chairman of
the Board, shall perform the duties and exercise the powers of the Chairman of
the Board.
Senior Executive Vice Presidents
Section 3. The Senior Executive Vice Presidents shall perform such duties and
have such powers as the Board of Directors may prescribe. One of such Senior
Executive Vice Presidents shall be the Chief Marketing Officer.
Executive Vice Presidents
Section 4. The Executive Vice President shall perform such duties and have such
powers as the Board of Directors may prescribe.
5
<PAGE>
Senior Vice Presidents
Section 5. Senior Vice Presidents shall perform such duties and have such
powers as the Board of Directors may prescribe.
Vice Presidents
Section 6. Vice Presidents shall perform such duties and have such powers as
the Board of Directors may prescribe.
Assistant Vice Presidents
Section 7. Assistant Vice Presidents shall perform such duties and have such
powers as the Board of Directors may prescribe.
Secretary
Section 8. The Secretary shall be custodian of all the Company's records, books
and papers and shall see that the books, reports, statements, certificates and
all other documents and reports required by law are properly executed and filed.
He shall keep such other records and reports as the Board of Directors may
prescribe, and render reports as may be called for by the Chairman of the Board
or the President. He shall have custody of the corporate seal with authority to
affix the same, attested by his signature, to all instruments requiring
execution under seal, and shall act with the Chairman of the Board and the
President in the general care and supervision of the Company's business. He
shall attend the meetings of the Stockholders, Board of Directors, and Finance
Committee, keeping a full account of their proceedings, and furnishing such
information, accounts, and papers as may be required and calling to their
attention any matter coming under his province on which their action is needed.
He shall perform such other duties and have such other powers as the Board of
Directors may prescribe.
Assistant Secretaries
Section 9. The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors, shall in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. He, or they, as the case may be, shall perform such
other duties and have such other powers as the board of Directors may prescribe.
Treasurer
Section 10. The Treasurer shall receive, in the name of the Company, all monies
due or owing to it from any source whatever, and deposit same in the name and to
the account of the Company in authorized depositories, and he shall keep an
accurate account of all cash transactions of the
6
<PAGE>
Company. He shall perform such duties and have such powers as the Board of
Directors may prescribe.
Assistant Treasurer
Section 11. The Assistant Treasurer, or if there be more than one, the
Assistant Treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer. He, or they, as the case may be, shall perform
such other duties and have such other powers as the Board of Directors may
prescribe.
Controller
Section 12. The Controller shall act as the principal accounting officer in
charge of the general accounting books, accounting records and forms of the
Company; have general supervision of the accounting records and forms of the
Company; have general supervision of the accounting practices of all subsidiary
corporations; obtain from agents and from departments of the Company all reports
needed for recording the general operations of the Company or for supervising or
directing its accounts. He shall cause to be enforced and maintained the
classification and other accounting rules and regulations prescribed by any
regulatory body; cause to be prepared, compiled and filed such statutory
accounting reports, statements, statistics, returns, and other data as may be
required by law, prepare the Company's financial reports, and such reports as
required and submit same to the President.
He shall approve for payment all vouchers, drafts, and other accounts payable
where authorized or approved by the President or persons authorized to do so by
the President; and countersign warrants with the Treasurer or Secretary for
deposit or withdrawal of securities from custodian banks; have charge over
preparation and supervision of budgets; and supervision over the purchasing
functions of the Company, and shall perform such other duties and have such
other powers as the Board of Directors may prescribe.
Assistant Controllers
Section 13. The Assistant Controller, or if there shall be more than one, the
Assistant Controllers, in the order determined by the Board of Directors, shall,
in the absence or disability of the Controller, perform the duties and exercise
the powers of the Controller. He, or they, as the case may be, shall perform
such other duties and have such other powers as the Board of Directors may
prescribe.
Actuary
Section 14. The Actuary, or if there shall be more than one, the Actuaries in
the order determined by the Board of Directors, shall have charge of the
Actuarial Department of the Company, and all special work connected therewith.
He shall make all calculations required in transacting the
7
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insurance operations of the Company, and perform such other duties as shall be
assigned him by the Chairman of the Board, President, or Board of Directors.
Assistant Actuaries
Section 15. The Assistant Actuary, or if there be more than one, the Assistant
Actuaries in the order determined by the Board of Directors shall, in the
absence or disability of the Actuary, perform the duties and exercise the powers
of the Actuary. He, or they, as the case may be, shall perform such other
duties and have such other powers as the Board of Directors may prescribe.
Medical Directors
Section 16. The Medical Director shall have general supervision of the Medical
Department of the Company. He shall make recommendations of medical standards
to be adopted by the Company in the selection of risks. He shall examine, or
cause to be examined, every application for insurance and approve or reject
same; shall examine all proofs of death submitted for his opinion, and shall
perform such other duties as the President or Board of Directors may require.
General Counsel
Section 17. General Counsel, which may be a firm of attorneys, shall, subject
to the instructions of the Board of Directors, have charge and control of the
legal business and affairs of the Company; shall give legal advice pertaining to
the Company's business submitted to Counsel by any officer of the Company, by
the Chairman of the Board of Directors, or by the Chairman of the Finance
Committee; shall prepare or cause to be prepared legal documents and papers for
the Company; shall, at the request of the Chairman of the Board or the
President, attend any meeting of the Board of Directors or the Finance
Committee; and shall perform such other services as are necessary or appropriate
in the discharge of the Counsel's responsibilities with respect to the business
and affairs of the Company.
ARTICLE VII
Designation of Banks and Withdrawal of Funds
Section 1. Jointly, any two (2) of the following officers: The Chairman of the
Board, the President, a Senior Executive Vice President, an Executive Vice
President, the Secretary, or the Treasurer are authorized and directed to
designate the banks in which funds of this corporation shall be deposited, and
the Treasurer shall deposit or cause to be deposited all of its funds in the
banks so selected. Said banks shall pay out such funds on deposit only upon
drafts or checks signed and countersigned by the persons designated for such
purposes.
Section 2. Jointly, any two (2) of the following officers: the Chairman of the
Board, the President, a Senior Executive Vice President, an Executive Vice
President, the Secretary or the Treasurer are
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authorized and directed to designate in writing the persons who are authorized
to sign and countersign the drafts or checks for withdrawal of the funds on
deposit.
ARTICLE VIII
Fidelity Bond
Section 1. The Board of Directors shall require a Fidelity Bond, in an amount
fixed by such Board of Directors and payable to the Company, on all officers and
employees, conditioned that each will well and faithfully discharge the duties
of his office and account for all the Company's monies coming into his hands.
ARTICLE IX
Directors' Fees
Section 1. All Directors who are not full-time salaried officers shall be paid
a basic fee for each year or part of a year they serve as Directors of the
Company. Such basic fee will be set from time to time by the Board, shall be
payable in a lump sum immediately after the election of a Director. In
addition, all Directors who are not full-time salaried officers shall be paid an
amount set by the Board from time to time for each Board meeting or Executive
Committee meeting attended, payable after each meeting. The Board shall also
set from time to time the amount any Director who is a member of the Audit
Committee and/or Compensation Committee of the Board of Directors and who is not
a full-time salaried officer shall be paid per committee meeting attended.
Section 2. All Directors who are full-time salaried officers shall be paid no
fee for attendance at any regular or special meeting of the Board of Directors.
Section 3. The necessary expenses incurred by the Directors in attending the
meetings of the Board of Directors, and also their necessary expenses when
absent from the place of their residence in the discharge of the official duty
of the Company's business shall be paid by the Company.
ARTICLE X
Capital Stock
Section 1. The amount, classes and par value of the stock of this Company shall
be as stated in the Company's Restated Articles of Incorporation, as such
articles may be amended and restated from time to time.
Certificate of Shares
Section 2. Each Stockholder shall be entitled to a certificate or certificates
for the number of shares
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of Capital Stock held by him and fully paid for, signed with the facsimile
signature of the Chairman of the Board or the President and the Secretary,
attested with the facsimile seal of the Company.
All transfer of stock, before effective, shall be made upon the proper books of
the Company, by the written order or request of the Stockholders, and the Board
of Directors may require that the certificate of stock be returned and canceled
before a new certificate is issued in name of the person to whom the transfer is
to be made.
ARTICLE XI
Corporate Seal
Section 1. The seal of the Company shall be as follows:
ARTICLE XII
Amendments
Section 1. The Bylaws may be amended, altered or repealed and additional Bylaws
enacted at any Annual Meeting of the stockholders or any regular meeting of the
Board of Directors, or at any special or rescheduled meeting of either, if in
the notice for such special or rescheduled meeting there is incorporated notice
of the proposed action.
ARTICLE XIII
Indemnification of Officers, Directors,
Employees and Agents
Section 1. (a) The Corporation shall indemnify any person who serves or has
served as a director or officer of the Corporation, or who at the Corporation's
request serves or has served as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary (herein
collectively called "director or officer") of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise (herein collectively called "business
enterprise"), and the respective heirs, administrators, successors and assigns
of any such director or officer against any and all expenses, including
attorneys' fees, judgments, penalties (including excise or similar taxes),
fines, costs and amounts paid in settlement (before or after suit is commenced)
actually and necessarily incurred by any such person in connection with the
defense, settlement or investigation of any actual or threatened claim, action,
suit or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, asserted against such person or at which such person is made a
party by reason of being or having been a director or officer of the Corporation
or such other business enterprise; provided that:
10
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(1) The Corporation shall not indemnify any such person (or his heirs,
administrators, successors or assigns) for obligations resulting from a
proceeding (i) in which the person is found liable on the basis that
personal benefit was improperly received by him, whether or not the
benefit resulted from an action taken in the person's official
capacity, or (ii) in which the person is found liable to the
Corporation, unless and only to the extent indemnification is permitted
by the Court;
(2) In the case of settlement (before or after suit is commenced) of any
actual or threatened action, suit or proceeding in which any such
person is involved by reason of his having been a director or officer,
indemnification shall be provided if the Board of Directors determines,
in a manner set forth herein that such person conducted himself in good
faith and in a manner he reasonably believed: (i) in the case of
conduct in his official capacity as a director of the Corporation, that
his conduct was in the Corporation's best interest; and (ii) in all
other cases that his conduct was at least not opposed to the
Corporation's best interests; and (iii) in the case of any criminal
proceeding, had no reasonable cause to believe his conduct was
unlawful;
(3) A determination of indemnification under Section 1(a)(2) of this
Article shall be made (i) by a majority vote of a quorum consisting of
directors who at the time of the vote are not named defendants or
respondents in the proceeding; (ii) if a quorum cannot be obtained by a
majority vote of a committee of the Board of Directors designated to
act in the matter by a majority vote of all directors consisting solely
of two or more directors who at the time of the vote are not named
defendants or respondents in the proceeding; (iii) by special legal
counsel selected by the Board of Directors or a committee of the Board
by vote as set forth in Subparagraph (i) or (ii) of this Section
1(a)(3), or, if such quorum cannot be obtained and such a committee
cannot be established, by a majority vote of all directors; or (iv) by
the shareholders in a vote that excludes the shares held by directors
who are named defendants or respondents in the proceeding.
(b) Reasonable expenses, including attorney's fees, incurred by a director or
officer who was, is, or is threatened to be made a named defendant or respondent
in a proceeding may be paid or reimbursed by the Corporation in advance of the
final disposition or the proceeding after:
(1) The Corporation received a written affirmation by the director or
officer of his good faith belief that he has met the standard of
conduct necessary for indemnification under this Article and a written
undertaking by or on behalf of the director or officer to repay the
amount paid or reimbursed if it is ultimately determined that he has
not met those requirements; and
(2) A determination that the facts then known to those making the
determination would not preclude indemnification under this Article.
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(c) The written undertaking required by Section 1(b)(1) of this Article must be
an unlimited general obligation of the director or officer, but need not be
secured. It may be accepted without financial ability to make payment.
Determinations and authorization of payments under Section 1(b) must be made in
the manner specified by Section 1(a)(3) of this Article for determining that
indemnification is possible.
(d) The Corporation shall indemnify a director or officer against reasonable
expenses, including costs and attorney's fees, incurred by him in connection
with an action, suit, or proceeding in which he is a party because he is a
director or officer if he has been wholly successful on the merits or otherwise,
in the defense of the action, suit, or proceeding.
(e) The indemnification provided for in this Article is not exclusive of any
other rights to which persons covered by this Article may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise.
The right to indemnification provided under this Article shall inure to the
benefit of the heirs, executors or administrators of any person covered by this
Article.
(f) The Board of Directors shall have the power to abide by resolution for the
indemnification of individual employees or agents who face exceptional risks of
liability because of the nature of their jobs.
(g) Any indemnification of or advance of expenses to a director in accordance
with this Article shall be reported in writing to the shareholders with or
before the notice or waiver of notice of the next stockholders' meeting or with
or before the next submission to stockholders of a consent to action without a
meeting pursuant to Section A, Article 9.10, of the Texas Business Corporation
Act and in any case, within the 12-month period immediately following the date
of the indemnification or advance.
Section 2. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or who is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, other
enterprise, or employee benefit plan, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify him
against that liability under this Article.
Section 3. This Article XIII is intended to provide the fullest indemnification
possible under the law in consistent with the provisions of this Article. If
any provision of this Article or the application of this Article to any person
or circumstance shall be found to be invalid or unenforceable, the remainder of
this Article or the application of this Article to any person or circumstance
which is not invalid or unenforceable shall not be affected and each provision
of this Article shall be valid and enforced to the full extent permitted by law.
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ARTICLE XIV
General Auditor
Section 1. The General Auditor shall assist members of Management in achieving
the most efficient and effective discharge of their responsibilities by
furnishing them with independent and objective analyses, appraisals, and
pertinent comments in order to provide a basis for appropriate corrective action
for the Company and its affiliates, including the recommendation of changes for
the improvement of various phases of their operations. He shall be responsible
for reviewing and appraising the soundness, adequacy, and application of
accounting, financial and operating controls; ascertaining the extent of
compliance with established policies, plans, and procedures; the extent to which
Company and affiliate assets are accounted for and safeguarded from losses of
all kinds; ascertaining the reliability of accounting, financial, and operating
data developed within the Company and its affiliates; appraising the quality of
performance in carrying out assigned responsibilities. He shall report to the
Board of Directors through the President, and shall perform such other duties as
the Board of Directors may prescribe.
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Exhibit 99.B8a
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, entered into on this 1ST day of AUGUST, 1994, among
AMERICAN NATIONAL INSURANCE COMPANY ("Company"), a life insurance company
organized under the laws of the State of Texas, on behalf of itself and AMERICAN
NATIONAL VARIABLE LIFE SEPARATE ACCOUNT ("Separate Account"), a separate account
established by the Company in accordance with the laws of the State of Texas,
AMERICAN NATIONAL INVESTMENT ACCOUNTS, INC. ("Fund"), an open-end management
investment company organized under the laws of the State of Maryland, and
SECURITIES MANAGEMENT AND RESEARCH, INC. ("Distributor"), a Florida corporation.
W I T N E S S E T H:
WHEREAS, the Separate Account has been established by the Company pursuant
to the Texas Insurance Code in connection with certain variable contracts
("Contracts") issued to the public by the Company; and
WHEREAS, the Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940;
WHEREAS, the income, gains and losses, whether or not realized, from assets
allocated to the Separate Account are, in accordance with the applicable
Contracts, to be credited to or charged against such Separate Account without
regard to other income, gains or losses of the Company; and
WHEREAS, the Separate Account is subdivided into various Subaccounts under
which income, gains and losses, whether or not realized, form assets allocated
to each such Subaccount are, in accordance with the applicable Contracts, to be
credited to or charged against such Subaccounts without regard to other income,
gains or losses of other Subaccounts or of the Company; and
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940; and
WHEREAS, the Fund is divided into various series ("Portfolios"), each
Portfolio having a different investment objective and being subject to separate
investment policies and restrictions which may not be changed without the
majority vote of shareowners of such Portfolio; and
WHEREAS, the Fund agrees to make its shares available to serve as
underlying investment media for the Separate Account, with shares of each
Portfolio of the Fund to serve as the underlying investment medium for each of
the various Subaccounts in the Separate Account; and
WHEREAS, Distributor, the principal underwriter for the Contracts to be
funded in the Separate Account, is a broker-dealer registered as such under the
Securities Exchange Act of 1934;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions set forth herein and for other good and valuable
consideration, the Company, the Separate Account, the Fund and the Distributor
hereby agree as follows:
<PAGE>
1. The Contracts funded through the Separate Account will provide for the
allocation of net amounts among the various Subaccounts of the
Separate Account for investment in the shares of the Portfolios of the
Fund underlying each Subaccount. The selection of the particular
Subaccount is to be made by the Contract Owner and such selection may
be changed in accordance with the terms of the Contracts.
2. No representation is made as to the number or amount of such Contracts
to be sold. The Company and the Distributor will make reasonable
efforts to market such Contracts and will comply with all applicable
federal or state laws in connection therewith.
3. Fund shares to be made available to each Subaccount of the Separate
Account shall be sold by each of the respective Portfolio of the Fund
and purchased by the Company for the corresponding Subaccount at the
net asset value (without the imposition of a sales load) next computed
after receipt of each order, as established in accordance with the
provisions of the then current prospectus of the Fund. Shares of a
particular Portfolio shall be ordered in such quantities and at such
times as determined by the Company to be necessary to meet the
requirements of those Contracts issued by the Company in that
Subaccount of the Separate Account for which the Portfolio shares
serve as the underlying investment medium. Orders or payments for
shares purchases will be sent promptly to the Fund and will be made
payable in the manner established from time to time by the Fund for
the receipt of such payments. The Fund reserves the right to delay
transfer of its shares until the payment check has cleared. The Fund
has the obligation to insure that its shares are registered at all
times.
4. Transfer of the Fund's shares will be by book entry only. No stock
certificate will be issued to the Separate Account. Shares ordered
from a particular Portfolio of the Fund will be recorded in an
appropriate title for the corresponding Subaccount of the Separate
Account by the Company.
5. The Fund shall furnish notice promptly to the Company of any dividend
or distribution payable on its shares. All such dividends and
distributions as are payable on each Portfolio's shares in the title
for the corresponding Subaccount of the Separate Account shall be
automatically reinvested in additional shares of that Portfolio. The
Fund shall notify the Company of the number of shares so issued.
6. All expenses incident to the performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall ensure that all
its shares are registered and authorized for issue in accordance with
applicable federal and state laws prior to their purchase for the
Separate Account. The Company shall bear none of the expenses for the
cost of registration of the Fund's shares, preparation of the Fund's
prospectuses, proxy materials and reports, the preparation of all
statements and notices required by any federal or state law, or taxes
on the issue or transfer of the Fund's shares subject to this
Agreement.
7. The Company and the Distributor shall make no representations
concerning the Fund's shares except those contained in the then
current prospectus of the Fund and in printed information subsequently
issued on behalf of the Fund as supplemental to such prospectus.
8. This Agreement shall terminate:
<PAGE>
(a) at the option of the Company or of the Fund upon sixty (60) days'
advance written notice to all other parties to this Agreement;
(b) at the option of the Company if any of the Fund's shares are not
reasonably available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of election to
terminate shall be furnished by the Company;
(c) at the option of the Company upon institution of formal
proceedings against the Fund by the Securities and Exchange
Commission;
(d) upon requisite vote of the Contract Owners having an interest in
a particular Subaccount of the Separate Account to substitute the
shares of another investment company for the corresponding Fund
shares in accordance with the terms of the Contracts for which
those Fund shares had been selected to serve as the underlying
investment medium. The Company will give thirty (30) days' prior
written notice to the Fund of the date of any proposed vote to
replace the Fund shares;
(e) in the event the Fund'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.
Prompt notice shall be given by any party to all other parties in
the event that the conditions stated in this subsection (e) or in
any subsection of this Section 8. should occur.
9. Each notice required by this agreement may be given by wire or
facsimile transmission and confirmed in writing to:
Securities Management and Research, Inc.
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Investment Accounts, Inc.
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Variable Life Separate Account
One Moody Plaza
Galveston, Texas 77550
ATTN: President
American National Insurance Company
One Moody Plaza
Galveston, Texas 77550
ATTN: President
10. This agreement shall be construed in accordance with the laws of the
State of Texas.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
duly executed and attested on the date first stated above.
AMERICAN NATIONAL INSURANCE COMPANY
By: __________________________________________________
Carl R. Robertson, Senior Executive Vice President
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
By: __________________________________________________
Carl R. Robertson, Senior Executive Vice President
AMERICAN NATIONAL INVESTMENT ACCOUNTS, INC.
By: __________________________________________________
Michael W. McCroskey, President
SECURITIES MANAGEMENT AND RESEARCH, INC.
By: __________________________________________________
Michael W. McCroskey, President
<PAGE>
Exhibit 99.B8b
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN NATIONAL INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 16th day of August, 1993 by
and among AMERICAN NATIONAL INSURANCE COMPANY, (hereinafter the "Company"), a
Texas corporation, on its own behalf and on behalf of each segregated asset
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"), and
the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
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 life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1., the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston 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.
1.2 The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and
2
<PAGE>
the Fund shall use reasonable efforts to calculate such net asset value on each
day which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse 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.
1.3 The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 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 1.5, 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.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available
as a funding vehicle for the Contracts prior to the date of this Agreement and
the Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7 The company shall pay for Fund shares on the next business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment
3
<PAGE>
shall be in federal funds transmitted by wire. For purpose of Section 2.10 and
2.11, upon receipt by the Fund of the federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8 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.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income 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
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 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 6:30 p.m.
Boston time) and shall use its best efforts to make such net asset value per
share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 3.75 of the Texas Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
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2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, 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
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Texas and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Texas to the extent required to perform this Agreement.
2.7 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Texas and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Texas and any applicable state and federal securities laws.
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2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by entities subject to the requirements of Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Fund's prospectus shall state that the statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which instructions have
been received;
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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. Participating Insurance Companies shall be responsible for
assuring 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 attached hereto and incorporated herein by this reference, 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 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
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen business
days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not 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 for each Account which are in the public
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domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The 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, application 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
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, 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. FEES AND EXPENSES
5.1 The Fund and Underwriter 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 and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2 All expenses 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
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<PAGE>
for the cost of registration and qualification of the Fund's shares, preparation
and filing of the Fund's prospectus and registration statement, proxy materials
and reports, setting the prospectus in type, setting in type and printing the
proxy materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law, all taxes on the issuance or
transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will 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.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer 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 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 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
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irreconcilable material conflict, up to and including: (1), withdrawing the
assets allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of all
affected Contract owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
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; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by
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a majority of the disinterested members of the Board.
7.7 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
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;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the 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 Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, 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 persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
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<PAGE>
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
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8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or 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
Underwriter or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
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(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
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account whichever is applicable.
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 agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
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(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against 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 or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
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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 by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund 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; or
(c) termination by the Company by written notice to the Fund 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 media of the Contracts issued or to be
issued by the Company; or
(d) termination by the Company by written notice to the Fund 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 if the Company
reasonably believes that the Fund may fail to so qualify; 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 or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that the Company and/or its 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; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith,
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that either the Fund 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;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.6(b) 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 forty-five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 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 opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the 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 Underwriter 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:
82 Devonshire Street
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Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
One Moody Plaza
Galveston, Texas 77550
Attention: Sr. VP & Chief Actuary
with a copy to:
Jerry L. Adams
Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 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.
12.2 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.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate
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governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable life
insurance operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceeding; provided however that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8 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.
12.9 This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.10 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"), as soon as practical and in
any event within 105 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as soon
as practical and in any event within 45 days after the end of each
quarterly 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;
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(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 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 and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY:
AMERICAN NATIONAL INSURANCE
COMPANY
By its authorized officer,
By_____________________________
Title: Vice President and
Chief Actuary
Date: _________________________
FUND:
VARIABLE INSURANCE PRODUCTS
FUND
By its authorized officer,
By:____________________________
Title: Senior Vice President
Date:__________________________
20
<PAGE>
UNDERWRITER:
FIDELITY DISTRIBUTORS
CORPORATION
By its authorized officer,
By:___________________________
Title: President
Date:_________________________
21
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Company's
Board which Established the
Account
Variable Universal Life July 30, 1987
Insurance
Variable Annuity Contracts December 20, 1991
22
<PAGE>
Schedule B
Contracts
1. Contract Forms:
FL89
VA93-NQ
VA93-PQ
GUA93
SPIVA93
23
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. 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 Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter 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 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 Fidelity, 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.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
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 Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties
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<PAGE>
relating to the proposals.)
5. During this time, Fidelity Legal 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 Insurance Company). Contents of envelope sent to Customers by 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 Fidelity Legal.
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 Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareholder. (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 Fidelity 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 "Bertram C. Jones,
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
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<PAGE>
back to Customer with an explanatory letter, 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
"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.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline 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.
Fidelity Legal 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, Fidelity Legal
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.
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Exhibit 99.B8c
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN NATIONAL INSURANCE COMPANY
THIS AGREEMENT, made and entered into this 16th day of August, 1993 by
and among AMERICAN NATIONAL INSURANCE COMPANY, (hereinafter the "Company"), a
Texas corporation, on its own behalf and on behalf of each segregated asset
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"), and
the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts (hereinafter the
"Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
<PAGE>
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
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 life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1., the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston 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.
1.2 The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and
2
<PAGE>
the Fund shall use reasonable efforts to calculate such net asset value on each
day which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse 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.
1.3 The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4 The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5 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 1.5, 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.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available
as a funding vehicle for the Contracts prior to the date of this Agreement and
the Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7 The company shall pay for Fund shares on the next business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment
3
<PAGE>
shall be in federal funds transmitted by wire. For purpose of Section 2.10 and
2.11, upon receipt by the Fund of the federal funds so wired, such funds shall
cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8 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.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income 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
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10 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 6:30 p.m.
Boston time) and shall use its best efforts to make such net asset value per
share available by 7 p.m. Boston time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 3.75 of the Texas Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
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<PAGE>
2.3 The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4 The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5 The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, 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
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Texas and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Texas to the extent required to perform this Agreement.
2.7 The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Texas and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8 The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Texas and any applicable state and federal securities laws.
5
<PAGE>
2.10 The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund, in an amount not less than the minimal coverage as required currently
by entities subject to the requirements of Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1 The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2 The Fund's prospectus shall state that the statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3 The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such portfolio for
which instructions have been
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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. Participating Insurance Companies shall be responsible for
assuring 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 attached hereto and incorporated herein by this reference, 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 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
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen business
days after receipt of such material.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee object to such use
within fifteen Business Days after receipt of such material.
4.4 The Fund and the Underwriter shall not 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
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prospectus for the Contracts as such registration statement and prospectus may
be amended or supplemented from time to time, or in published reports for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the 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, application 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
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, 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. FEES AND EXPENSES
5.1 The Fund and Underwriter 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 and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2 All expenses 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
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Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will 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.
ARTICLE VII. POTENTIAL CONFLICTS
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer 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 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 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
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<PAGE>
majority of the disinterested trustees), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to and including:
(1), withdrawing the assets allocable to some or all of the separate accounts
from the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the Fund,
or submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the assets
of any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
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; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination
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<PAGE>
shall be limited to the extent required by any such material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
7.7 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
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;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. INDEMNIFICATION
8.1 Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the 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 Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, 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 persons under its control) or wrongful
conduct of the Company or persons under its control, with respect to
the
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<PAGE>
sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Company, as limited by and in accordance with the
provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
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8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or 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
Underwriter or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment thereof
or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
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<PAGE>
(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
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account whichever is applicable.
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 agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3 Indemnification By the Fund
8.3(a) The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
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<PAGE>
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against 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 or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d) The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
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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 by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund 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; or
(c) termination by the Company by written notice to the Fund 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 media of the Contracts issued or to be
issued by the Company; or
(d) termination by the Company by written notice to the Fund 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 if the Company
reasonably believes that the Fund may fail to so qualify; 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 or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that the Company and/or its 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; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith,
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that either the Fund 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;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.6(b) 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 forty-five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 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 opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the 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 Underwriter 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:
82 Devonshire Street
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Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
One Moody Plaza
Galveston, Texas 77550
Attention: Sr. VP & Chief Actuary
with a copy to:
Jerry L. Adams
Greer, Herz & Adams, L.L.P.
One Moody Plaza, 18th Floor
Galveston, Texas 77550
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 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.
12.2 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.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate
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governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable life
insurance operations of the Company are being conducted in a manner consistent
with the California Variable Life Insurance Regulations and any other applicable
law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceeding; provided however that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund and/or the Underwriter under this
Agreement.
12.8 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.
12.9 This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.10 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"), as soon as practical and in
any event within 105 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as soon
as practical and in any event within 45 days after the end of each
quarterly 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;
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(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 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 and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY:
AMERICAN NATIONAL INSURANCE
COMPANY
By its authorized officer,
By_____________________________
Title: Vice President and
Chief Actuary
Date: _________________________
FUND:
VARIABLE INSURANCE PRODUCTS
FUND II
By its authorized officer,
By:____________________________
Title: Senior Vice President
Date:__________________________
20
<PAGE>
UNDERWRITER:
FIDELITY DISTRIBUTORS
CORPORATION
By its authorized officer,
By:___________________________
Title: President
Date:_________________________
21
<PAGE>
Schedule A
Accounts
Name of Account Date of Resolution of Company's
Board which Established the
Account
Variable Universal Life July 30, 1987
Insurance
Variable Annuity Contracts December 20, 1991
22
<PAGE>
Schedule B
Contracts
1. Contract Forms:
FL89
VA93-NQ
VA93-PQ
GUA93
SPIVA93
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<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. 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 Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter 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 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 Fidelity, 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.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
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 Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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<PAGE>
5. During this time, Fidelity Legal 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 Insurance Company). Contents of envelope sent to Customers by 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 Fidelity Legal.
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 Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company as
the shareholder. (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 Fidelity 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 "Bertram C. Jones,
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, a new
Card and return envelope. The mutilated or illegible Card is disregarded
and considered to be not received for purposes of vote
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tabulation. Any Cards that have "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.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline 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.
Fidelity Legal 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, Fidelity Legal
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.
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<PAGE>
Exhibit 99.B8d
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND III,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN NATIONAL INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of January,
1998 by and among AMERICAN NATIONAL INSURANCE COMPANY, (hereinafter the
"Company"), a Texas corporation, on its own behalf and on behalf of each
segregated asset 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"), and the VARIABLE INSURANCE PRODUCTS FUND III, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is 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 under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<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, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life insurance and variable annuity contracts and/or variable life insurance
policies under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable annuity contracts and
variable life insurance policies; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
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 life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 10:00 a.m. Boston 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.
2
<PAGE>
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse 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.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. 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 1.5, 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.
1.6. 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 Company agrees that all
net amounts available under the variable annuity contracts and variable life
insurance policies with the form number(s) which are listed on Schedule A
attached hereto and incorporated herein by this reference, as such Schedule A
may be amended from time to time hereafter by mutual written agreement of all
the parties hereto, (the "Contracts") shall be invested in the Fund, in such
other Funds advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in an investment company other than the Fund if (a)
such other investment company, or series thereof, has investment objectives or
policies that are substantially different from the investment objectives and
policies of all the Portfolios of the Fund; or (b) the Company gives the Fund
and the Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule C to this Agreement); or (d) the Fund or Underwriter
consents to the use of such other investment company.
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<PAGE>
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
For purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. 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.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income 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
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. 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. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 3.75 of the Texas Insurance Code and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
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2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated
as annuity or life insurance contracts, under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Fund and the Underwriter immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.5. With respect to Initial Class Shares, the Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, 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
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Texas and the Fund and the Underwriter represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Texas to the extent required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Texas and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Texas and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal
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coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
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 for the benefit of the Fund, and that said bond is
issued by a reputable bonding company, includes coverage for larceny and
embezzlement, and is in an amount not less than $5 million. 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 and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company with as many printed
copies of the Fund's current prospectus and Statement of Additional Information
as the Company may reasonably request. If requested by the Company in lieu
thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in lieu
of receiving printed copies of the Fund's prospectus, the Fund will reimburse
the Company in an amount equal to the product of A and B where A is the number
of such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
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 printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
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<PAGE>
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy statements, reports to shareholders, and other communications
(except for prospectuses and Statements of Additional Information, which are
covered in Section 3.1) to shareholders in such quantity as the Company shall
reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate account,
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. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule B attached hereto and incorporated herein by this reference, 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 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
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales
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<PAGE>
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used if the Company or its designee reasonably objects
to such use within fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not 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 for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The 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
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: 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. Fees and Expenses
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5.1. To the extent that the Fund or any Portfolio has adopted and
implemented a plan pursuant to Rule 12b-1 to finance distribution expenses, the
Underwriter may make payments to the Company or to the underwriter with respect
to the Contracts if and in amounts agreed to by the Underwriter in writing and
such payments will be made out of existing fees otherwise payable to the
Underwriter, past profits of the Underwriter or other resources available to the
Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses 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, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the Fund's
prospectus, proxy materials and reports to owners of Contracts issued by the
Company.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will 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 of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
9
<PAGE>
voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The 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 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 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 contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
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; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined
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<PAGE>
by a majority of the disinterested members of the Board. Until the end of the
foregoing six month period, the Underwriter and Fund shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. 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
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;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the 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 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
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<PAGE>
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 persons under its control) or wrongful conduct of the Company
or persons under its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, or
sales literature of the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process
giving information of the nature
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<PAGE>
of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The Company
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts or
the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration
Statement or prospectus or 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 Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement or prospectus for the Fund or
in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
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<PAGE>
(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 Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
or sales literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance
upon information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI 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 Sections 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
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
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
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<PAGE>
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 agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against 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 or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund
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<PAGE>
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Fund
will be entitled to participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Fund to
such party of the Fund's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Fund will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
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 by sixty (60) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund 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; or
(c) termination by the Company by written notice to the Fund 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 media of the
Contracts issued or to be issued by the Company; or
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<PAGE>
(d) termination by the Company by written notice to the Fund 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 if the Company reasonably believes that the Fund may
fail to so qualify; 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 or the Underwriter by written notice
to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its 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; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund 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; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) 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 forty five
(45) days after the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 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 opposed to 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
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"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 Underwriter 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:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
One Moody Plaza
Galveston, TX 77550
Attention: Sr. VP & Chief Actuary
with a copy to:
Jerry L. Adams
Greer, Herz & Adams, L.L.P.
One Moody Plaza
Galveston, TX 77550
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 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.
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12.2 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.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7 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.
12.8. 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 Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
The Company shall promptly notify the Fund and the Underwriter of any change in
control of the Company.
12.9. 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
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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 quarterly statements (statutory) (and GAAP, if any),
as soon as practical and in any event within 45 days after the end
of each quarterly 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 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 and its seal to be hereunder affixed hereto as of the date
specified below.
AMERICAN NATIONAL LIFE INSURANCE COMPANY
By: _________________________
Name: _________________________
Title: _________________________
VARIABLE INSURANCE PRODUCTS FUND III
By: ________________________
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: _______________________
Kevin J. Kelly
Vice President
20
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
American National Variable Life FPVA-NQ
Separate Account established FPVA-PQ
July 30, 1987 VA95-NQ
VA95-PQ
FL89
GUA95
SPIVA94
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<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. 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 Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter 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 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 Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by the
Company either before or together with the Customers' receipt of a proxy
statement. Underwriter 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 Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
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<PAGE>
5. During this time, Fidelity Legal 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 Insurance Company). Contents of envelope sent to Customers by 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 Fidelity Legal.
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 Fidelity Legal.
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 Fidelity 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 "Bertram C. Jones,
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, a new
Card and return
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<PAGE>
envelope. The mutilated or illegible Card is disregarded and considered to
be not received for purposes of vote tabulation. Any Cards that have
"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.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline 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.
Fidelity Legal 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, Fidelity Legal
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.
24
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company.
American National Investment Accounts, Inc.
Variable Insurance Products Fund
Variable Insurance Products Fund II
MFS Variable Insurance Products Trust
T. Rowe Price International Series, Inc.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Fixed Income Series, Inc.
Van Eck Worldwide Insurance Trust
Federated Insurance Series
Lazard Retirement Series, Inc.
25
<PAGE>
PARTICIPATION AGREEMENT
AMONG
T. ROWE PRICE INTERNATIONAL SERIES, INC.,
T. ROWE PRICE EQUITY SERIES, INC.,
T. ROWE PRICE FIXED INCOME SERIES, INC.,
T. ROWE PRICE INVESTMENT SERVICES, INC.,
AND
AMERICAN NATIONAL LIFE
THIS AGREEMENT, made and entered into as of this day of
, 1997 by and among American National Life (hereinafter, the "Company"), a Texas
insurance company, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each account hereinafter referred to as the "Account"), and the
undersigned funds, each, a corporation organized under the laws of Maryland
(hereinafter referred to as the "Fund") and T. Rowe Price Investment Services,
Inc. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming
International, Inc. (each
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<PAGE>
hereinafter referred to as the "Adviser") are each duly registered as an
investment adviser under the federal Investment Advisers Act of 1940, as
amended, and any applicable state securities laws; and
WHEREAS, the Company has registered or will register certain variable life
insurance or variable annuity contracts supported wholly or partially by the
Account (the "Contracts") under the 1933 Act, and said Contracts are listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the SEC, and the Fund shall use its best efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Directors of the Fund
(hereinafter the "Board") may refuse to sell shares of any Designated Portfolio
to any person, or suspend or terminate the offering of shares of any Designated
Portfolio if such action is required by law or by regulatory authorities having
jurisdiction, or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Designated
Portfolio.
2
<PAGE>
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The
Fund and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I and VII of this Agreement is in effect to govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, executing
such requests on a daily basis at the net asset value next computed after
receipt by the Fund or its designee of the request for redemption, except that
the Fund reserves the right to suspend the right of redemption or postpone the
date of payment or satisfaction upon redemption consistent with Section 22(e) of
the 1940 Act and any sales thereunder, and in accordance with the procedures and
policies of the Fund as described in the then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of each
Designated Portfolio offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day after
receipt of an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire by 4:00 p.m. Baltimore time. If payment in Federal Funds
for any purchase is not received or is received by the Fund after 4:00 p.m.
Baltimore time on such Business Day, the Company shall promptly, upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or other
expenses incurred by the Fund in connection with any advances to, or borrowings
or overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund
of the federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Fund.
1.8 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.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated Portfolio shares in additional shares of that
Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number
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<PAGE>
of shares so issued as payment of such dividends and distributions. The Fund
shall use its best efforts to furnish advance notice of the day such dividends
and distributions are expected to be paid.
1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Baltimore time.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that (a) such other investment company, or series thereof, has
investment objectives or policies that are different from the investment
objectives and policies of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company, such consent
not to be unreasonably withheld.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly established the Account
prior to any issuance or sale thereof as a segregated asset account under the
Texas insurance laws and has registered or, prior to any issuance or sale of the
Contracts, will register the Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated investment account
for the Contracts.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the state of Texas and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
4
<PAGE>
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the state of Texas to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Texas and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Texas and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Fund are covered by
a blanket fidelity bond or similar coverage in an amount not less than $5
million. The aforesaid bond includes coverage for larceny and embezzlement and
is issued by a reputable bonding company. The Company agrees that any amounts
received under such bond in connection with claims that arise from the
arrangements described in this Agreement will be held by the Company for the
benefit of the Fund. 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. The Company agrees to exercise its best efforts to
ensure that other individuals/entities not employed or controlled by the Company
and dealing with the money and/or securities of the Fund maintain a similar bond
or coverage in a reasonable amount.
ARTICLE III. Prospectuses, Statements of Additional Information, and Proxy
Statements; Voting
3.1 The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on
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<PAGE>
Schedule A) as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide such documentation (including a final
copy of the new prospectus as set in type at the Fund's expense) and other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Contracts and the Fund's prospectus printed together in one
document.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company (or,
in the Fund's discretion, from the Fund), and the Underwriter (or the Fund), at
its expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares of such Designated Portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. 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.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act
in accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee,
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<PAGE>
each piece of sales literature or other promotional material that the Company
develops or uses and in which the Fund (or a Portfolio thereof) or the Adviser
or the Underwriter is named, at least fifteen calendar days prior to its use. No
such material shall be used if the Fund or its designee reasonably object to
such use within fifteen calendar days after receipt of such material. The Fund
or its designee reserves the right to reasonably object to the continued use of
such material, and no such material shall be used if the Fund or its designee so
object.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI 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 or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause
to be furnished, to the Company, each piece of sales literature or other
promotional material in which the Company, and/or its Account, is named at least
fifteen calendar days prior to its use. No such material shall be used if the
Company reasonably objects to such use within fifteen calendar days after
receipt of such material. The Company reserves the right to reasonably object
to the continued use of such material and no such material shall be used if the
Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, 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 Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper,
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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, 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,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter 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, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund, except as otherwise provided herein. 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, preparation and filing of the Fund's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Fund's
shares.
5.3 The Company shall bear the expenses of printing the Fund's prospectus
(in accordance with 3.1) and of distributing the Fund's prospectus, proxy
materials, and reports to Contract owners and prospective Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 Subject to the Company's maintaining the treatment of the Contracts as
life insurance, endowment, or annuity contracts under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
issued thereunder (or any successor provisions), the Fund will invest its assets
in such a manner as to ensure that the Contracts will be treated as annuity,
endowment, or life insurance contracts, whichever is appropriate, under the Code
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Code and Treasury Regulation (S)1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund,
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it will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
6.3 Subject to the Fund's compliance with Section 817(h) of the Code and
Treasury Regulation (S)1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, any amendments or other modifications or successor
provisions to such Sections or Regulations, the Company represents that the
Contracts are currently, and at the time of issuance shall be, treated as life
insurance, endowment contracts, or annuity insurance contracts, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter immediately upon
having a reasonable basis for believing the Contracts have ceased to be so
treated or that they might not be so treated in the future. The Company agrees
that any prospectus offering a contract that is a "modified endowment contract"
as that term is defined in Section 7702A of the Code (or any successor or
similar provision), shall identify such contract as a modified endowment
contract.
ARTICLE VII. Potential Conflicts. The following provisions apply effective
upon investment in the Fund by a separate account of a Participating Insurance
Company supporting variable life insurance contracts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer 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 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 members, that a material irreconcilable conflict exists, the
Company and other Participating
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<PAGE>
Insurance Companies shall, at their expense and to the extent reasonably
practicable (as determined by a majority of the disinterested Board members),
take whatever steps are necessary to remedy or eliminate the irreconcilable
material conflict, up to and including: (1), withdrawing the assets allocable to
some or all of the separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Fund, or submitting the question whether
such segregation should be implemented to a vote of all affected contract owners
and, as appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
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
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal
and termination must take place within six (6) months after the Fund gives
written notice that this provision is being implemented, and until the end of
that six month period the Fund shall continue to accept and implement orders by
the Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
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7.7 If and to the extent 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;
and (b) Sections 3.4, 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and the Underwriter and each of their officers and directors and each person, if
any, who controls the Fund or the Underwriter within the meaning of Section 15
of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the 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,
prospectus, or statement of additional information for the Contracts or
contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of the Fund for use in the Registration
Statement, prospectus or statement of additional information for the Contracts
or in the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund shares;
or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by the
Company or persons under its control) or wrongful conduct of the Company or
persons under its authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus, 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
11
<PAGE>
required to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the qualification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Company will
not be liable to such party under this Agreement for any 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 of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund Shares or the Contracts or the operation
of the Fund.
8.2 Indemnification by the Underwriter
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement or
prospectus or SAI 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
Underwriter or Fund by or on behalf of the Company for use in the Registration
Statement or prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the Fund or
Underwriter or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements specified in Article VI
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 Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with
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<PAGE>
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
or such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or the Account, whichever is applicable.
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 Party, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from the 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 agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement (including
a failure, whether unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements specified in Article VI
of this Agreement); or
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<PAGE>
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense; provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the 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 Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
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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 with respect to some or
all Designated Portfolios, by six (6) months' advance written notice delivered
to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio based upon the Company's
determination that shares of the Fund are not reasonably available to meet the
requirements of the Contracts; provided that such termination shall apply only
to the Designated Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event any of the Designated 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
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
SEC, the Insurance Commissioner or like official of any state or any other
regulatory body regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of any Account, or the purchase of
the Fund shares, provided, however, that the Fund or Underwriter determines in
its sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the Company
to perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund or Underwriter by the NASD, the SEC,
or any state securities or insurance department or any other regulatory body,
provided, however, that the Company determines in its sole judgment exercised in
good faith, that any such administrative proceedings will have a material
adverse effect upon the ability of the Fund or Underwriter to perform its
obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event that such
Designated Portfolio ceases to qualify as a Regulated Investment Company under
Subchapter M or fails to comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if the Company reasonably
believes that such Designated Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the qualifications
specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this Agreement
or is the subject of material adverse publicity; or
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<PAGE>
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised in
good faith, that the Fund 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; or
(j) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.11 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(j) shall
be effective sixty days after the notice specified in Section 1.11 was given.
10.2 Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (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
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
10.5 Any successor by law of the parties hereto shall be entitled to the
benefits of the indemnification provisions contained in Article VIII.
17
<PAGE>
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: John Cammack
Copy to: Henry H. Hopkins, Esq.
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
such Fund, and in the case of a series company, the respective Designated
Portfolio listed on Schedule A hereto as though such Designated Portfolio had
separately contracted with the Company and the Underwriter for the enforcement
of any claims against the Fund. The parties agree that neither the Board,
officers, agents or shareholders assume any personal liability or responsibility
for obligations entered into by or on behalf of the Fund.
12.2 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 without the express written consent
of the affected party until such time as such information may come into the
public domain.
18
<PAGE>
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Texas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with Texas
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 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.
12.8 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.
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 and
its seal to be hereunder affixed hereto as of the date specified below.
COMPANY: AMERICAN NATIONAL LIFE
By its authorized officer
By:
-------------------------------------
Title:
Date:
FUND: T. ROWE PRICE INTERNATIONAL
SERIES, INC.
By its authorized officer
By:
-------------------------------------
Title:
Date:
FUND: T. ROWE PRICE EQUITY SERIES, INC.
By its authorized officer
By:
--------------------------------------
Title:
Date:
20
<PAGE>
FUND: T. ROWE PRICE FIXED INCOME SERIES, INC.
By its authorized officer
By:
-------------------------------------
Title:
Date:
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:
-------------------------------------
Title:
Date:
21
<PAGE>
SCHEDULE A
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
T. Rowe Price International Series, Inc.
T. Rowe Price International Stock Portfolio
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio
T. Rowe Price Mid-Cap Growth Portfolio
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Limited-Term Bond Portfolio
22
<PAGE>
Exhibit 99.B8f
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
[ ]
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this ____ day of November 1994, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), ______________________Company, a __________ corporation (the "Company)
on its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Investor Services, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, CIGNA Financial Advisors, Inc. the underwriter for the individual
variable annuity and the variable life policies, is registered as a broker-
dealer with the SEC under the 1934 Act and is a member in good standing of the
NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust
and MFS (the "Participating Insurance Companies") and their separate
accounts, qualified pension and retirement plans and MFS or its affiliates.
The Trust and MFS will not sell Trust shares to any insurance company or
separate account unless and agreement containing provisions substantially
the same as Articles III and VII of this Agreement is in effect to govern
such sales. The Company will not resell the Shares except to the Trust or
its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 9:30 a.m. New York time on the next
following Business Day.
1.5. Purchase, redemption and exchange orders placed by the Company shall
be placed separately for each Portfolio and shall not be netted among
Portfolios. However, with respect to payment of the purchase price by the
Company and of redemption proceeds by the Trust, the Company and the Trust
shall net purchase and redemption orders with respect to each Portfolio and
shall transmit one net payment for all of the Portfolios in accordance with
Section 1.6.
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<PAGE>
1.6. In the event of net purchases, the Company shall pay for the Shares by
2:00 p.m. New York time on the next Business Day after an order to purchase
the Shares is made in accordance with the provisions of Section 1.1. hereof.
In the event of net redemptions, the Trust shall pay the redemption proceeds
by 2:00 p.m. New York time on the next Business Day after an order to redeem
the shares is made in accordance with the provisions of Section 1.4. hereof.
All such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Trust shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
1.9. The Trust or its custodian shall make the net asset value per share for
each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall make
an adjustment to the number of shares purchased or redeemed for the Accounts
to reflect the correct net asset value per share. Any material error in the
calculation or reporting of net asset value per share, dividend or capital
gains information shall be reported promptly upon discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable state
and federal laws, including without limitation the 1933 Act, the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. The
Company further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has legally
and validly established the Account as a segregated asset account under
applicable law and has registered or, prior to any issuance or sale of the
Policies, will register the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act (unless exempt therefrom) to serve as
segregated investment accounts for the Policies, and that it will maintain
such registration for so long as any Policies are outstanding. The Company
shall amend the registration statements under the 1933 Act for the Policies
and the registration statements under the 1940 Act for the Accounts from
time to time as required in order to effect the continuous offering of the
Policies or as may otherwise be required by applicable law. The Company
shall register and qualify the Policies for sales accordance with the
securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently and
at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), that it will maintain such treatment and that
it will notify the Trust or MFS immediately upon having a reasonable basis
for believing that the policies have ceased to be so treated or that they
might not be so treated in the future.
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<PAGE>
2.3. The Company represents and warrants that [ ], the underwriter for the
individual variable annuity and the variable life policies, is a member in
good standing of the NASD and is a registered broker-dealer with the SEC.
The Company represents and warrants that the Company and [ ] will sell and
distribute such policies in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust shall
amend the registration statement for its Shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Shares. The Trust shall register and qualify the Shares for
sale in accordance with the laws of the various states only if and to the
extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and that it does and
will comply in all material respects with the 1940 Act and any applicable
regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly registered
under all applicable federal securities laws and that it shall perform its
obligations for the Trust in compliance in all material respects with any
applicable federal securities laws and with the securities laws of The
Commonwealth of Massachusetts. MFS represents and warrants that it is not
subject to state securities laws other than the securities laws of The
Commonwealth of Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the Board
such reports, material or data as the Board may reasonably request so that
it may carry out fully the obligations imposed upon it by the conditions
contained in the exemptive application pursuant to which the SEC has granted
exemptive relief to permit mixed and shared funding (the "Mixed and Shared
Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing
only the Portfolios listed in Schedule A hereto) for the Shares as the
Company may reasonably request for distribution to existing Policy owners
whose Policies are funded by such Shares. The Trust or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Shares as the Company may reasonably request for
distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent to
the financial printer) and other assistance as is reasonably necessary in
order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the prospectus
for the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a) the
Company and (b) the Trust or its designee in proportion to the number of
pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; the Trust or its designee to bear the cost of printing
the Shares' prospectus portion of such document for distribution to owners
-4-
<PAGE>
of existing Policies funded by the Shares and the Company to bear the
expenses of printing the portion of such document relating to the Accounts;
provided, however, that the Company shall bear all printing expenses of such
combined documents where used for distribution to prospective purchasers or
to owners of existing Policies not funded by the Shares. In the event that
the Company requests that the Trust or its designee provides the Trust's
prospectus in a "camera ready" or diskette format, the Trust shall be
responsible for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses), and
the Company shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and provide
such statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any
owner of a Policy funded by the Shares. The Trust or its designee, at the
Company's expense, shall print and provide such statement to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to a prospective purchaser who requests such statement or to an
owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution to
Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or
of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but are
not limited to, the printing of the Shares' prospectus or prospectuses for
distribution to prospective purchasers or to owners of existing Policies not
funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order. The
Trust and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
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<PAGE>
4.1. The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the Trust,
or any affiliate of MFS are named, at least three (3) Business Days prior to
its use. No such material shall be used if the Trust, MFS, or their
respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of the Trust, MFS, any other investment adviser to
the Trust, or any affiliate of MFS or concerning the Trust or any other such
entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Shares, as such
registration statement, prospectus and statement of additional information
may be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved by the Trust, MFS or their respective designees, except
with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any
request for approval on a prompt and timely basis. The Company shall adopt
and implement procedures reasonably designed to ensure that information
concerning the Trust, MFS or any of their affiliates which is intended for
use only by brokers or agents selling the Policies (i.e., information that
is not intended for distribution to Policy holders or prospective Policy
holders) is so used, and neither the Trust, MFS nor any of their affiliates
shall be liable for any losses, damages or expenses relating to the improper
use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter shall
not give, any information or make any representations on behalf of the
Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be amended
or supplemented from time to time, or in reports for the Accounts, or in
sales literature or other promotional material approved by the Company or
its designee, except with the permission of the Company. The Company or its
designee agrees to respond to any request for approval on a prompt and
timely basis. The parties hereto agree that this Section 4.4. is neither
intended to designate nor otherwise imply that MFS is an underwriter or
distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other or the
results of any examination by the SEC (or other regulatory authorities) that
relates to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have
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<PAGE>
changes affecting Policy prospectuses become effective simultaneously with
the annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers or
the public, educational or training materials or communications distributed
or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and
Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to the
Company or to the underwriter for the Policies if and in amounts agreed to
by the Trust in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof, reimburse
other parties for expense initially paid by one party but allocated to
another party. In addition, nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Trust and/or to the
Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's registration
statement, and payment of filing fees and registration fees; preparation and
filing of the Trust's proxy materials and reports to Shareholders; setting
in type and printing its prospectus and statement of additional information
(to the extent provided by and as determined in accordance with Article III
above); setting in type and printing the proxy materials and reports to
Shareholders (to the extent provided by and as determined in accordance with
Article III above); the preparation of all statements and notices required
of the Trust by any federal or state law with respect to its Shares; all
taxes on the issuance or transfer of the Shares; and the costs of
distributing the Trust's prospectuses and proxy materials to owners of
Policies funded by the Shares and any expenses permitted to be paid or
assumed by the Trust pursuant to a plan, if any, under Rule 12b-1 under the
1940 Act. The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports and proxy materials to
Policy owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under applicable
federal securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing annual
individual account statements for Policy owners as required by state
insurance laws .
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ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that they will use their best
efforts to ensure that each Portfolio of the Trust will meet the
diversification requirements of Section 817(h)(1) of the Code and Treas.
Reg. 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, as they may be amended from
time to time (and any revenue rulings, revenue procedures, notices, and
other published announcements of the Internal Revenue Service interpreting
these sections).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to determine
if a material irreconcilable conflict exists, and such determination shall
be binding on the Company only if approved in the form of a resolution by a
majority of the Board, or a majority of the disinterested trustees of the
Board. The Board will give prompt notice of any such determination to the
Company.
7.2. The Company agrees that it will be responsible for assisting the Board
in carrying out its responsibilities under the conditions set forth in the
Trust's exemptive application pursuant to which the SEC has granted the
Mixed and Shared Funding Exemptive Order by providing the Board, as it may
reasonably request, with all information necessary for the Board to consider
any issues raised and agrees that it will be responsible for promptly
reporting any potential or existing conflicts of which it is aware to the
Board including, but not limited to, an obligation by the Company to inform
the Board whenever contract owner voting instructions are disregard. The
Company also agrees that, if a material irreconcilable conflict arises, it
will at is own cost remedy such conflict up to an including (a) withdrawing
the assets allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting
to a vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets attributable
to any appropriate group of contract owners that votes in favor of such
segregation, or offering to any of the affected contract owners the option
of segregating the assets attributable to their contracts or policies, and
(b) establishing a new registered management investment company and
segregating the assets underlying the Policies, unless a majority of Policy
owners materially adversely affected by the conflict have voted to decline
the offer to establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of the
Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required to remedy
any such material irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shares
funding (as defined in the Mixed and Shared Funding Exemptive Order) on
terms and conditions materially different from those contained in the Mixed
Shared Funding Exemptive Order, then (a) the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable; and (b) Sections 3.5,
3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect
only to
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the extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees, officers
and each person, if any, who controls the Trust or MFS within the meaning of
Section 15 of the 1933 Act, and any agents or employees of the foregoing
(each an "Indemnified Party," or collectively, the "Indemnified Parties" for
purposes of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent
of the Company) or expenses (including reasonable counsel fees) to which an
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are
related to the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or containe d in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the commission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reasonable reliance upon and in
conformity with information furnished to the Company or its
designee by or on behalf of the Trust or MFS for use in the
registration statement, prospectus or statement of additional
information for the Policies or in the Policies or sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or this designee, or persons
under its control and on which the Company has reasonably relied)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Trust by or on behalf
of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
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as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(d) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result
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<PAGE>
from (i) a breach of any representation, warranty, and/or covenant made by
the Company hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by the Company or any Participating Insurance
Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account
under applicable state law and as a duly registered unit investment trust
under the provisions of the 1940 Act (unless exempt therefrom); or (iii)
the failure by the Company or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts
(with respect to which any Portfolio serves as an underlying funding
vehicle) as life insurance, endowment or annuity contracts under applicable
provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5.
of commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any Indemnified Party otherwise than under
this section. In case any such action is brought against any Indemnified
Party, and it notified the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the indemnifying
party of its intention to assume the defense of an action, the Indemnified
Party shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party under
this section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
inde mnification provisions contained in this Article VIII shall survive
any termination of this Agreement.
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<PAGE>
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may
grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some , or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt notice
of the election to terminate for such cause and an explanation of
such cause shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of any
necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of the
Policies for which those Portfolio Shares had been selected to
serve as the underlying investment media. The Company will give
thirty (30) day's prior written notice to the Trust of the Date of
any proposed vote or other action taken to replace the Shares; or
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<PAGE>
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material
breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and, if
applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated transactions,
or as required by state insurance laws or regulations, the Company shall not
redeem the Shares attributable to the Policies (as opposed to the Shares
attributable to the Company's assets held in the Accounts), and the Company
shall not prevent Policy owners from allocating payments to a Portfolio that
was otherwise available under the Policies, until thirty (30) days after the
Company shall have notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or reallocate
investment under the Policies, redeem investments in any Portfolio and/or
invest in the Trust upon the making of additional purchase payments under
the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
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If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
[ ]
Attn:
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement or as otherwise required by applicable law or regulation,
shall not disclose, disseminate or utilize such names and addresses and
other confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection
with inquiries by appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) relating to
this Agreement or the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
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<PAGE>
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and liabilities
of each Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
[ ]
By its authorized officer,
By: _______________________________
Title: ____________________________
Date: _____________________________
MFS VARIABLE INSURANCE TRUST, ON BEHALF
OF THE PORTFOLIOS
By its authorized officer and not
individually,
By: _______________________________
Title: ____________________________
Date: _____________________________
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: _______________________________
Title: ____________________________
Date: _____________________________
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As of ____________________
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE
ACCOUNT AND DATE
ESTABLISHED BY BOARD POLICIES FUNDED PORTFOLIOS
OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- -------------------- ------------------- ----------------------
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Exhibit 99.B8g
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this ____ day of _____________________ , 199_, by
and between _________________________________ (the "Insurer"), a life insurance
company domiciled in __________________________ , on its behalf and on behalf of
the segregated asset accounts of the Insurer listed on Exhibit A to this
Agreement (the "Separate Accounts"); Insurance Series (the "Fund"), a
Massachusetts business trust; and Federated Securities Corp. (the
"Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
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offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of eight separate portfolios, and
other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
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<PAGE>
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse 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 Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
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1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios to
any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the agent
of the Fund for the limited purpose of receiving and accepting purchase and
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redemption orders from each Separate Account and receipt of such orders by 4:00
p.m. Eastern time by the Insurer shall be deemed to be receipt by the Fund for
purposes of Rule 22c-1 of the 1940 Act; provided that the Fund receives notice
of such orders on the next following business day prior to 4:00 p.m. Eastern
time on such day, although the Insurer will use its best efforts to provide such
notice by 9:00 a.m. Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each Portfolio
in accordance with the provisions of the current prospectus for the Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next business
day after it places an order to purchase shares of the Portfolio. Payment shall
be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Insurer of any income dividends or capital gain
distributions payable on the shares of the Portfolios. The Insurer hereby
elects to reinvest in the Portfolio all such dividends and distributions as
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<PAGE>
are payable on a Portfolio's shares and to receive such dividends and
distributions in additional shares of that Portfolio. The Insurer reserves the
right to revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of shares
so issued as payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the Insurer
on each business day of the net asset value per share for each Portfolio 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. Eastern time.
ARTICLE II. Representations and Warranties
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the ____________________ Insurance Code, and that each of the Separate Accounts
is a validly existing segregated asset account under applicable federal and
state law.
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2.3 The Insurer represents and warrants that the Variable Contracts issued
by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate Accounts
(1) has been registered as a unit investment trust in accordance with the
provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law and that the
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Fund is registered as an open-end management investment company under the 1940
Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
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3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
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shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the Portfolios
of the Fund in accordance with the applicable provisions of the 1933 Act, the
1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
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3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any proposal submitted by the Fund at a meeting of
owners of Variable Contracts or shareholders of the Fund, and will in no way
recommend, oppose, or interfere with the solicitation of proxies for Fund shares
held by Contract Owners, without the prior written consent of the Fund, which
consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
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including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive 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 of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, 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 Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
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4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), 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 another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
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Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, 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 of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
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4.7 The Board of Trustees of the Fund shall promptly notify the Insurer in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the
Insurer and the current prospectus for the Fund, or a document combining the
Fund prospectus with prospectuses of other funds in which the Variable Contracts
may be invested. The Fund shall bear the expense of printing copies of its
current prospectus that will be distributed to existing Variable Contract
Owners, and the Insurer shall bear the expense of printing copies of the Fund's
prospectus that are used in connection with offering the Variable Contracts
issued by the Insurer.
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5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of its
proxy materials, periodic reports to shareholders, and other communications to
shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Insurer shall vote
shares of each Portfolio of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
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meetings of the Fund in accordance with instructions timely received by the
Insurer (or its designated agent) from owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote shares of a Portfolio of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Insurer (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Portfolio from
whom instructions have been timely received. The Insurer shall vote shares of
each Portfolio of the Fund held in its general account, if any, in the same
proportion as the votes cast with respect to shares of the Portfolio held in all
Separate Accounts of the Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate
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accounts funding both variable annuity contracts and variable life insurance
policies and to separate accounts funding Variable Contracts of unaffiliated
life insurance companies.
ARTICLE VI. Sales Material and Information
6.1 The Insurer shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund (or any Portfolio thereof) or its investment adviser or the
Distributor is named at least 15 days prior to the anticipated use of such
material, and no such sales literature or other promotional material shall be
used unless the Fund and the Distributor or the designee of either approve the
material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
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6.3 The Fund or the Distributor or the designee of either shall furnish to
the Insurer or its designee, each piece of sales literature or other promotional
material in which the Insurer or its Separate Accounts are named at least 15
days prior to the anticipated use of such material, and no such material shall
be used unless the Insurer or its designee approves the material or does not
respond with comments on the material within 10 days from receipt of the
material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Insurer or its
designee, except with the permission of the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of the
Mixed and Shared Funding Exemptive Application and any amendments thereto, all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
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6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, 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.
ARTICLE VII. Indemnification
7.1 Indemnification by the Insurer
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7.1(a) The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers, any affiliated person of the Fund within the
meaning of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively,
the "Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
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 (which shall include an
offering memorandum) for the Variable Contracts issued by the
Insurer or sales literature for such Variable 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 Insurer by or on
behalf of the Fund for use in the registration statement or
prospectus for the Variable Contracts issued by the Insurer or
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of such Variable Contracts
or Fund shares; or
(ii) arise out of or as a result of any statement or representation
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the
Fund not supplied by the Insurer or persons under its control)
or wrongful conduct of the Insurer or any of its affiliates,
employees or agents with respect to the sale or distribution
of the Variable Contracts issued by the Insurer or the Fund
shares; or
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(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on
behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer 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
Party shall have received notice of such service on any designated agent), but
failure to notify the Insurer of any such claim shall not relieve the Insurer
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.
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In case any such action is brought against the Indemnified Parties, the Insurer
shall be entitled to participate, at its own expense, in the defense of such
action. The Insurer also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer'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 Insurer 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.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Contracts issued by
the Insurer or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at
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common law or otherwise, insofar as such losses, claims, damages, liabilities or
litigation expenses are related to the sale or acquisition of the Fund's shares
or the Variable Contracts issued by the Insurer 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 Distributor or
the Fund or the designee of either by or on behalf of the Insurer 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 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 Variable Contracts issued by the Insurer or Fund shares;
or
(ii) arise out of or as a result of any statement or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts not
supplied by the Distributor or any employees or agents thereof) or
wrongful conduct of the Fund or Distributor, or the affiliates,
employees, or agents of the Fund or the Distributor with respect to the
sale or distribution of the Variable Contracts issued by the Insurer or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus, or
sales literature covering the Variable Contracts issued by the Insurer,
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 Insurer by or on behalf of the Fund; or
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(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the 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 Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at is own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the
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Distributor to such party of the 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 the Distributor will not be liable to
such party under this Agreement for any legal or other expense subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor 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 Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 Indemnification by the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Insurer,
its affiliated principal underwriter of the Variable Contracts, and each of
their directors and officers and any affiliated person of the Insurer within the
meaning of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation expenses (including legal and other expenses)
to which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
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(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 Distributor or
the Fund or the designee of either by or on behalf of the Insurer 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 Variable Contracts issued by the Insurer
or Fund shares; or
(ii) arise out of or as a result of any statement or representation
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Contracts not
supplied by the Distributor or any employees or agents thereof) or
wrongful conduct of the Fund, or the affiliates, employees, or agents of
the Fund, with respect to the sale or distribution of the Variable
Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement, prospectus or
sales literature covering the Variable Contracts issued by the Insurer,
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 Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
27
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7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses
28
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subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the com-
mencement of any litigation or proceedings against it or any of its officers or
directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order),
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice
to the other parties; or
29
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(b) at the option of the Insurer if shares of the Portfolios are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Insurer, as determined by the Insurer, and upon prompt notice by the
Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Insurer or its agent by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body regarding
the Insurer's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Insurer, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to substitute the
shares of another investment company for the corresponding shares of the Fund or
a Portfolio in accordance with the terms of the Variable Contracts for which
those shares had been selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not registered,
issued or sold in accordance with applicable state and/or federal law, or such
30
<PAGE>
law precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a majority
of the Trustees of the Fund, or a majority of its disinterested Trustees, that
an irreconcilable conflict, as described in Article IV hereof, exists; or
(h) at the option of the Insurer if the Fund or a Portfolio fails to
meet the requirements under Subchapter M of the Code for qualification as a
Regulated Investment Company specified in Section 3.2 hereof or the diversi-
fication requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other parties
to the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer shall
give 60 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable
31
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Contract Owners from allocating payments to a Portfolio, until 60 days after the
Insurer shall have notified the Fund or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
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If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
ARTICLE XI: Miscellaneous
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2 or
Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final
form, to the extent applicable, the Fund and the Insurer shall each take such
steps as may be necessary to comply with the Rule as amended or adopted in final
form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be
33
<PAGE>
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In
consideration of the administrative savings resulting from having a sole
shareholder rather than multiple shareholders, Distributor agrees to pay to
Insurer an amount computed at an annual rate of .25 of 1% of the average daily
net asset value of shares held in subaccounts for which Insurer provides
administrative services. Distributor's payments to Insurer are for
administrative services only and do not constitute payment in any manner for
investment advisory services.
11.5 It is understood that the name "Federated" or any derivative thereof
or logo associated with that name is the valuable property of the Distributor
and its affiliates, and that the Insurer has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
34
<PAGE>
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agree-ment
except with the written consent of the other parties to the Agreement.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE MANAGEMENT SERIES
ATTEST: __________________________ BY: _____________________________________
Name: ____________________________ Name: ___________________________________
Title: ___________________________ Title: __________________________________
FEDERATED SECURITIES CORP.
ATTEST: __________________________ BY: _____________________________________
Name: ____________________________ Name: ___________________________________
Title: ___________________________ Title: __________________________________
[INSURER NAME]
ATTEST: __________________________ BY: _____________________________________
Name: ____________________________ Name: ___________________________________
Title: ___________________________ Title: __________________________________
36
<PAGE>
Exhibit 99.B8h
PARTICIPATION AGREEMENT
Among
VAN ECK WORLDWIDE INSURANCE TRUST,
VAN ECK SECURITIES CORPORATION,
VAN ECK ASSOCIATES CORPORATION
and
_____________________________
THIS AGREEMENT, made and entered into to be effective on
____________________, by and among __________________________________________,
(hereinafter the "Company"), a __________________ corporation, on its own behalf
and on behalf of each segregated asset account of the Company set forth on
Schedule A hereto and incorporated herein by this reference, as such Schedule A
may from time to time be amended by mutual written agreement of the parties
hereto (each such account hereinafter referred to as the "Account"), and VAN ECK
WORLDWIDE INSURANCE TRUST, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (hereinafter the "Fund"),VAN ECK
SECURITIES CORPORATION (hereinafter the "Underwriter"), a Delaware corporation
and VAN ECK ASSOCIATES CORPORATION (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 for variable life insurance policies and variable annuity contracts
(hereafter referred to collectively as the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each representing the interest in a particular managed portfolio of
securities and other assets (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (hereinafter the "SEC") (File No. 811-5083), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Order");
and
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<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 Company has registered or will register certain variable life
insurance and variable annuity contracts under the 1933 Act, unless such
contracts are exempt from registration thereunder; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid variable life insurance and
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act, unless such Account is exempt from
registration thereunder; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law; 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 life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Underwriter and the Adviser agree as follows:
ARTICLE I
Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the
Portfolios (which are listed on Schedule B attached hereto and incorporated
herein by this reference, as such Schedule B may from time to time be amended by
mutual written agreement of the parties hereto) which each Account orders,
executing such orders on a daily basis at the net asset value per share next
computed after receipt by the Fund or its designee of the order for the shares
of the Portfolios subject to the terms and conditions of this Agreement. 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 9:00 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
business and on which the Fund calculates the Portfolios' net asset values
pursuant to the rules of the SEC.
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1.2. The Fund agrees to make Portfolio shares available for purchase at the
applicable net asset value per share by the Company and its Accounts on those
days on which the Fund calculates net asset values pursuant to the rules of the
SEC and the Fund shall use reasonable efforts to calculate such net asset values
on each day on which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse 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 if it is,
in the sole discretion of the Board, desirable or advisable, and in the best
interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts or
other accounts (e.g., qualified retirement plans) as may be permitted so that
the Variable Insurance Products continue to qualify as a "life insurance,
annuity or variable contract" under Section 817(h) of the Internal Revenue Code
of 1986, as amended (hereinafter the "Code"). No shares of any Portfolio will
be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company, separate account or other account unless an agreement
containing provisions substantially the same as Article I, Section 2.5 of
Article II, Sections 3.4 and 3.5 of Article III, Article V and Article VII of
this Agreement is in effect to govern such sales.
1.5. Subject to its rights under Section 18(f) of the 1940 Act, the Fund
agrees to redeem for cash, on the Company's request, any full or fractional
shares of a Portfolio held by the Company, executing such requests on a daily
basis at the net asset value per share next computed after receipt by the Fund
or its designee of the request for redemption. For purposes of this Section 1.5,
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 by 9:00 a.m., Eastern Time, on the next following Business Day.
Payment of redemption proceeds for any whole or fractional shares shall be made
within seven days of actual receipt of the redemption request by the Fund, or
within such greater or lesser period as may be permitted by law or rule,
regulation, interpretive position or order of the SEC.
1.6. 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 Company agrees that all net amounts
available in the Accounts which are listed in Schedule A attached hereto and
incorporated herein by this reference, as such Schedule A may from time to time
be amended by mutual written agreement of the parties hereto (the "Contracts"),
shall be invested in the Portfolios and in such other funds advised by the
Adviser as are listed in Schedule B, or in the Company's general account;
provided that such amounts may also be invested in an investment company other
than the Fund if (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of all the Portfolios of the Fund; or (b) the
Company gives the Fund and the Underwriter 45 days' written notice of its
intention to make such other investment company available as a funding vehicle
for the Contracts; or (c) such other investment company was available as a
funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund
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and Underwriter prior to their signing this Agreement (a list of such funds
appearing on Schedule C to this Agreement); or (d) the Fund or Underwriter
consents in writing to the use of such other investment company.
1.7. The Company shall pay for Portfolio shares on the next Business Day
after an order to purchase such shares is made in accordance with the provisions
of this Article I. Payment shall be in federal funds transmitted by wire. For
purposes of Sections 2.10 and 2.11, upon receipt by the Fund of the federal
funds so wired, such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
1.8. 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.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income dividends or capital gain
distributions payable on the Portfolios' shares. The Company hereby elects to
receive all such income 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 income
dividends and capital gain distributions in cash. The Fund shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. 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.
ARTICLE II
Representations and Warranties
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act or exempt therefrom; that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws and that the sale of the Contracts shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under the Insurance Code and Regulations of the State of
____________________, and has registered or, prior to any issuance or sale of
the Contracts, will, unless exempt from registration, register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Company represents that the Contracts will be eligible for
treatment as life insurance or annuity contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter promptly upon
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having determined that the Contracts may have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that all of its
directors/trustees, employees, investment advisers and other
individuals/entities dealing with money and/or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund, in an amount not less than $5 million. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. The Company shall notify the Fund, the
Underwriter and the Adviser in the event that such coverage no longer applies.
2.4. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement are registered under the 1933 Act, duly authorized for issuance
and sale in compliance in all material respects with the terms of this Agreement
and all applicable federal and state securities laws, and that, while shares of
the Portfolios are being offered for sale, the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend its Registration Statement
under the 1933 Act and the 1940 Act from time to time as required in order to
effect the continuous offering of Portfolio shares. The Fund shall register or
otherwise 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 or the
Underwriter.
2.5. The Fund represents that each Portfolio is qualified as a Regulated
Investment Company under Subchapter M of the Code and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company promptly upon having
determined that any Portfolio may have ceased to so qualify or that it might not
so qualify in the future.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may make such payments in the future. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a board of trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees, expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund has disclosed or made available,
in writing, all information requested by Company and represents and warrants
that such written information is true and accurate in all material respects as
of the effective date of this Agreement. Without prior written notice to the
Company, the Fund will not make any changes in fundamental investment policies
or advisory fees, and shall at all times remain in compliance with federal
securities law as it applies to insurance products. The Company will use its
best efforts to provide the Fund with copies of amendments to provisions of
state insurance laws and regulations related to separate accounts and variable
products, which may affect Fund operations.
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2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute Portfolio shares
to the Company in accordance with all applicable state and federal securities
laws, including, without limitation, the 1933 Act, the 1934 Act and the 1940
Act.
2.10. The Adviser 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 shall perform its obligations for the Fund in
compliance in all material respects with any applicable state and federal
securities laws.
2.11. The Fund, the Underwriter and the Adviser represent and warrant that
all of their directors/trustees, officers, employees, investment advisers and
other individuals/entities dealing with money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund, in an amount not less than the
minimum coverage as required by Rule 17g-1 of the 1940 Act or related provisions
as may from time to time be promulgated. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company. The Fund shall notify the Company in the event such coverage no longer
applies.
ARTICLE III
Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Underwriter's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus (or private offering memorandum,
if a Contract and its associated Account are exempt from registration) for the
Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter (or in the Fund's
discretion, from the Fund), and the Underwriter (or the Fund), at its expense,
shall provide such Statement of Additional Information free of charge to the
Company and to any owner of a Contract or prospective owner who requests such
Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy statements, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law, the Company shall:
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(i) solicit voting instructions from Contract owners;
(ii) vote Portfolio shares in accordance with instructions received
from Contract owners; and
(iii) vote Portfolio shares for which no instructions have been
received in the same proportion as shares of such Portfolio
for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners. The Company
reserves the right to vote Fund shares held in any segregated asset account in
its own right, to the extent permitted by law. The Company shall be responsible
for assuring that each of its separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
in the Shared Funding Order and rules and regulations of the SEC, which
standards will also be provided to 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 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 SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV
Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund, the Underwriter or the Adviser is named, at least fifteen
Business Days prior to its use. No such material shall be used unless approved
in writing by the Fund or the Underwriter. The Fund and the Underwriter will use
reasonable best efforts to provide the Company with written response within ten
Business Days of receipt of such materials. Any piece which merely names the
Fund, the Underwriter or the Adviser as participating in the Variable Insurance
Products may be used after ten Business Days of receipt by the Fund and the
Underwriter if the Company has not received a written response from the Fund or
the Underwriter.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Fund, as such
registration statement and prospectus may from time to time be amended or
supplemented, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material provided to the Company by the Fund or
its designee or by the Underwriter, except with the written permission of the
Fund or the Underwriter, pursuant to Section 4.1 hereof.
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4.3. The Fund, the Underwriter or their designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least fifteen Business Days prior to its use.
No such material shall be used unless approved in writing by the Company or its
designee. The Company will use reasonable best efforts to provide the Fund with
written response within ten Business Days of receipt of such materials. Any
piece which merely states that the Fund, the Underwriter or the Adviser are
participating in the Variable Insurance Products may be used after ten Business
Days after receipt by the Company if the Fund or the Underwriter have not
received a written response from the Company.
4.4. The Fund and the Underwriter shall not 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 from time to time be amended or
supplemented, or in published reports which are in the public domain or approved
by the Company for distribution to Contract owners, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
4.5. The 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 any of the Portfolios or their shares,
promptly following the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Contracts or
each Account, promptly following the filing of such document with the SEC or
other regulatory authorities; and, if a Contract and its associated Account are
exempt from registration, the equivalents to the above.
4.7. For purposes of this Agreement, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following that
refer to the Fund or any affiliate of the Fund: advertisements (such as material
published or designed for use in a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape or electronic 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.
ARTICLE V
Fees and Expenses
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5.1. The Fund and the Underwriter 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 and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. Except as otherwise expressly provided in the Agreement, all expenses
incident to performance by the Fund under this Agreement shall be paid by the
Fund. The Fund shall see to it that all Portfolio 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 Portfolios' shares, preparation and filing
of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of all statements
and notices required by any federal or state law and all taxes on the issuance
or transfer of the Portfolios' shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI
Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will 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 Regulation. In the event of
a breach of this Article VI by the Fund, it will take all reasonable steps (a)
to notify Company of such breach and (b) to adequately diversify the Fund so as
to achieve compliance with the grace period afforded by Regulation 1.817-5.
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. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance, tax
or securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretive letter
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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 a Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that a material
irreconcilable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts to the
Board. The Company will assist the Board in carrying out its responsibilities
under the Shared Funding 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
any of the events in Section 7.1, as they pertain to the Company, occur (e.g., a
decision to disregard contract owner voting instructions).
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 material irreconcilable conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change, and (2) establishing a new
registered management investment company or managed separate account.
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; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested trustees of the Board. Any such
withdrawal and termination must take place within six months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Fund and the Underwriter shall continue to accept
and implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
that of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created a material irreconcilable
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested trustees
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of the Board. Until the end of that six month period, the Fund and the
Underwriter shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested trustees of the Board shall determine whether any proposed
action adequately remedies a material irreconcilable conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy a material irreconcilable conflict,
then the Company will withdraw the Account's investment in the Fund and
terminate this Agreement within six months after the Board informs the Company
in writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.7. 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 Order) on terms and conditions materially
different from those contained in the Shared Funding Order, then (a) the Fund
and/or the Participating Insurance Companies, as appropriate, shall take such
steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and
Rule 6e-3 as adopted, to the extent such rules are applicable; and (b) Sections
3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII
Indemnification
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund, the
Underwriter and the Adviser and each trustee/director and officer thereof and
each person, if any, who controls the Fund, the Underwriter, or the Adviser
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), expenses or litigation (including legal and other
expenses) (hereinafter referred to collectively as a "Loss"), to which the
Indemnified Parties may become subject under any statute or regulation, at
common law or otherwise, insofar as a Loss is related to the sale or acquisition
of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or private offering
memorandum for the Contracts or contained in the Contracts or
sales literature or other promotional materials for the
Contracts (or any
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amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with written information furnished to the Company
by or on behalf of the Indemnified Party for use in the
registration statement or prospectus for the Contracts or in
the Contracts or in sales literature or any other promotional
materials (or any amendment or supplement to any of the
foregoing); 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 or
other promotional materials of the Fund not supplied by the
Company, or persons under its control) or wrongful conduct of
the Company or persons under its control, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or sales literature or other promotional materials
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 if such statement or omission was made
in reliance upon or in conformity with written information
furnished to the Fund, the Underwriter or the Adviser by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8.1 (b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any Loss incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party's willful misfeasance, bad
faith or gross negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, the Underwriter or the Adviser,
whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified
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the Company in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to notify
the Company of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the Company shall be entitled
to participate, at its own expense, in the defense thereof. The Company also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Company to such Party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such Party under this Agreement for any legal
or other expenses subsequently incurred by such Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
this Agreement, the issuance or sale of Portfolio shares or the Contracts or the
operation of the Fund.
8.2. Indemnification By The Fund
8.2(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors/trustees 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 Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement);or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund, as limited by and in
accordance with the provisions of Sections 8.2(b) and 8.2(c)
hereof.
8.2(b). The Fund shall not be liable under this indemnification provision
with respect to any Loss 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 or to the Company, an Account, the Fund, the Underwriter or
the Adviser, whichever is applicable.
8.2(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund
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in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the Fund
of any such claim shall not relieve the Fund from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund shall be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such Party under this Agreement for any legal or other expenses
subsequently incurred by such Party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company will promptly notify the Fund of the commencement of
any litigation or proceedings against the Indemnified Parties in connection with
this Agreement, the issuance or sale of Portfolio shares or the Contracts, the
operation of each Account or the acquisition of shares of the Fund.
8.3. Indemnification By The Underwriter
8.3(a) The Underwriter agrees to indemnify and hold harmless the Company
and each of its directors/trustees and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature or
other promotional materials 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 written information furnished to the Fund, the
Underwriter or the Adviser by or on behalf of the Indemnified
Party for use in the registration statement or prospectus of
the Fund or in sales literature or other promotional materials
(or any amendment or supplement to any of the foregoing); 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 or
other promotional materials for the Contracts not supplied by
the Underwriter or persons under its control) or wrongful
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conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; o r
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or private offering memorandum for the Contracts or
contained in the Contracts or sales literature or other
promotional materials for the Contracts (or any amendment or
supplement to any of the foregoing) or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon or in
conformity with written 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 Underwriter to provide
the services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); o r
(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 Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Underwriter shall not be liable under this indemnification
provision with respect to any Loss 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 or to the Company or an Account, whichever is
applicable.
8.3(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 shall 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.
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8.3(d). The Company will promptly notify the Underwriter of the
commencement of any litigation or proceedings against the Indemnified Parties in
connection with this Agreement, the issuance or sale of Portfolio shares or the
Contracts or the operation of each Account.
8.4. Indemnification By The Adviser
8.4(a) The Adviser agrees to indemnify and hold harmless the Company and
each of its directors/trustees 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 8.4)
against any Loss to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as a Loss is related
to the sale or acquisition of the Fund's shares or the Contracts and:
(i) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature or
other promotional materials for the Contracts not supplied by
the Adviser, or persons under its control) or wrongful conduct
of the Adviser or persons under its control, with respect to
the sale or distribution of the Contracts or Fund shares; or
(ii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus or private offering memorandum for the Contracts or
contained in the Contracts or sales literature or other
promotional materials for the Contracts (or any amendment or
supplement to any of the foregoing) or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon or in conformity with
written information furnished to the Company by or on behalf
of the Adviser; or
(iii) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this
Agreement (including a failure by the Fund, whether
unintentional or in good faith or otherwise, to comply with
the diversification requirements specified in Article VI of
this Agreement); or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Adviser, as limited by and in
accordance with the provisions of Sections 8.4(b) and 8.4(c)
hereof.
8.4(b). The Adviser shall not be liable under this indemnification
provision with respect to any Loss incurred or assessed against an Indemnified
Party as such may arise from such Indemnified
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Party's willful misfeasance, bad faith or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or an Account, whichever is applicable.
8.4(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 shall 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.
8.4(d). The Company will promptly notify the Adviser of the commencement
of any litigation or proceedings against the Indemnified Parties in connection
with this Agreement, the issuance or sale of Portfolio shares or the Contracts
or the operation of each Account.
8.5. Except as otherwise expressly provided in the Agreement, no party
shall be liable to any other party for special, consequential, punitive or
exemplary damages, or damages of a like kind or nature; and, without limiting
the foregoing, with respect to Section 1.10 of Article I and Sections 8.2, 8.3
and 8.4 of Article VIII as such Sections relate to errors in calculation or
untimely reporting of net asset value per share or dividend or capital gain
rate, the liability of a party to any other party shall be limited to the amount
required to correct the value of the Account as if there had been no incorrect
calculation or reporting or untimely reporting of the net asset value per share
or dividend or capital gain rate.
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 Act, the
1934 Act and the 1940 Act and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Shared Funding Order) and the
terms of this Agreement shall be interpreted and construed in accordance
therewith.
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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 by sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund 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; or
(c) termination by the Company by written notice to the Fund 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 media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the Fund, the
Underwriter 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
reasonably believes that the Fund will fail to so qualify; or
(e) termination by the Company by written notice to the Fund, the
Underwriter and the Adviser with respect to any Portfolio in
the event that such Portfolio fails to meet the
diversification requirements specified in Article VI hereof;
or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter shall determine, in their sole judgment
exercised in good faith, that the Company and/or its
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; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that either the Fund 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; or
Page 18
<PAGE>
(h) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the
Underwriter the written notice specified in Section 1.6(b)
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, that any termination under
this Section 10.1(h) shall be effective forty-five days after
the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding termination of this
Agreement, the Fund and the Underwriter shall, if the Company and the
Underwriter mutually agree, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to retain investments in the
Fund, reinvest dividends and redeem investments in the Fund. The parties agree
that this Section 10.2 shall not apply to any terminations under Section 1.2 of
Article I or 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 opposed to 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 a
result of action by the Fund's Board, acting in good faith, upon sixty (60)
days' advance written notice to the Company and Contract Owners. 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, or is as permitted by an order of
the SEC pursuant to Section 26(b) of the 1940 Act. In the event that the Company
is to redeem shares pursuant to clause (iii) above, the Fund will promptly
furnish to the Company the opinion of counsel for the Fund (which counsel shall
be reasonably satisfactory to the Company) to the effect that any such
redemption is not in violation of the 1940 Act or any rule or regulation
thereunder, or is as permitted by an order of the SEC. 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
Underwriter 90 days' advance written notice of its intention to do so.
ARTICLE XI
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail or next-day delivery to the other parties at the address of such parties
set forth below or at such other address as any party may from time to time
specify in writing to the other parties.
Page 19
<PAGE>
If to the Company:
___________________________________
___________________________________
Attention:___________________________
If to the Fund:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
If to the Underwriter:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
If to the Adviser:
99 Park Avenue
New York, New York 10016
Attention: President, with a copy to the General Counsel
ARTICLE XII
Miscellaneous
12.1. 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.
12.2. 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 without the express written consent
of the affected party, until such time as it may come into the public domain.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
Page 20
<PAGE>
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
12.7. 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.
12.8. 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
hereunder; provided, however, that the Underwriter may assign this Agreement or
any rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. 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 120 days after the
end of each fiscal year;
(b) the Company's semi-annual statements (statutory) (and GAAP, if
any), as soon as practical and in any event within 60 days
after the end of each period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as soon
as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other 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.
Page 21
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified below.
____________________________ Attest:
By: ________________________ By: _________________________
Name: ______________________ Name: _______________________
Title: _____________________ Title: ______________________
VAN ECK WORLDWIDE INSURANCE TRUST Attest:
By: ________________________ By: _________________________
Name: ______________________ Name: _______________________
Title: _____________________ Title: ______________________
VAN ECK SECURITIES CORPORATION Attest:
By: ________________________ By: _________________________
Name: ______________________ Name: _______________________
Title: _____________________ Title: ______________________
VAN ECK ASSOCIATES CORPORATION Attest:
By: ________________________ By: ________________________
Name: ______________________ Name: ______________________
Title: _____________________ Title: _____________________
Page 22
<PAGE>
SCHEDULE A
ACCOUNTS
Date Established by the Company's
Name of Account Board of Directors
--------------- ---------------------------------
Page 23
<PAGE>
SCHEDULE B
PORTFOLIOS AND OTHER FUNDS
ADVISED BY ADVISER
I. Portfolios
II. Other Funds Advised by the Adviser
Page 24
<PAGE>
SCHEDULE C
OTHER INVESTMENT COMPANIES AVAILABLE
AS FUNDING VEHICLE FOR THE CONTRACTS
(If none, so state)
Page 25
<PAGE>
Exhibit 99.B8i
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of April 21, 1998, between American
National Insurance("Insurance Company"), a life insurance company organized
under the laws of the State of TX, and LAZARD RETIREMENT SERIES, INC. (the
"Fund"), a corporation organized under the laws of the State of Maryland, with
respect to the Fund's portfolios set forth on Schedule 1 hereto, as such
Schedule may be revised from time to time (each, a "Portfolio").
ARTICLE I
DEFINITIONS
"Act" shall mean the Investment Company Act of 1940, as amended.
"Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
"Business Day" shall mean any day for which the Fund calculates net
asset value per share as described in the Fund's Prospectus.
"Commission" shall mean the Securities and Exchange Commission.
"Contract" shall mean a variable annuity contract that uses the Fund as
an underlying investment medium. Individuals who participate under a group
Contract are "Participants".
"Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.
"Disinterested Board Members" shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined by the
Act.
"LAM" shall mean Lazard Asset Management, a division of Lazard Freres &
Co. LLC.
"Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life insurance
contracts to the public and which has entered into an agreement with the Fund
for the purpose of making Fund shares available to serve as the underlying
investment medium for the aforesaid Contracts.
"Prospectus" shall mean the Fund's current prospectus and statement of
additional information, as most recently filed with the Commission, with respect
to the Portfolios.
<PAGE>
"Separate Account" shall mean American National Insurance Company
Variable Annuity Separate Account, a separate account established by Insurance
Company in accordance with the laws of the State of TX.
"Software Program" shall mean the software program used by the Fund for
providing Fund and account balance information including net asset value per
share.
"Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates which invest in the Fund.
ARTICLE II
REPRESENTATIONS
Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b) it has
legally and validly established the Separate Account pursuant to the TX
Insurance Code for the purpose of offering to the public certain individual
variable annuity contracts; (c) it has registered the Separate Account as a unit
investment trust under the Act to serve as the segregated investment account for
the Contracts; and (d) each Separate Account is eligible to invest in shares of
the Fund without such investment disqualifying the Fund as an investment medium
for insurance company separate accounts supporting variable annuity contracts or
variable life insurance contracts.
Insurance Company represents and warrants that (a) the Contracts will
be described in a registration statement filed under the Securities Act of 1933,
as amended ("1933 Act"); (b) the Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state laws; and (c) the
sale of the Contracts shall comply in all material respects with state insurance
law requirements. Insurance Company agrees to inform the Fund promptly of any
investment restrictions imposed by state insurance law and applicable to the
Fund.
Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate Account
are, in accordance with the applicable Contracts, to be credited to or charged
against such Separate Account without regard to other income, gains or losses
from assets allocated to any other accounts of Insurance Company. Insurance
Company represents and warrants that the assets of the Separate Account are and
will be kept separate from Insurance Company's General Account and any other
separate accounts Insurance Company may have, and will not be charged with
liabilities from any business that Insurance Company may conduct or the
liabilities of any companies affiliated with Insurance Company.
<PAGE>
Fund represents that the Fund is registered with the Commission under
the Act as an open-end, management investment company and possesses, and shall
maintain, all legal and regulatory licenses, approvals, consents and/or
exemptions required for the Fund to operate and offer its shares as an
underlying investment medium for Participating Companies. The Fund has
established nine portfolios and may in the future establish other portfolios.
Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify Insurance Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life insurance
policies or annuity contracts, whichever is appropriate, under applicable
provisions of the Code, and that it will make every effort to maintain such
treatment and that it will notify the Fund and LAM immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future. Insurance Company agrees
that any prospectus offering a Contract that is a "modified endowment contract,"
as that term is defined in Section 7702A of the Code, will identify such
Contract as a modified endowment contract (or policy).
Fund agrees that each Portfolio's assets shall be managed and invested
in a manner that complies with the requirements of Section 817(h) of the Code.
Insurance Company agrees that the Fund shall be permitted (subject to
the other terms of this Agreement) to make the Portfolios' shares available to
other Participating Companies and contractholders.
Fund represents and warrants that any of its directors, officers,
employees, investment advisers, and other individuals/entities who deal with the
money and/or securities of the Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than that required by Rule 17g-1 under the Act. The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage in an amount not less than the coverage required to be maintained by
the Fund. The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
<PAGE>
Insurance Company agrees that LAM shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights conferred by
virtue of this Agreement.
ARTICLE III
FUND SHARES
The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Portfolios' shares.
Fund agrees to make the shares of its Portfolios available for purchase
at the then applicable net asset value per share by Insurance Company and the
Separate Account on each Business Day pursuant to rules of the Commission.
Notwithstanding the foregoing, the Fund may refuse to sell the shares of any
Portfolio to any person, or suspend or terminate the offering of the 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 its fiduciary duties under federal and any applicable
state laws, necessary and in the best interests of the shareholders of such
Portfolio.
Fund agrees that shares of the Portfolios will be sold only to
Participating Companies, their separate accounts, the general accounts of those
Participating Companies and their affiliates and to qualified pension and
retirement plans. No shares of any Portfolio will be sold to the general
public.
Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Portfolio available on a per-
share and Portfolio basis to Insurance Company by 6 p.m. Eastern Time on each
Business Day. Any material errors in the calculation of net asset value,
dividend and capital gain information shall be reported immediately upon
discovery to Insurance Company. Non-material errors will be corrected in the
next Business Day's net asset value per share for the Portfolio in question.
At the end of each Business Day, Insurance Company will use the
information described in Section 3.4 to calculate the Separate Account unit
values for the day. Using this unit value, Insurance Company will process the
day's Separate Account transactions received by it by the close of trading on
the floor of the New York Stock Exchange (currently 4:00 p.m. Eastern time) to
determine the net dollar amount of Portfolio shares which will be purchased or
redeemed at that day's closing net asset value per share for such Portfolio.
The net purchase or redemption orders will be transmitted to the Fund by
Insurance Company by [11:00] a.m. Eastern Time on the Business Day next
following Insurance Company's receipt of that information. Subject to Sections
3.6 and 3.8, all purchase and redemption orders for Insurance Company's General
Accounts shall be effected at the net asset value per share of the relevant
Portfolio next calculated after receipt of the order by the Fund or its Transfer
Agent.
Fund appoints Insurance Company as its agent for the limited purpose of
accepting orders for the purchase and redemption of shares of each Portfolio for
the Separate Account. Fund will execute orders for any Portfolio at the
applicable net asset value per share
<PAGE>
determined as of the close of trading on the day of receipt of such orders by
Insurance Company acting as agent ("effective trade date"), provided that the
Fund receives notice of such orders by [11:00] a.m. Eastern Time on the next
following Business Day and, if such orders request the purchase of Portfolio
shares, the conditions specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request for any Portfolio that does not satisfy the
conditions specified above and in Section 3.8, as applicable, will be effected
at the net asset value computed for such Portfolio on the Business Day
immediately preceding the next following Business Day upon which such conditions
have been satisfied.
Insurance Company will make its best efforts to notify Fund in advance
of any unusually large purchase or redemption orders.
If Insurance Company's order requests the purchase of Portfolio shares,
Insurance Company will pay for such purchases by wiring Federal Funds to Fund or
its designated custodial account on the day the order is transmitted. Insurance
Company shall make all reasonable efforts to transmit to the Fund payment in
Federal Funds by [12:00 noon] Eastern Time on the Business Day the Fund receives
the notice of the order pursuant to Section 3.5. Fund will execute such orders
at the applicable net asset value per share determined as of the close of
trading on the effective trade date if Fund receives payment in Federal Funds by
[12:00 noon] Eastern Time on the Business Day the Fund receives the notice of
the order pursuant to Section 3.5. If payment in Federal Funds for any purchase
is not received or is received by the Fund after [12:00 noon] Eastern Time on
such Business Day, Insurance Company shall promptly upon the Fund's request,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowings or
overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. If Insurance Company's order requests the redemption of Portfolio
shares valued at or greater than $1 million, the Fund will wire such amount to
Insurance Company within seven days of the order.
Fund has the obligation to ensure that Portfolio shares are registered
with the Commission at all times.
Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Portfolio shares will be by book entry only. No share
certificates will be issued to Insurance Company. Insurance Company will record
shares ordered from Fund in an appropriate title for the corresponding account.
Fund shall credit Insurance Company with the appropriate number of
shares.
On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance Company the
amount of dividend and capital gain, if any, per share of each Portfolio. All
dividends and capital gains of any Portfolio shall be automatically reinvested
in additional shares of the relevant Portfolio
<PAGE>
at the applicable net asset value per share of such Portfolio on the payable
date. Fund shall, on the day after the payable date or, if not a Business Day,
on the first Business Day thereafter, notify Insurance Company of the number of
shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th) Business
Day of the following month.
Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other printed
materials (which the Fund customarily provides to its shareholders) in
quantities as Insurance Company may reasonably request for distribution to each
Contractholder and Participant.
Fund will provide to Insurance Company at least one complete copy of
all registration statements, Prospectuses, 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 Commission or other regulatory authorities.
Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, 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 Contracts or the Separate Account, contemporaneously with the
filing of such document with the Commission.
ARTICLE V
EXPENSES
The charge to the Fund for all expenses and costs of the Portfolios,
including but not limited to management fees, administrative expenses and legal
and regulatory costs, will be made in the determination of the relevant
Portfolio's daily net asset value per share.
<PAGE>
Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any expenses
of the Fund or expenses relating to the distribution of its shares. Insurance
Company shall pay the following expenses or costs:
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or marketing materials for
prospective Insurance Company Contractholders and Participants as LAM and
Insurance Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing materials
for prospective Insurance Company Contractholders and Participants.
c. Distribution expenses of Fund materials or marketing materials for
Insurance Company Contractholders and Participants.
Except as provided herein and as may be reflected in each Portfolio's net
asset value per share, all other Fund expenses shall not be borne by Insurance
Company.
ARTICLE VI
EXEMPTIVE RELIEF
Insurance Company has reviewed a copy of the Application For an Order
of Exemption pending before the Commission under Section 6(c) of the Act and, in
particular, has reviewed the conditions to the requested relief set forth in the
related Notice. As set forth therein, Insurance Company agrees to report any
potential or existing conflicts promptly to the Board, and in particular
whenever contract voting instructions are disregarded, and recognizes that it
will be responsible for assisting the Board in carrying out its responsibilities
under such application. Insurance Company agrees to carry out such
responsibilities with a view to the interests of existing Contractholders. Fund
agrees to promptly inform Insurance Company of any additional conditions, if
any, imposed by the Commission in its Order granting the requested relief.
If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists with regard
to Contractholder investments in the Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that Insurance Company is
responsible for causing or creating said conflict, Insurance Company shall at
its sole cost and expense, and to the extent reasonably practicable (as
determined by a majority of the Disinterested Board Members), take such action
as is necessary to remedy or eliminate the irreconcilable material conflict.
Such necessary action may include, but shall not be limited to:
<PAGE>
a. Withdrawing the assets allocable to the Separate Account from the
Portfolios and reinvesting such assets in a different investment medium, or
submitting the question of whether such segregation should be implemented to a
vote or all affected Contractholders; and/or
b. Establishing a new registered management investment company.
If a material irreconcilable conflict arises as a result of a decision
by Insurance Company to disregard Contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote by all
Contractholders having an interest in the Fund, Insurance Company may be
required, at the Board's election, to withdraw the Separate Account's investment
in the Fund.
For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will the Fund be required
to bear the expense of establishing a new funding medium for any Contract.
Insurance Company shall not be required by this Article to establish a new
funding medium for any Contract if an offer to do so has been declined by vote
of a majority of the Contractholders materially adversely affected by the
irreconcilable material conflict.
No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act or failure
to act by Insurance Company pursuant to this Article VI shall relieve Insurance
Company of its obligations under, or otherwise affect the operation of, Article
V.
ARTICLE VII
VOTING OF FUND SHARES
Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the Fund's proxy material, reports to shareholders and
other communications to shareholders in such quantity as Insurance Company shall
reasonably require for distributing to Contractholders or Participants.
Insurance Company shall:
a. solicit voting instructions from Contractholders or Participants on a
timely basis and in accordance with applicable law;
b. vote Portfolio shares in accordance with instructions received from
Contractholders or Participants; and
c. vote Portfolio shares for which no instructions have been received in
the same proportion as Portfolio shares for which instructions have been
received.
<PAGE>
Insurance Company agrees at all times to votes its General Account shares
in the same proportion as Portfolio shares for which instructions have been
received from Contractholders or Participants. Insurance Company further agrees
to be responsible for assuring that voting Portfolio shares for the Separate
Account is conducted in a manner consistent with other Participating Companies.
Insurance Company agrees that it shall not, without the prior written
consent of the Fund and LAM, solicit, induce or encourage Contractholders to (a)
change or supplement the Fund's current investment adviser or (b) change,
modify, substitute, add to or delete the Fund from the current investment media
for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
The Fund or its underwriter shall periodically furnish Insurance
Company with the following documents, in quantities as Insurance Company may
reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by Insurance
Company in accordance with Section 5.2 of this Agreement.
Insurance Company shall designate certain persons or entities which
shall have the requisite licenses to solicit applications for the sale of
Contracts. No representation is made as to the number or amount of Contracts
that are to be sold by Insurance Company. Insurance Company shall make
reasonable efforts to market the Contracts and shall comply with all applicable
federal and state laws in connection therewith.
Insurance Company shall furnish, or shall cause to be furnished, to the
Fund, each piece of sales literature or other promotional material in which the
Fund, its investment adviser or the administrator is named, at least fifteen
Business Days prior to its use. No such material shall be used unless the Fund
approves such material. Such approval (if given) must be in writing and shall
be presumed not given if not received within ten Business Days after receipt of
such material. The Fund shall use all reasonable efforts to respond within ten
days of receipt.
<PAGE>
Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund or
any Portfolio in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or
Prospectus, as 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.
Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other promotional material
in which Insurance Company or the Separate Account is named, at least fifteen
Business Days prior to its use. No such material shall be used unless Insurance
Company approves such material. Such approval (if given) must be in writing and
shall be presumed not given if not received within ten Business Days after
receipt of such material. Insurance Company shall use all reasonable efforts to
respond within ten days of receipt.
Fund shall not, in connection with the sale of Portfolio shares, give
any information or make any representations on behalf of Insurance Company or
concerning Insurance Company, the Separate Account, or the Contracts other than
the information or representations contained in a registration statement or
prospectus for the Contracts, as may be amended or supplemented from time to
time, or in published reports for the Separate Account which are in the public
domain or approved by Insurance Company for distribution to Contractholders or
Participants, or in sales literature or other promotional material approved by
Insurance Company.
For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. rules, the
Act or the 1933 Act.
<PAGE>
ARTICLE IX
INDEMNIFICATION
Insurance Company agrees to indemnify and hold harmless the Fund, LAM,
any sub-investment adviser of a Portfolio, and their affiliates, and each of
their directors, trustees, general members, officers, employees, agents and each
person, if any, who controls or is associated with any of the foregoing entities
or persons within the meaning of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section), against any and all losses, claims,
damages or liabilities joint or several (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted) for which
the Indemnified Parties may become subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect to
thereof) (i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in information furnished by
Insurance Company for use in the registration statement or Prospectus or sales
literature or advertisements of the Fund or with respect to the Separate Account
or Contracts, 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; (ii) arise out of or as
a result of conduct, statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisements of the Fund) of Insurance Company or its agents, with respect to
the sale and distribution of Contracts for which Portfolio shares are an
underlying investment; (iii) arise out of the wrongful conduct of Insurance
Company or persons under its control with respect to the sale or distribution of
the Contracts or Portfolio shares; (iv) arise out of Insurance Company's
incorrect calculation and/or untimely reporting of net purchase or redemption
orders; or (v) arise out of any breach by Insurance Company of a material term
of this Agreement or as a result of any failure by Insurance Company to provide
the services and furnish the materials or to make any payments provided for in
this Agreement. Insurance Company will reimburse any Indemnified Party in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that with respect to clauses (i) and
(ii) above Insurance Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any untrue statement or omission or alleged omission made in such registration
statement, prospectus, sales literature, or advertisement in conformity with
written information furnished to Insurance Company by the Fund specifically for
use therein. This indemnity agreement will be in addition to any liability
which Insurance Company may otherwise have.
<PAGE>
The Fund agrees to indemnify and hold harmless Insurance Company and
each of its directors, officers, employees, agents and each person, if any, who
controls Insurance Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which Insurance Company or any such
director, officer, employee, agent or controlling person may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) 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 or
advertisements of the Fund; (2) arise out of or are based upon the omission to
state in the registration statement or Prospectus or sales literature or
advertisements of the Fund any material fact required to be stated therein or
necessary to make the statements therein not misleading; or (3) 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
or advertisements with respect to the Separate Account or the Contracts and such
statements were based on information provided in writing to Insurance Company by
the Fund specifically for use therein; and the Fund will reimburse any legal or
other expenses reasonably incurred by Insurance Company or any such director,
officer, employee, agent or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Fund will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or omission or alleged omission made in such Registration
Statement, Prospectus, sales literature or advertisements in conformity with
written information furnished to the Fund by Insurance Company specifically for
use therein. This indemnity agreement will be in addition to any liability
which the Fund may otherwise have.
The Fund shall indemnify and hold Insurance Company harmless against
any and all liability, loss, damages, costs or expenses which Insurance Company
may incur, suffer or be required to pay due to the Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate of a Portfolio; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3) untimely
reporting of the net asset value, dividend rate or capital gain distribution
rate; provided that the Fund shall have no obligation to indemnify and hold
harmless Insurance Company if the incorrect calculation or incorrect or untimely
reporting was the result of incorrect information furnished by Insurance Company
or information furnished untimely by Insurance Company or otherwise as a result
of or relating to a breach of this Agreement by Insurance Company. In no event
will the Fund be liable for any consequential, incidental, special or indirect
damages resulting to Insurance Company hereunder.
<PAGE>
Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Article, notify the indemnifying party of the commencement thereof. The
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability under this Article IX, except to the extent that the
omission results in a failure of actual notice to the indemnifying party and
such indemnifying party is damaged solely as a result of the failure to give
such notice. In case any such action is brought against any indemnified party,
and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, assume the defense thereof, with counsel satisfactory to such
indemnified party, and to the extent that the indemnifying party has given
notice to such effect to the indemnified party and is performing its obligations
under this Article, the indemnifying party shall not be liable for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof, other than reasonable costs of investigation.
Notwithstanding the foregoing, in any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article IX.
ARTICLE X
COMMENCEMENT AND TERMINATION
This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
This Agreement shall terminate without penalty as to one or more
Portfolios at the option of the terminating party:
<PAGE>
a. At the option of Insurance Company or the Fund at any time from the
date hereof upon 180 days' notice, unless a shorter time is agreed to by the
parties;
b. At the option of Insurance Company, if shares of any Portfolio are
not reasonably available to meet the requirements of the Contracts as determined
by Insurance Company. Prompt notice of election to terminate shall be furnished
by Insurance Company, said termination to be effective ten days after receipt of
notice unless the Fund makes available a sufficient number of shares to meet the
requirements of the Contracts within said ten-day period;
c. At the option of Insurance Company, upon the institution of formal
proceedings against the Fund by the Commission, the National Association of
Securities Dealers, Inc. or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in Insurance Company's
reasonable judgment, materially impair the Fund's ability to meet and perform
the Fund's obligations and duties hereunder. Prompt notice of election to
terminate shall be furnished by Insurance Company with said termination to be
effective upon receipt of notice;
d. At the option of the Fund, upon the institution of formal proceedings
against Insurance Company by the Commission, the National Association of
Securities Dealers, Inc. or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the Fund's reasonable
judgment, materially impair Insurance Company's ability to meet and perform
Insurance Company's obligations and duties hereunder. Prompt notice of election
to terminate shall be furnished by the Fund with said termination to be
effective upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in its sole
judgment reasonably exercised in good faith, that Insurance Company has suffered
a material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse change or
material adverse publicity is likely to have a material adverse impact upon the
business and operation of the Fund or LAM, the Fund shall notify Insurance
Company in writing of such determination and its intent to terminate this
Agreement, and after considering the actions taken by Insurance Company and any
other changes in circumstances since the giving of such notice, such
determination of the Fund shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall be the effective
date of termination;
<PAGE>
f. Upon termination of the Investment Management Agreement between the
Fund and LAM or its successors unless Insurance Company specifically approves
the selection of a new Fund investment adviser. The Fund shall promptly furnish
notice of such termination to Insurance Company;
g. In the event Portfolio shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use of such
shares as the underlying investment medium of Contracts issued or to be issued
by Insurance Company. Termination shall be effective immediately upon such
occurrence without notice;
h. At the option of the Fund upon a determination by the Board in good
faith that it is no longer advisable and in the best interests of shareholders
for the Fund to continue to operate pursuant to this Agreement. Termination
pursuant to this Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
i. At the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the Code, or
if the Fund reasonably believes that the Contracts may fail to so qualify;
j. At the option of either party to this Agreement, upon another party's
breach of any material provision of this Agreement;
k. At the option of the Fund, if the Contracts are not registered,
issued or sold in accordance with applicable federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of the non-assigning party.
Any such termination pursuant to this Article X shall not affect the
operation of Article V of this Agreement. Any termination of this Agreement
shall not affect the operation of Article IX of this Agreement.
Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, the Fund and LAM may, at the option of the Fund, continue to make
available additional Portfolio shares for so long as the Fund desires pursuant
to the terms and conditions of this Agreement as provided below, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if the Fund or LAM so elects to make additional Portfolio shares
available, the owners of the Existing Contracts or Insurance Company, whichever
shall have legal authority to do so, shall be permitted to reallocate
investments in the Portfolio, redeem investments in the Fund and/or invest in
the Fund upon the making of additional purchase payments under the Existing
Contracts. In the event of a termination of this Agreement pursuant to Section
10.2 hereof, the Fund and LAM, as promptly as is practicable under the
circumstances, shall notify Insurance
<PAGE>
Company whether LAM and the Fund will continue to make Portfolio shares
available after such termination. If Portfolio shares continue to be made
available after such termination, the provisions of this Agreement shall remain
in effect and thereafter either the Fund or Insurance Company may terminate the
Agreement, as so continued pursuant to this Section 10.3, upon prior written
notice to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be for more than six
months.
ARTICLE XI
AMENDMENTS
Any changes in the terms of this Agreement shall be made by agreement
in writing between Insurance Company and Fund.
ARTICLE XII
NOTICE
Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the following
addresses:
Insurance Company: American National Insurance
1 Moody Plazaz
Galveston, TX 77550
Fund: Lazard Retirement Series, Inc.
30 Rockefeller Plaza
New York, New York 10020
Attention: Secretary
with copies to: Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Attn: Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the addresses as
evidenced by the return receipt.
<PAGE>
ARTICLE XIII
MISCELLANEOUS
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund.
ARTICLE XIV
LAW
This Agreement shall be construed in accordance with the internal laws
of the State of New York, without giving effect to principles of conflict of
laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be duly
executed and attested as of the date first above written.
American National Insurance
By:
Attest:_____________________
LAZARD RETIREMENT SERIES, INC.
By:
Attest:_____________________
<PAGE>
SCHEDULE 1
Name of Portfolio
- -----------------
Lazard Retirement Bantam Value Portfolio
Lazard Retirement Emerging Markets Portfolio
Lazard Retirement Equity Portfolio
Lazard Retirement Global Equity Portfolio
Lazard Retirement International Equity Portfolio
Lazard Retirement International Fixed-Income Portfolio
Lazard Retirement International Small Cap Portfolio
Lazard Retirement Small Cap Portfolio
Lazard Retirement Strategic Yield Portfolio
1
<PAGE>
DISTRIBUTION AND SERVICING PLAN AGREEMENT
LAZARD RETIREMENT SERIES, INC.
Lazard Freres & Co. LLC
30 Rockefeller Plaza
New York, New York 10020
Gentlemen:
We wish to enter into this Agreement with you for distribution and
certain other services with respect to the shares of each portfolio set forth on
Schedule 1 hereto, as such Schedule may be revised from time to time (each, a
"Portfolio"), of Lazard Retirement Series, Inc. (the "Fund") of which you are
the principal underwriter as defined in the Investment Company Act of 1940, as
amended (the "Act"), and the exclusive agent for the continuous distribution of
its shares.
The terms and conditions of this Agreement are as follows:
1. We agree to provide reasonable assistance in connection with the
sale of the Portfolios' shares, which assistance may include distributing sales
literature, marketing and advertising. If we are restricted or unable to
provide the services contemplated above, we agree not to perform such services
and not to accept fees thereafter. Our acceptance of any fees hereunder shall
constitute our representation (which shall survive any payment of such fees and
any termination of this Agreement and shall be reaffirmed each time we accept a
fee hereunder) that our receipt of such fee is lawful.
2. We agree to provide shareholder and administrative services for
our clients who own shares of any Portfolio ("clients"), which services may
include, without limitation, answering client inquiries about the Fund or any
Portfolio; assisting clients in changing dividend options, account designations
and addresses; performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing purchase and redemption
transactions; investing client account cash balances automatically in Portfolio
shares; providing periodic statements showing a client's account balance and
integrating such statements with those of other transactions and balances in the
client's other accounts serviced by us; arranging for bank wires; and providing
such other information and services as the Fund reasonably may request, to the
extent we are permitted by applicable statute, rule or regulation. In this
regard, you recognize that to the extent we are subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities we may undertake and for which we may be paid, we intend to perform
only those activities as are consistent with our statutory and regulatory
obligations. We shall provide to clients a schedule of the services and of any
fees that we may charge directly to them for such services.
2
<PAGE>
3. We shall provide such office space and equipment, telephone
facilities and personnel (which may be all or any part of the space, equipment
and facilities currently used in our business, or all or any personnel employed
by us) as is necessary or beneficial in order to provide such services
contemplated hereunder.
4. We agree that neither we nor any of our employees or agents are
authorized to make any representation concerning the Portfolios' shares, except
those contained in the Fund's then-current Prospectus and Statement of
Additional Information, copies of which will be supplied by you to us, or in
such supplemental literature or advertising materials as may be authorized by
you in writing.
5. For all purposes of this Agreement, we will be deemed to be an
independent contractor, and will have no authority to act as agent for you or
the Fund in any matter or in any respect. We and our employees will, upon
request, be available during normal business hours to consult with you or your
designees concerning the performance of our responsibilities under this
Agreement.
6. In consideration of the services and facilities described herein,
we shall be entitled to receive from you, and you agree to pay to us with
respect to each Portfolio, the fees set forth opposite such Portfolio's name on
Schedule 1 hereto. We understand that the payment of these fees has been
authorized and will be paid pursuant to a Distribution and Servicing Plan
approved by the Fund's Board and shareholders, and any payments pursuant to this
Agreement shall be paid only so long as this Agreement and the Distribution and
Servicing Plan adopted by the Fund is in effect.
7. You reserve the right, at your discretion and without notice, to
suspend or withdraw the sale of any Portfolio's shares.
8. We acknowledge that this Agreement shall become effective, as to a
Portfolio, only when approved by vote of a majority of (i) the Fund's Board and
(ii) the Board members who are not "interested persons" (as defined in the Act)
of the Fund and have no direct or indirect financial interest in this Agreement,
cast in person at a meeting called for the purpose of voting on such approval.
3
<PAGE>
9. As to each Portfolio, this Agreement shall continue until the last
day of the calendar year next following the date of execution, and thereafter
shall continue automatically for successive annual periods ending on the last
day of each calendar year, provided such continuance is approved specifically at
least annually by a vote of a majority of (i) the Fund's Board and (ii) the
Directors who are not "interested persons" (as defined in the Act) of the Fund
and have no direct or indirect financial interest in this Agreement, by vote
cast in person at a meeting called for the purpose of voting on such approval.
As to each Portfolio, this Agreement is terminable without penalty, at any time,
by vote of a majority of the Directors who are not "interested persons" (as
defined in the Act) and have no direct or indirect financial interest in this
Agreement or, on not more than 60 days' written notice, by vote of holders of a
majority of a Portfolio's outstanding shares, or, upon 15 days' notice, by you.
Notwithstanding anything contained herein, if the Distribution and Servicing
Plan adopted by the Fund is terminated by the Fund's Board, or the Distribution
and Servicing Plan, or any part thereof, is found invalid or is ordered
terminated by any regulatory or judicial authority, or we fail to perform the
distribution and servicing functions contemplated by the Fund or by you, this
Agreement shall be terminable effective upon receipt of notice thereof by us.
This Agreement also shall terminate automatically, as to the relevant Portfolio,
in the event of its assignment (as defined in the Act).
10. We understand that the Fund's Board will review, at least
quarterly, a written report of the amounts expended pursuant to this Agreement
and the purposes for which such expenditures were made. In connection with such
reviews, we will furnish you or your designees with such information as you or
they may reasonably request and will otherwise cooperate with you and your
designees (including, without limitation, any auditors designated by you), in
connection with the preparation of reports to the Fund's Board concerning this
Agreement and the monies paid or payable by you pursuant hereto, as well as any
other reports or filings that may be required by law.
11. All communications to you shall be sent to you at the address set
forth above. Any notice to us shall be duly given if mailed or telegraphed to
us at the address set forth below.
4
<PAGE>
12. This Agreement shall be construed in accordance with the internal
laws of the State of New York, without giving effect to principles of conflict
of laws.
Very truly yours,
__________________________________________
(Please Print or Type Name of Entity)
__________________________________________
Address
__________________________________________
City State Zip Code
Date____________________ By:_______________________________________
Authorized Signature
NOTE: Please return both signed copies of this Agreement to Lazard Freres
& Co. LLC. Upon acceptance one countersigned copy will be returned for
your files.
Accepted:
LAZARD FRERES & CO. LLC
Date _________________________ By:____________________________
5
<PAGE>
SCHEDULE 1
Distribution and Servicing Plan Agreement
between
LAZARD FRERES & CO. LLC
and
__________________________________
American National Insurance
Fee at an Annual Rate as a Percentage of Average Daily Net Asset Value of
Portfolio Shares Owned by Clients*
Name of Portfolio* Fee
- ------------------ ----
Lazard Retirement Bantam Value Portfolio .25
Lazard Retirement Emerging Markets Portfolio .25
Lazard Retirement Equity Portfolio .25
Lazard Retirement Global Equity Portfolio .25
Lazard Retirement International Equity Portfolio .25
Lazard Retirement International Fixed-Income Portfolio .25
Lazard Retirement International Small Cap Portfolio .25
Lazard Retirement Small Cap Portfolio .25
Lazard Retirement Strategic Yield Portfolio .25
Dated: April 21, 1998
* For purposes of determining the fees payable hereunder, the average daily
net asset value of each Portfolio's shares shall be computed in the manner
specified in the Fund's charter documents and then-current Prospectus and
Statement of Additional Information.
7
