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Registration No. 33-36525
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-211:06 AM
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
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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 Distribution 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; Policy Rights; Charges and
Deductions; General Provisions; Voting Rights
11 American National Insurance Company and the
Separate Account; Fixed Account
12 American National Insurance Company and the
Separate Account
13 Summary; Charges and Deductions
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14 Payment and Allocation of Premiums
15 Payment and Allocation of Premiums
16 Payment and Allocation of Premiums
17 Policy Rights
18 American National Insurance Company and the
Separate Account; Fixed Account; Policy Rights;
Payment and Allocation of Premiums
19 Safekeeping of the Separate Account's Assets
20 Not Applicable
21 Policy Rights
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 American National Insurance Company and the
Separate Account
26 American 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 Distribution of the Policies
39 Distribution of the Policies
40 American National Insurance Company and the
Separate Account; Distribution of the Policies
41 Distribution of the Policies
42 Not Applicable
43 Not Applicable
44 Payment and Allocation of Premiums
45 Not Applicable
46 Payment and Allocation of Premiums
47 American National Insurance Company and the
Separate Account; Payment and Allocation of
Premiums
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48 Safekeeping of the Separate Account's Assets
49 Not Applicable
50 American National Insurance Company and the
Separate Account
51 Policy Benefits; Payment and Allocation of
Premiums; 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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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.
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VARIABLE UNIVERSAL LIFE II INSURANCE POLICY
ISSUED BY
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550
(409) 763-4661
This Prospectus describes a variable universal life insurance policy
("Policy") offered by American National Insurance Company ("American National"),
a stock life insurance company. The Policy is designed to provide lifetime
insurance protection and at the same time provide flexibility, within limits, to
vary the frequency and amount of premium payments and to increase or decrease
the level of Death Benefits payable under the Policy.
The Policy guarantees a death benefit payable at the Insured's death for as
long as the Policy remains in force. The policyowner ("Policyowner") may choose
either Death Benefit option A (generally, until age 95 a level benefit that
equals the Specified Amount of the Policy) or option B (a variable benefit that
until age 95 generally equals the Specified Amount plus the Policy's
Accumulation Value). Under either Death Benefit option, the Death Benefit at age
95 and thereafter equals the Accumulation Value. The Policy is available only to
persons who have an age last birthday of 80 or less at the time the Policy is
purchased. The minimum Specified Amount is currently $100,000 for preferred risk
classification and $50,000 for all other risk classifications. Determination of
insured risk classifications is made in accordance with American National's
underwriting guidelines. The Policy provides for a Surrender Value that can be
obtained with a partial or total surrender of the Policy, or with a Policy loan.
There is no minimum guaranteed Accumulation Value.
You have the right to examine the Policy and return it for a refund within
10 days after you receive the Policy (the "Refund Period"). (See "Refund
Privilege", page XX.)
Premium payments made under the Policy are paid to American National. The
amount of any initial premium
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payment received with the application will be allocated to the money market
portfolio of the American National Fund, as of the issue date, for the first 15
days of the Refund Period. After the expiration of such 15 day period, the
initial premium, together with investment gains thereon, and all subsequent
premium payments, will be allocated among the twenty subaccounts ("Subaccounts")
of the American National Variable Life Separate Account ("Separate Account")
available under the Policy and/or the Fixed Account as directed by the
Policyowner. The amount of the Policy's Accumulation Value, the duration of the
Death Benefit and, if Option B is selected, the amount of the Death Benefit
above the Specified Amount, will vary with the investment experience of the
selected Subaccounts, and the rate of interest being paid on the amount
allocated to the Fixed Account.
Certain fees and charges are deducted from the Policy's Accumulation Value. A
Daily Asset Charge of 1.25% of the Accumulation Value of each Subaccount on an
annual basis will be deducted. A monthly policy charge will also be deducted.
Such monthly policy charge will range from a maximum of $7.50 plus $XX per
$1,000 of Specified Amount at age 0 to a maximum of $7.50 plus $XX per $1,000 of
Specified Amount at age 80. In addition, the monthly cost of insurance and any
optional insurance benefits will also be deducted.
Generally, the Policy will continue in force so long as the Accumulation Value
is sufficient to pay certain monthly charges imposed in connection with the
Policy. However, American National agrees to keep the Policy in force during the
first three years ("Guaranteed Coverage Benefit") so long as the Guaranteed
Coverage Premium is paid and other policy provisions are met even though, in
certain instances, the minimum payment allowed by the contract will not generate
positive Surrender Value, after payment of Monthly Deductions, at one or more
points during such period.
The assets of each Subaccount of the Separate Account are invested in shares
of a corresponding portfolio of the American National Investments Accounts, Inc.
(the "American National Fund"), the Variable Insurance Products Fund ("VIP"),
the Variable Insurance Products Fund II ("VIP II") and the Variable Insurance
Products Fund III ("VIP III") (collectively the "Fidelity Funds"), and the T.
Rowe Price International Series, Inc., and the T. Rowe Price Equity Series, Inc.
(the "T. Rowe Price Funds"). The portfolios of the American National Fund, the
Fidelity Funds and the T. Rowe Price Funds that are available for investment
will sometimes be referred to, individually, as an "Eligible Portfolio" and
collectively, as the "Eligible Portfolios". The American National Fund, the
Fidelity Funds and the T. Rowe Price Funds are open-end, diversified, series
mutual funds. The American National Fund currently has four portfolios, all of
which are Eligible Portfolios: The AN Money Market Portfolio, the AN Growth
Portfolio, the AN Balanced Portfolio and the AN Managed Portfolio. The Fidelity
Funds currently have thirteen portfolios which are Eligible Portfolios: the VIP
II Investment Grade Bond, The VIP II Asset Manager, the VIP II Index 500, The
VIP Money Market, the VIP Equity-Income, the VIP High Income, the VIP Growth,
the VIP Overseas, the VIP II Contrafund, the VIP II Asset Manager: Growth, the
VIP III Growth Opportunities, the VIP III Balanced and the VIP III Growth and
Income. The T. Rowe Price Funds currently have three portfolios which are
Eligible Portfolios: Equity Income, the International Stock and the Mid-Cap
Growth. The accompanying prospectuses for the American National Fund, the
Fidelity Funds and the T. Rowe Price Funds describe the investment objectives
and policies and the risks of each of the Eligible Portfolios. The Separate
Account is organized as a unit investment trust.
Replacing existing insurance with a Policy or purchasing a Policy as a means
of obtaining additional insurance protection if the purchaser already owns
another variable universal life insurance policy may not be advantageous.
The Policy is not a deposit or obligation of, nor guaranteed or endorsed by
any bank, credit union, broker-dealer or any other financial institution. The
Policy is not federally insured by the Federal Reserve Board, or any other
agency; and involves investment risks, including the loss or principal.
This Prospectus must be accompanied by
Current Prospectuses or Prospectus Profiles for each Eligible Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR BY ANY STATE SECURITIES REGULATORY AUTHORITY, NOR HAS
THE COMMISSION, OR ANY STATE SECURITIES REGULATORY AUTHORITY, PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS _____________
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TABLE OF CONTENTS
PAGE
Definitions......................................... 5
Summary............................................. 7
The Policy......................................... 7
Policy Benefits and Rights......................... 8
Flexibility to Adjust Death Benefits............... 9
Premiums........................................... 9
Policy Lapse....................................... 9
Charges............................................ 10
Fees and Expenses Incurred by Eligible Portfolios.. 10
Tax Treatment of the Policy........................ 11
Unisex Policies.................................... 11
Refund Privilege................................... 11
American National Insurance Company
and the Separate Account........................... 12
American National Insurance Company............... 12
The Separate Account.............................. 12
The Funds.......................................... 12
Addition, Deletion or Substitution of Investments.. 14
Resolving Material Conflicts........................ 14
Fixed Account....................................... 15
Policy Benefits..................................... 15
Purposes of the Policy............................. 15
Death Benefit Proceeds............................. 15
Death Benefit Options.............................. 15
Change in Specified Amount......................... 17
Methods of Affecting Insurance Protection.......... 18
Duration of the Policy............................. 18
Accumulation Value................................. 18
Payment of Policy Benefits......................... 19
General Provisions for Settlement Options........... 20
Policy Rights....................................... 20
Loan Benefits...................................... 20
Surrenders......................................... 21
Transfers.......................................... 22
Refund Privilege................................... 22
Dollar Cost Averaging.............................. 22
Rebalancing........................................ 22
Specialized Uses of the Policy..................... 22
Payment and Allocation of Premiums.................. 23
Issuance of a Policy............................... 23
Premiums........................................... 23
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PAGE
Allocation of Premiums and Accumulation Value...... 24
Policy Lapse, Grace Period and Reinstatement....... 24
Charges and Deductions.............................. 24
Premium Charges.................................... 25
Charges from Accumulation Value.................... 25
Surrender Charge................................... 25
Transfer Charge.................................... 25
Partial Surrender Charge........................... 26
Daily Charges Against the Separate Account......... 26
Fees and Expenses Incurred by Eligible Portfolios.. 26
Taxes.............................................. 26
General Provisions.................................. 26
The Contract....................................... 26
Control of Policy.................................. 27
Beneficiary........................................ 27
Change of Beneficiary.............................. 27
Change in Policyowner or Assignment................ 27
Payment of Proceeds................................ 27
Incontestability................................... 27
Misstatement of Age or Sex......................... 27
Suicide............................................ 27
Postponement of Payments........................... 27
Additional Insurance Benefits (Riders)............. 27
Dividends.......................................... 27
Distribution of the Policies........................ 28
Federal Income Tax Considerations................... 28
Safekeeping of the Separate Account's Assets........ 30
Voting Rights....................................... 30
State Regulations of American National.............. 31
Senior Executive Officers and Directors
American National Insurance Company................. 32
Legal Matters....................................... 35
Legal Proceedings................................... 35
Experts............................................. 35
Additional Information.............................. 35
Financial Statements................................ 35
Appendix-Illustration of Death Benefits and
Accumulation Values................................. 67
4
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DEFINITIONS
Accumulation Value - The total amount that a Policy provides for investment at
any time. The determination of Accumulation Value is described on page XX.
Age at Issue - The age at the Insured's last birthday preceding the Policy
Date.
American National Fund - The American National Investment Accounts, Inc., a
series mutual fund.
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 Accumulation Value of each Subaccount of the Separate Account.
Date of Issue - The Date of Issue set forth in the Policy and any riders
thereto that is used to determine Policy anniversary dates, Policy Years and
Monthly Deduction 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 selected
Death Benefit option of the Policy.
Death Benefit Proceeds - The proceeds payable to the Beneficiary upon receipt
by American National of Satisfactory Proof of Death of the Insured while the
Policy is in force equal to: (1) the Death Benefit; plus (2) any additional life
insurance proceeds provided by any riders; minus (3) any Policy Debt; minus (4)
any unpaid Monthly Deduction that may apply during a grace period.
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 benefit rider, or
reinstatement of coverage will take effect on the Monthly Deduction Date which
coincides with or next follows the date American National approves an
application for such change or for reinstatement of the Policy.
Eligible Portfolio - A Portfolio of American National Investment Accounts,
Inc., Variable Insurance Products Fund, Variable Insurance Products Fund II,
Variable Insurance Products Fund III, T. Rowe Price International Series, Inc.,
and T. Rowe Price Equity Series, Inc., which corresponds to and in which a
Subaccount can be invested.
Fidelity Funds - The Variable Insurance Products Fund, the Variable Insurance
Products Fund II, and Variable Insurance Products Fund III, series mutual funds.
Fixed Account - An account that is a part of American National's General
Account to which all or a portion of 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.
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Guaranteed Coverage Benefit - American National's agreement to keep the Policy
in force during the first three Policy Years if the Guaranteed Coverage Premium
is paid and other Policy provisions are met.
Guaranteed Coverage Premium - A specified premium which, if paid in advance as
required, will cause American National to keep the Policy in force during the
first three Policy Years so long as other Policy provisions are met, even if the
Surrender Value is zero or less.
Insured - The person upon whose life the Policy is issued.
Monthly Deduction - The sum of the cost of insurance charge, applicable charge
for any riders and the monthly policy 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. The Date of Issue is the first Monthly Deduction Date.
Planned Periodic Premiums - A scheduled premium of a level amount at a fixed
interval selected by the Policyowner. The Policyowner is not required to follow
this schedule and following this schedule does not necessarily ensure that the
Policy will remain in force unless the requirements of the Guaranteed Coverage
Benefit are met.
Policy - The variable universal life insurance policy offered by American
National and described in the Prospectus.
Policy Data Page - The pages of the Policy so titled.
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 owner 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.
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 premiums
allocated by the Policyowner to the Separate Account and
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premiums allocated by policyowners of other variable life insurance policies
American National issues.
Specified Amount - The minimum Death Benefit under the Policy until the
Insured reaches Attained Age of 95. The Specified Amount is an amount selected
by the policyowner(s) in accordance with Policy requirements.
Subaccount - A subdivision of the Separate Account. Each Subaccount invests
exclusively in the shares of a corresponding Eligible Portfolio.
Surrender Value - The Policy Accumulation Value less any Policy Debt and
surrender charges.
T. Rowe Price Funds - The T. Rowe Price International Series, Inc. and the T.
Rowe Price Equity Series, Inc., series mutual funds.
Valuation Date - A Valuation Date is each day on which the New York Stock
Exchange ("NYSE") and American National are open for trading. American National
will be closed on each national holiday on which the NYSE is closed, and will be
closed on Friday, November 27, 1998 and on Thursday, December 24, 1998.
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.
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SUMMARY
THE FOLLOWING SUMMARY OF THE INFORMATION IN THIS PROSPECTUS SHOULD BE READ IN
CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE POLICY CONTAINED
IN THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN EFFECT AND THAT THERE IS NO
POLICY DEBT.
THE POLICY
The Policy is a variable universal life insurance policy that allows the
Policyowner, subject to certain limitations, to make premium payments in any
amount and at any frequency. So long as the Policy remains in force, it will
provide for life insurance coverage on the named Insured and a variety of
optional benefits and riders that may be added to the Policy for an additional
charge.
The Policy is a flexible premium policy because, unlike traditional insurance
policies, there is no fixed schedule for premium payments. The Policyowner may
establish a schedule of Planned Periodic Premiums. The Policyowner is not
required to pay such Planned Periodic Premiums. As explained further below, the
Policyowner's payment or nonpayment of such Planned Periodic Premiums will not
necessarily keep the Policy in effect or cause the Policy to lapse.
American National agrees to provide a Guaranteed Coverage Benefit during the
first three Policy Years so long as the Guaranteed Coverage Premium is paid and
other Policy provisions are met even though, in certain instances, such payment
may not, after deduction of the Monthly Deduction, generate positive Surrender
Value at one or more points during such period. After the first three Policy
Years, the Policy will lapse at any time the Surrender Value is insufficient to
pay the Monthly Deductions and a grace period expires without sufficient
additional payment. Such lapse could occur even if Planned Periodic Premiums are
being paid.
The Policy is a variable policy because, unlike the fixed benefits of a
conventional life insurance policy, the Death Benefit under the Policy may, and
the Accumulation Value will, if so invested, reflect the investment performance
of the selected Subaccounts of the Separate Account supporting the Policy, as
well as other factors. (See Policy Benefits-Death Benefit Proceeds, page 15 and
Policy Benefits-Accumulation Value, page 18.) Accordingly, the Policyowner
benefits from any appreciation in value and bears the investment risk of any
depreciation in value of the underlying assets. The amount
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and/or duration of the life insurance coverage provided by the Policy is not
guaranteed except under its Guaranteed Coverage Benefit provision. Further, the
Accumulation Values of the Policy are not guaranteed except in the Fixed
Account, and may increase or decrease depending upon the investment experience
of the Subaccounts supporting the Policy.
Premiums are allocated by the Policyowner to one or more of these Subaccounts
or to the Fixed Account. The Fixed Account will earn interest as established by
American National. (See Fixed Account, page 15.) The assets of the various
Subaccounts are invested in an Eligible Portfolio.
Each Eligible Portfolio pursues different investment objectives. There is no
assurance that these investment objectives will be met. The Policyowner bears
the entire investment risk of amounts allocated to the Subaccounts of the
Separate Account. (See American National Insurance Company and the Separate
Account, page XX.)
POLICY BENEFITS AND RIGHTS
Death Benefit Proceeds and Death Benefit Options. So long as the Policy
remains in force, American National will pay the Death Benefit Proceeds upon
receipt of Satisfactory Proof of Death of the Insured. The Death Benefit
Proceeds may be paid in a lump sum or in accordance with an optional payment
plan.
The Policy provides for two Death Benefit options. Until age 95, under either
option, the Death Benefit will not be less than the current Specified Amount of
the Policy. The Death Benefit may, however, exceed the Specified Amount,
depending upon the investment experience of the Policy. Until age 95, Death
Benefit Option A provides for a Death Benefit equal to the current Specified
Amount of the Policy, or if greater, the Accumulation Value at the end of the
Valuation Period that includes the date of the Insured's death multiplied by the
applicable corridor percentage set forth in the Policy. Until age 95, Death
Benefit Option B provides for a Death Benefit equal to the current Specified
Amount plus the Policy's Accumulation Value at the end of the Valuation Period
that includes the date of the Insured's death, or if greater, the Accumulation
Value at the end of the Valuation Period that includes the date of the Insured's
death multiplied by the applicable corridor percentage set forth in the Policy.
Under either Death Benefit option, the Death Benefit at age 95 and thereafter
equals the Accumulation Value. (See Policy Benefits-Death Benefit Options, page
XX.)
Optional Insurance Benefits. At issue, certain additional optional benefits
may be obtained. These benefits will be described in what is known as a "rider"
to the Policy. The cost of any riders will be deducted as part of the Monthly
Deductions.
An example of such optional benefit is a rider which pays an additional amount
if the Insured dies in an accident.
More detailed information concerning such riders may be obtained from the
agent selling the Policy.
Accumulation Value. The value attributable to the Policy in the Separate
Account or the Fixed Account will reflect the investment performance of the
chosen Subaccounts of the Separate Account or the rate of interest paid on the
Fixed Account, the premiums paid, any partial surrenders, and the charges
assessed in connection with the Policy. The entire investment risk of the
Separate Account is borne by the Policyowner. American National does not
guarantee a minimum Accumulation Value. (See Policy Benefits-Accumulation Value,
page XX.)
Surrenders. The Policyowner may at any time effect a full surrender of the
Policy and receive its Surrender Value. Subject to certain limitations, the
Policyowner may also partially surrender the Policy at any time and obtain a
portion of the Surrender Value. Partial surrenders will reduce both the
Accumulation Value and the Death Benefit payable under the Policy. A charge will
be deducted from the amount paid upon partial surrender. (See Charges and
Deduction-Partial Surrender Charge, page XX. See Policy Rights-Surrenders, page
XX.) Surrenders may have tax consequences. (See Federal Income Tax
Considerations, page XX.)
Policy Loans. So long as the Policy remains in effect, a Policyowner may
borrow money from American National using the Policy as the only security for
the loan subject to certain limitations.
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Interest on Policy loans accrues on a daily basis at an annual rate of 5%, 3%
on preferred loans. Interest is due and payable on each Policy anniversary date,
and any interest not paid when due becomes part of the Policy loan and will bear
interest at the same rate. When the loan is made or when interest is not paid
when due, an amount sufficient to secure the Policy Debt will be transferred out
of the Separate Account and/or the Fixed Account and into American National's
General Account as security for the loan. Amounts held in the General Account as
security for loans will earn interest at the annual rate of 3%, credited on the
Policy anniversary. Any loan transaction will permanently affect the values of
the Policy. If the Policy Debt exceeds the Policy's Accumulation Value less any
surrender charge, the excess must be repaid within the time period specified in
the Policy or the Policy will terminate without value. (See Policy Rights-Loan
Benefits, page XX.) Policy loans may have tax consequences. (See Federal Income
Tax Considerations, page XX.)
FLEXIBILITY TO ADJUST DEATH BENEFITS
The Policyowner has flexibility to adjust the Death Benefit by changing the
Death Benefit option and by increasing or decreasing the Specified Amount of the
Policy. A change in the Specified Amount and a change in the Death Benefit
option are subject to certain limitations. Increases in the Specified Amount
will require satisfactory evidence of insurability. No decreases in Specified
Amount may be made during the first three (3) Policy Years. (See Policy
Benefits-Death Benefit Options, page XX and Change in Specified Amount, page
XX.)
PREMIUMS
Amounts. The initial premium for the Policy 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.
Subject to certain limitations, premiums may be paid in any amount and at any
frequency. (See Payment and Allocation of Premiums, page XX.)
Allocation of Premiums. Premium payments received by American National prior
to the Date of Issue are held in its General Account without interest until the
Date of Issue.
Premium payments received on or before the Date of Issue and premiums received
during the 15-day period after the Date of Issue are allocated to the Subaccount
for the AN Money Market Portfolio. Thereafter, such amount allocated to the AN
Money Market Account and premiums paid are allocated as directed by the
Policyowner. The Policyowner may change the allocation instructions for premiums
and may also make a special designation for unscheduled premiums. Subject to
certain charges and restrictions, a Policyowner may transfer amounts among the
Subaccounts. (See Payment and Allocation of Premiums-Allocation of Premiums and
Accumulation Value, page XX.)
POLICY LAPSE
A Policy will lapse when the Surrender Value is insufficient to pay the
Monthly Deduction or Policy Debt exceeds the Accumulation Value less any
surrender charge, and a grace period expires without sufficient payment. A
period of 61 days from the date written notice of lapse is mailed to the
Policyowner's last known address will be allowed for the Policyowner to make
sufficient payment to keep the Policy in force (grace period).
Therefore, this Policy differs in two important respects from a conventional
life insurance policy. First, the failure to pay a Planned Periodic Premium will
not in itself cause the Policy to lapse. Second, a Policy can lapse even if
Planned Periodic Premiums have been paid unless, during the first three years,
the Guaranteed Coverage Benefit requirements have been met. (See Payment and
Allocation of Premiums, page XX.)
CHARGES
Premium Charges. No sales, premium tax and transaction charges will be
deducted from each premium before allocating any amount to a Subaccount or the
Fixed Account.
Charges from Accumulation Value. The Accumulation Value of the Policy will be
reduced by certain Monthly Deductions and Daily Asset Charges as follows:
a. On each Monthly Deduction Date, the Accumulation Value will be reduced by the
Monthly Deduction, which is equal to:
1. A monthly cost of insurance charge for the current policy month, plus
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2. A charge for the cost of any riders, (See General Provisions-Additional
Insurance Benefits (Riders), page XX), plus
3. A monthly policy charge.
b. On each Valuation Date, the Accumulation Value will be reduced by a Daily
Asset Charge not to exceed 1.25% annually of the average daily Accumulation
Value of each Subaccount, but not the Fixed Account. (See Charges and
Deductions, page XX.)
Surrender Charge. If a Policy is surrendered, American National will assess a
surrender charge. Surrender charges are calculated separately for the original
Specified Amount and for each increase in Specified Amount.
The surrender charge for the initial Specified Amount is applicable until the
14th anniversary of the Policy and for each increase in Specified Amount,
including an increase due to a change in Death Benefit option, for 14 years
after the effective date of such increase. Thereafter, there is no surrender
charge.
The surrender charge is assessed based on a rate per $1,000 of initial or
increase in Specified Amount. This rate is the same for the first five years
since issue or increase, as applicable, grading to zero after fourteen years.
If a partial surrender results in a decrease in Specified Amount, a partial
surrender charge is made against the amount of Accumulation Value which is
surrendered. (See Charges and Deductions-Partial Surrender Charge, page XX.) A
surrender charge will be assessed upon decreases in the Specified Amount of the
Policy or upon Death Benefit option changes that result in decreases in
Specified Amount.
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ELIGIBLE PORTFOLIO ANNUAL EXPENSES
AS A PERCENTAGE OF AVERAGE NET ASSETS
MANAGEMENT OTHER
FEES EXPENSES TOTAL
AN Money Market Portfolio /1,5/
AN Growth Portfolio /2,5/
AN Balanced Portfolio /3,5/
AN Managed Portfolio /4,5/
VIP II Investment Grade Bond Portfolio
VIP II Asset Manager Portfolio /7/
VIP II Index 500 Portfolio /6/
VIP Money Market Portfolio
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Overseas Portfolio
VIP II Contrafund Portfolio /7/
VIP II Asset Manager: Growth Portfolio /7/
VIP III Balanced Portfolio
VIP III Growth and Income Portfolio
VIP III Growth Opportunities Portfolio /7/
T. Rowe Price Equity Income Portfolio /8/
T. Rowe Price Mid-Cap Growth Portfolio /8/
T. Rowe Price International Stock Portfolio /8/
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Note: The Eligible Portfolio Annual Expenses are expenses for the most recent
fiscal year. The above table is intended to assist you in understanding the fund
expenses that you will bear, directly or indirectly; however such table is based
upon historical information and it is not a guarantee or prediction of future
performance. Actual Eligible Portfolio Expenses for future years may be more or
less than those shown in this table. For a more complete description of these
expenses, see the Prospectuses for the Eligible Portfolios that accompany this
Prospectus.
/1/ Without reimbursement, management fees would have been XX% and the total
portfolio annual expense would have been XX%.
/2/ Without reimbursement, management fees would have been XX% and the total
portfolio annual expense would have been XX%.
/3/ Without reimbursement, management fees would have been XX% and the total
portfolio annual expense would have been XX%.
/4/ Without reimbursement, management fees would have been XX% and the total
portfolio annual expense would have been XX%.
/5/ Under its Administrative Service Agreement with the American National Fund,
Securities Management and Research, Inc. ("SM&R"), the American National
Fund's investment advisor and manager, has agreed to pay (or to reimburse
each portfolio for) each portfolio's expenses (including the advisory fee
and administrative services fee paid to SM&R, but exclusive of interest,
commissions and other expenses incidental to portfolio transactions) in
excess of XX% per year of such portfolio's average daily net assets. In
addition, SM&R has entered into a separate undertaking with the American
National Fund effective May 1, 1994 until April 30, 1999, pursuant to which
SM&R has agreed to reimburse the AN Money Market Portfolio and the AN Growth
Portfolio for expense in excess of XX%; the AN Balanced Portfolio for
expenses in excess of XX% and the AN Managed Portfolio for expenses in
excess of XX%, of each of such portfolio's average daily net assets during
such period. SM&R is under no obligation to renew this undertaking for any
portfolio at the end of such period.
/6/ The portfolio's expenses were voluntarily reduced by the portfolio's
investment advisor. Absent reimbursement, management fee, other expenses and
total expenses would have been XX%, XX% and XX%, respectively.
/7/ A portion of the brokerage commissions that certain funds pay was used to
reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian and transfer agent where by interest
earned on uninvested cash balances was used to reduce custodian and transfer
agent expenses. Including these reductions, the total operating expenses
presented in the table would have been XX% for the VIP II Asset Manager
Portfolio, XX% for the VIP II Contrafund Portfolio, XX% for the VIP II Asset
Manager: Growth Portfolio and XX% for the VIP Growth Portfolio.
/8/ T. Rowe Price Funds do not itemize management fees and other expenses.
Because the surrender charge may be significant upon decrease or early
surrender, prospective Policyowners should purchase a Policy only if they do not
intend to decrease or surrender the Policy for a substantial period. (See
Charges and Deductions-Surrender Charge, page XX.)
Transfer Charge. The first twelve transfers per Policy Year will be permitted
free of charge. Thereafter, a transfer charge of $10 will be assessed for each
transfer of Accumulation Value among Subaccounts and/or the Fixed Account to
compensate American National for administrative costs in handling the transfer.
The transfer charge will be deducted from the amount transferred. (See Charges
and Deductions-Transfer Charge, page XX.)
FEES AND EXPENSES INCURRED BY ELIGIBLE PORTFOLIOS
In addition, because the Separate Account purchases shares of Eligible
Portfolios, the value of the units in each Subaccount will reflect the net asset
value of shares of its corresponding Eligible Portfolio held therein, and
therefore, the investment advisory fees and other expenses incurred by the
American
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National Fund, the Fidelity Funds and the T. Rowe Price Funds, as the
case may be. A table of Eligible Portfolio Annual Expenses is found on the
previous page. (See American National Insurance Company and the Separate
Account-The Funds, page XX.)
TAX TREATMENT OF THE POLICY
American National believes (based upon Notice 88-128 and the proposed
Regulations under Section 7702, issued on July 5, 1991) that a Policy issued on
a standard premium class basis generally should meet the Section 7702 definition
of a life insurance contract. With respect to a Policy issued on an extra
rating (i.e., substandard) basis, there is insufficient guidance to determine if
such a Policy would satisfy the Section 7702 definition of a life insurance
contract, particularly if the Policyowner pays the full amount of premiums
permitted under such a Policy. Assuming that a Policy qualifies as a life
insurance contract for Federal income tax purposes, a Policyowner should not be
deemed to be in constructive receipt of the Accumulation Value under a Policy
until there is a distribution from the Policy. Moreover, Death Benefits payable
under a Policy should be completely excludable from the gross income of the
Beneficiary. As a result, the Beneficiary generally should not be taxed on
these proceeds. (See Tax Status of the Policy, Page XX.)
Under certain circumstances, a Policy may be treated as a "Modified Endowment
Contract." If the Policy is a Modified Endowment Contract, then all pre-death
distributions, including Policy loans, will be treated first as a distribution
of taxable income and then as a return of basis or investment in the contract.
In addition, prior to age 59 1/2 any such distributions generally will be
subject to a 10% penalty tax. (For further discussion on the circumstances
under which a Policy will be treated as a Modified Endowment Contract, See Tax
Treatment of Policy Benefits, Page XX.)
If the Policy is not a Modified Endowment Contract, distributions generally
will be treated first as a return of basis or investment in the contract and
then as disbursing taxable income. Moreover, loans will not be treated as
distributions. Finally, neither distributions nor loans from a Policy that is
not a Modified Endowment Contract are subject to the 10% penalty tax. (See
Distributions from Policies Not Classified as Modified Endowment Contracts, Page
XX.)
UNISEX POLICIES
Policies issued in states that require "unisex" policies (currently Montana)
provide for Policy values that do not vary by the sex of the Insured. In
addition, Policies issued in conjunction with employee benefit plans provide for
Policy values that do not vary by the sex of the Insured. (See Cost of
Insurance, Page XX.) Thus, references in this Prospectus to sex-distinct and any
values that vary by the sex of the Insured are not applicable to Policies issued
in states that require "unisex" policies or to Policies issued in conjunction
with employee benefit plans. Illustrations of the effect of these unisex rates
on premiums, Accumulation Values and Death Benefits are available from American
National on request.
REFUND PRIVILEGE
The Policyowner is granted a period of time (a "free look period") to examine
a Policy and return it for a refund. The Policyowner may cancel the Policy
within 10 days after receiving the Policy. The amount of the refund will be the
amount of the premiums paid adjusted by investment gains during the 15-day
period such premiums have been allocated to the AN Money Market Portfolio and by
investment gains and losses thereafter. (See Policy Rights-Refund Privilege,
page XX.)
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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
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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. 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 President 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
Bancshare's 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 $XX on a statutory
basis.
American National writes life, health and accident insurance and annuities.
American National's financial statements appear on pages XX through XX.
THE SEPARATE ACCOUNT
The Separate Account was established by American National 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 of and persons
entitled to payments under variable life policies issued by American National.
At present the Separate Account is used only to support variable universal life
insurance policies. 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 which 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 any other business that American National may
conduct. 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 its liabilities arising under the policies supported by
it. In addition to these assets, the Separate Account assets may include
accumulations of the charges American National makes against 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
Subaccounts within the Separate Account available to Policyowners and each
invests only in a corresponding portfolio of the American National Fund,
Fidelity Funds or T. Rowe Price Funds.
THE FUNDS
Each Subaccount of the Separate Account will only invest in the shares of a
corresponding Eligible Portfolio. The American National Fund, the Fidelity Funds
and the T. Rowe Price Funds are registered with the SEC under the 1940 Act as
open-end diversified, series management investment companies.
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 full or partial surrenders of the policy, to make policy loans, to
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<PAGE>
provide benefits under the Policy, or to transfer assets from one Subaccount to
another, or to the Fixed Account, as requested by 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.
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. Each such Eligible Portfolio's total operating
expenses will include fees for management, shareholder services and other
expenses, such as custodial, legal, and other miscellaneous fees. More detailed
information, including a description of investment objectives, restrictions,
expenses and risks, is in the prospectuses for the American National Fund,
Fidelity Funds and T. Rowe Price Funds which must accompany or precede 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 various Eligible Portfolios.
The American National Fund's current Eligible Portfolios and respective
investment objectives are as follows:
The AN Money Market Portfolio seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. The AN
Money Market Portfolio will invest only in money market instruments of high
quality as determined by SM&R, the American National Fund's adviser.
The AN Growth Portfolio seeks to achieve capital appreciation, normally
through the purchase of common stocks (although the portfolio's 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.
The AN 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.
The AN Managed Portfolio seeks to achieve growth of capital and/or current
income by investing in a diversified portfolio consisting of, at the discretion
of SM&R, money market instruments, debt securities, stock or a combination
thereof. It is anticipated that over longer periods a larger portion of the
portfolio will consist of equity securities.
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' current Eligible Portfolios and respective investment
objectives are as follows:
VIP II Investment Grade Bond Portfolio ... seeks as high a level of current
income as is consistent with the preservation of capital by investing in a broad
range of investment-grade fixed-income securities. The VIP II Investment Grade
Bond Portfolio will maintain a dollar-weighted average portfolio maturity of ten
years or less.
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 changes and
income) of common stocks publicly traded in the United States. In seeking this
objective, the VIP II 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 VIP II Index 500
Portfolio is designed as a long-term investment option.
VIP Money Market Portfolio ... seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. The
VIP Money Market Portfolio will invest only in high
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quality U.S. dollar denominated money market securities of domestic and foreign
issuers.
VIP Equity-Income Portfolio ... seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities, the VIP
Equity-Income Portfolio will also consider the potential for capital
appreciation. The VIP Equity-Income Portfolio's goal is to achieve a yield which
exceeds the composite yield on the securities comprising the Standard & Poor's
500 Composite Stock Price Index.
VIP High Income Portfolio ... seeks to obtain a high level of current income
by investing primarily in high-yielding, high-risk, lower-rated, fixed-income
securities, commonly known as "junk bonds", while also considering growth of
capital. The risks of investing in "junk bonds" are described in the prospectus
for VIP High Income Portfolio, which should be read carefully before investing.
VIP Growth Portfolio ... seeks to achieve capital appreciation. The VIP
Growth Portfolio normally purchases common stocks, although its investments are
not restricted to any one type of security. Capital appreciation may also be
found in other types of securities, including bonds and preferred stocks.
VIP Overseas Portfolio ... seeks long term growth of capital primarily through
investments in foreign securities. VIP Overseas Portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
VIP II Contrafund Portfolio ... seeks capital appreciation by investing in
companies Fidelity Management & Research Company ("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.
VIP III Balanced Portfolio ... seeks both income and growth of capital by
investing in a diversified portfolio of equity and fixed-income securities. The
VIP III Balanced Portfolio is designed to seek a combination of growth and
income from equity and some bond investments.
VIP III Growth and Income Portfolio ... seeks high return through a
combination current income and capital appreication by investing in equity
securities of companies that pay current dividends and offer potential earnings
growth and some bond investments.
VIP III Growth Opportunities Portfolio ... seeks to ride out stock market
fluctuations in pursuit of potentially high long-term returns. The VIP III
Growth Opportunities Portfolio is designed for investors who want to be invested
in the stock market for its long term growth potential.
FMR 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 personal 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, 1997, FMR advised funds
having more than XX million shareholder accounts with a total value of more than
$XX 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 T. Rowe Price Funds' current Eligible Portfolios and respective investment
objectives are as
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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
dividend-paying 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 Associates, Inc. is responsible for selection and management of
the portfolio investments of T. Rowe Price Equity Series, Inc. 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, Inc.
American National has entered into or may enter into agreements with Funds
pursuant to which the adviser or distributor pays American National a fee based
upon an annual percentage of the average net assets amount invested by American
National on behalf of the Separate Account and other separate accounts of
American National, when average net assets exceed certain thresholds. These
percentages may differ, and American National may be paid a greater percentage
by some advisers or distributors than other advisers or distributors. These
agreements reflect administrative 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 judgement 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 laws,
purchase other securities for other contracts.
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, the Fidelity Funds, the T. Rowe
Price Funds or in shares of another investment company having a specified
investment objective. American National may, in its sole discretion, establish
new Subaccounts or eliminate one or more Subaccounts 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
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American National separate accounts. To the extent permitted by applicable law,
American National may also transfer the assets of the Separate Account
associated with the Policies to another separate account. 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 portfolio in which the owner has an interest.
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RESOLVING MATERIAL CONFLICTS
The Eligible Portfolios presently serve as the investment medium for the
Policy. In addition, the Eligible Portfolios (other than the portfolios of the
American National Fund) are available to registered separate accounts funding
other insurance contracts and, in some cases, certain retirement plans.
We do not currently foresee any disadvantages to you resulting from the Eligible
Portfolios selling shares to fund products other than the Policy. 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 American National or 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 contracts (including contracts 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 Eligible Portfolio from the Separate Account, 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
Policyowners may elect to allocate all or a portion of their premium payments
to the Fixed Account and, subject to certain limitations, they may also transfer
monies from the Separate Account to the Fixed Account or from the Fixed Account
to the Separate Account. (See Policy Rights-Transfers, page 22.)
Payments allocated to the Fixed Account and transfers from the Separate
Account to the Fixed Account are placed in the General Account of American
National which supports insurance and annuity obligations. The General Account
includes all of American National's assets, except those assets 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 Policyowner bears the investment risk that the Declared
Rate described below, 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 of 1933 (the "1933 Act") nor is the General Account registered as an
investment company under the
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1940 Act. Accordingly, neither the General Account nor any interest therein is
generally subject to the provisions of the 1933 or 1940 Act. We understand that
the staff of the SEC has not reviewed the disclosures in this Prospectus
relating to the Fixed Account portion of the Contract; however, disclosures
regarding the Fixed Account portion of the Contract 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 ("Declared Rate(s)"). Each month American
National will establish the Declared Rate and the Policyowner will earn interest
established by American National for each month.
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POLICY BENEFITS
PURPOSES OF THE POLICY
The Policy is designed to provide the Policyowner with both lifetime insurance
protection and flexibility in connection with the amount and frequency of
premium payments and with the level of life insurance proceeds payable under the
Policy. 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 Policyowner
may elect to pay the Guaranteed Coverage Premium necessary to cause the
Guaranteed Coverage Benefit provision to remain in effect. Moreover, the Policy
allows a Policyowner to adjust the level of Death Benefits payable under the
Policy without having to purchase a new policy by increasing (with evidence of
insurability) or decreasing the Specified Amount. An increase in the Specified
Amount during the first three years will increase the Guaranteed Coverage
Premium required. Thus, as insurance needs or financial conditions change, the
Policyowner has the flexibility to adjust life insurance benefits and vary
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.
The Policy will lapse at any time after the first three (3) Policy Years that
its Surrender Value is insufficient to pay the Monthly Deductions or Policy Debt
exceeds Accumulation Value less any surrender charge and a grace period expires
without sufficient additional payment. As a result, whether or not a Policy
continues in force may depend in part upon the investment experience of the
chosen Subaccounts. The failure to pay a Planned Periodic Premium will not
necessarily cause the Policy to lapse, but the Policy could lapse even if
Planned Periodic Premiums have been paid. American National agrees to keep the
Policy in force during the first three years and provide a Guaranteed Coverage
Benefit during that period so long as the Guaranteed Coverage Premium is paid
and other Policy provisions are met, even though, in certain instances, the
minimum payment allowed by contract will not, after the payment of Monthly
Deductions, generate positive Surrender Value at one or more points during such
period.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, American National will, upon
Satisfactory Proof of Death of the Insured, pay the Death Benefit Proceeds of a
Policy in accordance with the Death Benefit option in effect at the time of the
Insured's death. The amount of the Death Benefits payable will be determined at
the end of the Valuation Period during which the Insured's death occurred. 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 Payment of Policy Benefits, page
XX.)
Subject to the rights of any assignee, Death Benefit Proceeds will be paid to
the surviving Beneficiary or Beneficiaries specified in the application or as
subsequently changed. If no Beneficiary is chosen, the proceeds will be paid to
the Insured's estate.
DEATH BENEFIT OPTIONS
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<PAGE>
The Policy provides two Death Benefit options and the Policyowner selects one
of such options in the application. Until age 95, the Death Benefit under either
option will never be less than the current Specified Amount of the Policy. (See
Payment and Allocation of Premiums-Policy Lapse, Grace Period and Reinstatement,
page XX.)
Option A. Until age 95, under Option A the Death Benefit is the current
Specified Amount of the Policy or, if greater, the applicable corridor
percentage of Accumulation Value at the end of the Valuation Period that
includes the date of death. The applicable percentage is 250% for Insureds with
an attained age 40 or younger on the Policy anniversary prior to the date of
death. For Insureds with an attained age over 40 on that Policy anniversary, the
percentage declines as shown in the Corridor Percentage Table on page xx.
Accordingly, before age 95, under Option A the Death Benefit will remain level
at the Specified Amount unless the applicable percentage of Accumulation Value
exceeds the current Specified Amount, in which case the amount of the Death
Benefit will vary as the Accumulation Value varies. The Death Benefit at age 95
and thereafter equals the Accumulation Value. Policyowners who prefer to have
favorable investment performance, if any, reflected in higher Accumulation Value
and not increased insurance coverage generally should select Option A.
OPTION A EXAMPLE. For purposes of this example, assume that the Insured's
attained age is between 0 and 40. Under Option A, a Policy with a $50,000
Specified Amount will generally pay $50,000 in Death Benefits. However, because
the Death Benefit must be equal to or greater than 250% of Accumulation Value,
anytime the Accumulation Value of the Policy exceeds $20,000, the Death Benefit
will exceed the $50,000 Specified Amount. Each additional dollar added to
Accumulation Value above $20,000 will increase the Death Benefit by $2.50. Thus,
if the Accumulation Value exceeds $20,000 and increases by $100 because of
investment performance or premium payments, the Death Benefit will increase by
$250. A Policy with an Accumulation Value of $30,000 will provide a Death
Benefit of $75,000 ($30,000 x 250%); an Accumulation Value of $40,000 will
provide a Death Benefit of $100,000 ($40,000 x 250%); and, an Accumulation Value
of $50,000 will provide a Death Benefit of $125,000 ($50,000 x 250%).
Similarly, so long as Accumulation Value exceeds $20,000 each dollar taken out
of Accumulation Value will reduce the Death Benefit by $2.50. If, for example,
the Accumulation Value is reduced from $25,000 to $20,000 because of partial
withdrawals, charges or negative investment performance, the Death Benefit will
be reduced from $62,500 to $50,000. If at any time, however, the Accumulation
Value multiplied by the applicable percentage is less than the Specified Amount,
the Death Benefit will equal the current 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 at the beginning of the Policy
Year in the example above were, for example, 50 (rather than between 0 and 40),
the applicable percentage would be 185%. The Death Benefit would not exceed the
$50,000 Specified Amount unless the accumulation value exceeded approximately
$27,028 (rather than $20,000), and each $1 then added to or taken from the
Accumulation Value would change the Death Benefit by $1.85 (rather than $2.50).
Option B. Until age 95, under Option B the Death Benefit is equal to the
current Specified Amount plus the Accumulation Value or, if greater, the
applicable corridor percentage of the Accumulation Value at the end of the
Valuation Period that includes the date of death. The applicable corridor
percentage is the same as under Option A: 250% for Insureds with an attained age
40 or younger on the Policy anniversary prior to the date of death, and for
Insureds with an attained age over 40 on that Policy anniversary the percentage
declines as shown in the Corridor Percentage Table. Accordingly, before age 95,
under Option B the amount of the Death Benefit will always vary as the
Accumulation Value varies but will never be less than the Specified Amount. The
Death Benefit at age 95 and thereafter equals the Accumulation Value.
Policyowners who prefer to have favorable investment performance, if any,
reflected in increased insurance coverage, as well as higher Accumulation
Values, generally should select Option B.
OPTION B EXAMPLE. For purposes of this example, assume that the Insured is age
40 or younger. Under Option B, a Policy with a Specified Amount of $50,000 will
generally provide a Death Benefit of $50,000 plus Accumulation value. Thus, for
example, a Policy with an Accumulation Value of $5,000
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<PAGE>
will have a Death Benefit of $55,000 ($50,000 + $5,000); an Accumulation Value
of $10,000 will provide a Death Benefit of $60,000 ($50,000 + $10,000). The
Death Benefit, however, must be at least 250% of Accumulation Value. As a
result, if the Accumulation Value of the Policy exceeds approximately $33,334,
the Death Benefit will be greater than the Specified Amount plus Accumulation
Value. Each additional dollar of Accumulation Value above $33,334 will increase
the Death Benefit by $2.50. Thus, if the Accumulation Value exceeds $33,334 and
increases by $100 because of investment performance or premium payments, the
Death Benefit will increase by $250. A Policy with an Accumulation Value of
$20,000 will provide a Death Benefit of $70,000 (Specified
Amount $50,000 plus $20,000 Accumulation Value); an Accumulation Value of
$30,000 will provide a Death Benefit of $80,000 ($50,000 plus $30,000); and an
Accumulation Value of $50,000 will provide a Death Benefit of $125,000 ($50,000
x 250% is greater than $50,000 plus $50,000).
Similarly, any time Accumulation Value exceeds $33,334, each dollar taken out
of Accumulation Value will reduce the Death Benefit by $2.50. If, for example,
the Accumulation Value is reduced from $40,000 to $35,000 because of partial
surrenders, charges, or negative investment performance, the Death Benefit will
be reduced from $100,000 to $87,500. If at any time, however, the Accumulation
Value multiplied by the applicable corridor percentage is less than the
Specified Amount plus the Accumulation Value, then the Death Benefit will be the
current Specified Amount plus the Accumulation Value of the Policy.
The applicable percentage becomes lower as the Insured's attained age
increases. If the attained age of the Insured in the example above were, for
example, 50 (rather than 40 or younger), the applicable percentage would be
185%. Assuming a Specified Amount of $50,000 the amount of the Death Benefit
would be the sum of the Accumulation Value plus $50,000 unless the Accumulation
Value exceeded approximately $58,824 (rather than $33,334), and each $1 then
added to or taken from the Accumulation Value would change the Death Benefit by
$1.85 (rather than $2.50).
Change in Death Benefit Option. The Death Benefit option in effect may be
changed at any time by sending American National a written request for change.
The effective date of such a change will be the Monthly Deduction Date on or
following the date the written request is received by American National. A
change may have Federal Tax consequences. (See Federal Income Tax
Considerations, page XX.)
If the Death Benefit option is changed from Option A to Option B, the
Specified Amount after the change will equal the Specified Amount before the
change minus the Accumulation Value on the effective date of the change. If the
Death Benefit option is changed from Option B to Option A, the Specified Amount
under Option A after the change will equal the Death Benefit under Option B on
the effective date of change. A change in Death Benefit option will not be
allowed if the Specified Amount remaining in force after the change is less than
the minimum Specified Amount shown in the following schedule:
DURING MINIMUM
POLICY YEAR SPECIFIED AMOUNT
1 50,000
2 45,000
3 40,000
4 35,000
Thereafter 25,000
The minimum Specified Amount for an Insured to maintain a preferred risk
classification if $100,000.
An increase in Specified Amount due to a Death Benefit option change will
result in certain increases in the Monthly Deduction and the Guaranteed Coverage
Premium. A change in Death Benefit option may effect surrender charge. (See
Charges and Deductions-Surrender Charge, page XX.)
A change in Death Benefit option will not result in an immediate change in the
amount of a Policy's Accumulation Value. However, a change in the Death Benefit
option may affect subsequent cost of
22
<PAGE>
insurance charges since this charge varies with the net amount at risk. In
addition, a change may affect subsequent monthly policy charges. (See Charges
and Deductions. , page XX.)
CHANGE IN SPECIFIED AMOUNT
Subject to certain limitations, a Policyowner may increase the Specified
Amount of a Policy at any time and may decrease the Specified Amount at any time
after the first three (3) Policy Years. A change in Specified Amount may affect
the cost of insurance rate and the net amount at risk, both of which may affect
a Policyowner's cost of insurance charge and have Federal Tax consequences. (See
Charges and Deductions-Cost of Insurance, page XX and Federal Income Tax
Considerations, page XX.)
The Specified Amount remaining in force after a decrease may not be less than
the minimum Specified Amount shown in the following schedule:
DURING MINIMUM
POLICY YEAR SPECIFIED AMOUNT
4 35,000
Thereafter 25,000
The minimum Specified Amount for an Insured to maintain a preferred risk
classification is $100,000.
If following the decrease in Specified Amount, the Policy would not comply
with the maximum premium limitations required by federal tax law, the decrease
may be limited or Accumulation Value may be returned to the Policyowner at the
Policyowner's election, to the extent necessary to meet these requirements. A
decrease in the Specified Amount will reduce the Specified Amount in the
following order:
(a) The Specified Amount provided by the most recent increase;
(b) The next most recent increases successively; and
(c) The initial Specified Amount.
If there is a decrease in Specified Amount, American National will deduct a
surrender charge from the Accumulation Value. Such deduction will be the sum of
surrender charges computed separately for each reduction in Specified Amount as
required in (a) - (c) above. The surrender charge for each reduction is a pro
rata portion of any surrender charge applicable to a full surrender of the
related increase or initial Specified Amount. This portion will be based on the
percentage reduction in the related increase or initial Specified Amount. The
surrender charges applicable to each increase or the initial Specified Amount
remaining in force will be reduced on a pro rata basis. No decrease in Specified
Amount can be made if the Insured's Attained Age exceeds 94. A decrease in
Specified Amount will take effect on the Monthly Deduction Date which coincides
with or next follows the date American National receives the written request
from the Policyowner.
For an increase in the Specified Amount, a written supplemental application
must be submitted. American National may also require additional evidence of
insurability. As a result, the underwriting risk classification for the initial
Specified Amount and each increase in Specified Amount may be different.
Although an increase need not necessarily be accompanied by an additional
premium, in certain cases an additional premium will be required to effect the
requested increase. (See Payment and Allocation of Premiums-Premiums Upon
Increase in Specified Amount, page XX.) The minimum amount of any increase is
$5,000, and an increase cannot be made if the Insured's Attained Age is over 80.
An increase in the Specified Amount will result in certain increased charges,
which will be deducted from the Accumulation Value on each Monthly Deduction
Date. An increase in the Specified Amount may also increase surrender charges.
An increase in the Specified Amount during the time the Guaranteed Coverage
Benefit provision is in effect will increase the Guaranteed Coverage Premium
requirement. (See Charges and Deductions, page XX.)
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 afforded to a purchaser of a new Policy. (See Policy Rights-Refund
Privilege, page XX.) The Policyowner may cancel the increase in Specified Amount
within 10 days after receiving the Policy as increased. The amount of the refund
is premiums paid attributable to such increase in
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<PAGE>
Specified Amount adjusted by investment gains or losses.
METHODS OF AFFECTING INSURANCE PROTECTION
A Policyowner may increase or decrease the pure insurance protection provided
by a Policy--the difference between the Death Benefit and the Accumulation
Value--in several ways as insurance needs change. These ways include increasing
or decreasing the Specified Amount of insurance, changing the level of premium
payments, and making a partial surrender of the Policy. Certain changes may have
Federal Tax consequences. Although the consequences of each of these methods
will depend upon the individual circumstances, they may be generally summarized
as follows:
(a) A decrease in the Specified Amount will, subject to the applicable corridor
percentage limitations, decrease the insurance protection and the cost of
insurance charges under the Policy without reducing the Accumulation Value.
(b) An increase in the Specified Amount may increase the amount of pure
insurance protection, depending on the amount of Accumulation Value and the
resultant applicable corridor percentage limitation. If the insurance
protection is increased, the Policy charges generally will increase as well.
(c) An increased level of premium payments may reduce the pure insurance
protection, until the applicable corridor percentage of Accumulation Value
exceeds the Specified Amount if Option A is in effect. Increased premiums
should also increase the amount of funds available to keep the Policy in
force.
(d) A reduced level of premium payments generally will increase the amount of
pure insurance protection, depending on the applicable corridor percentage
limitations, if Death Benefit option A is in effect. It may also result in a
reduced amount of Accumulation Value and will increase the possibility that
the Policy will lapse.
(e) A partial surrender will reduce the Death Benefit. However, under Option A,
it only affects the amount of pure insurance protection and charges under
the Policy if the percentage from the Corridor Percentage Table is
applicable in determining the Death Benefit. Otherwise, the decrease in the
Death Benefit is offset by the amount of Accumulation Value withdrawn. The
primary use of a partial surrender is to withdraw Accumulation Value.
DURATION OF THE POLICY
The duration of the Policy generally depends upon the Accumulation Value. The
Policy will remain in force so long as the Surrender Value is sufficient to pay
the Monthly Deduction and any Policy Debt is less than the Accumulation Value
less any surrender charge. The tax consequences associated with continuing the
Policy beyond age 100 are unclear and a tax advisor should be consulted. Where,
however, the Surrender Value is insufficient to pay the Monthly Deduction and
the grace period expires without an adequate payment by the Policyowner, the
Policy will lapse and terminate without value. (See Payment and Allocation of
Premiums-Policy Lapse, Grace Period and Reinstatement, page XX.) American
National agrees to keep the Policy in force during the first three years and
provide a Guaranteed Coverage Benefit so long as the Guaranteed Coverage Premium
is paid and other policy provisions are met even though, in certain instances,
the minimum payment allowed by contract will not, after the payment of Monthly
Deductions, generate positive Surrender Value at one or more points during such
period. The Guaranteed Coverage Benefit is applicable only during the first
three Policy Years. An increase in the Specified Amount does not start a new
Guaranteed Coverage Benefit period, although an increase in Specified Amount
during the first three Policy Years will increase the Guaranteed Coverage
Premium for the remainder of the three year Guaranteed Coverage Benefit period.
A subsequent decrease in Specified Amount during the three year Guaranteed
Coverage Benefit period will not decrease the Guaranteed Coverage Premium.
ACCUMULATION VALUE
The value attributable to the Policy in the Separate Account and the Fixed
Account will reflect the investment performance of the chosen Subaccounts of the
Separate Account and the rate of interest paid on the Fixed Account, the
premiums paid, any partial surrenders, and the charges assessed in connection
with the Policy. A Policyowner may at any time surrender the Policy and receive
the Policy's Surrender Value. There is no guaranteed minimum Accumulation Value.
Determination of Accumulation Value. Accumulation Value is determined on each
Valuation Date. No
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<PAGE>
Policy transactions will be processed on days other than a Valuation Date. On
the Date of Issue, Accumulation Value will equal the premium, reduced by the
Monthly Deduction. Thereafter, on each Valuation Date, the Accumulation Value of
a Policy will equal:
(a) The aggregate of the values attributable to the Policy in each of the
Subaccounts on the Valuation Date, determined for each Subaccount by
multiplying the Subaccount's unit value by the number of 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 premiums to be processed on that Valuation Date; less
(e) Any partial surrender, and its charge, to be processed on that Valuation
Date; less
(f) Any Monthly Deduction to be processed on that Valuation Date; less
(g) Any federal or state income taxes charged against the Accumulation Value.
In computing the Policy's Accumulation Value, the number of Subaccount units
allocated to the Policy is determined after any transfers among Subaccounts, or
the Fixed Account (and deduction of transfer charges), but before any other
Policy transactions, such as receipt of premiums and partial surrenders, on the
Valuation Date. Because the Accumulation Value is dependent upon a number of
variables, including the investment performance of the chosen Subaccounts, the
frequency and amount of premium payments, transfers, partial surrenders, loans,
and charges assessed in connection with the Policy, a Policy's Accumulation
Value cannot be predetermined.
The Unit Value. The unit value of each Subaccount reflects the investment
performance of that Subaccount. The 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; minus
(ii) the Daily Asset Charge; and (iii) dividing the result by the total number
of units held in the Subaccount on the Valuation Date, after any transfers among
Subaccounts, or the Fixed Account (and deduction of transfer charges), but
before any other Policy transactions.
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 circumstances. (See General
Provisions-Postponement of Payments, page XX.) 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 Benefit Proceeds 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 its 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.
The Policyowner may elect to have the proceeds of the Policy paid under any of
the payment options described below. (See General Provisions for Settlement
Options, page XX.)
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<PAGE>
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.
Any amounts under the supplemental contact remaining payable after the death
of the Beneificary 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 four optional methods of payment are:
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 as
long as the payee lives.
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 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 amount 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.
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<PAGE>
CORRIDOR PERCENTAGE TABLE
<TABLE>
<CAPTION>
ATTAINED AGE CORRIDOR PERCENTAGE
<S> <C>
40 or younger 250
41 243
42 236
43 229
44 222
45 215
46 209
47 203
48 197
49 191
50 185
51 178
52 171
53 164
54 157
55 150
56 146
57 142
58 138
59 134
60 130
61 128
62 126
63 124
64 122
65 120
66 119
67 118
68 117
69 116
70 115
71 113
72 111
73 109
74 107
75 to 90 105
91 104
92 103
93 102
94 101
95 and thereafter 100
</TABLE>
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<PAGE>
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GENERAL PROVISIONS FOR SETTLEMENT
OPTIONS
The first installment under Option 1, 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.
To avoid paying installments of less than $20.00 each, American National may:
(1) change the installments to a quarterly, semi-annual or annual basis; and/or
(2) 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 discounted
present value of installments under the other options. The effective interest
rate used to compute discounted present value equals the interest rate used in
computing the settlement option plus 1%.
If the payee dies, under Option 1 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.
Limitations. Election of an option by written request may be made only with
the consent of American National if:
(1) Proceeds are to joint or successive payees, or
(2) proceeds are payable to other than a natural person.
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POLICY RIGHTS
LOAN BENEFITS
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 which may be borrowed is $100. Except as otherwise
required by applicable state law or regulation, the maximum amount that may be
borrowed during the first three Policy Years is 75% of the Surrender Value at
the end of the Valuation Period during which the loan request is received. After
the first three years the maximum loan amount is 90% of the Surrender Value.
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
aforementioned maximum loan amount, the amount available as a preferred loan is
equal to the Accumulation Value less Policy Debt and less premiums paid
(adjusted by partial surrenders). The tax consequences associated with a
preferred loan are unclear and a tax advisor should be consulted before
effecting such a loan. The loan may be completely or partially repaid at any
time while the Insured is living. Each loan repayment must be at least $10 or
the full amount of Policy Debt, if less. Loans usually are funded within seven
days after receipt of a written request. (See General Provisions-Postponement of
Payments, page XX.) Loans may have tax consequences. (See Federal Income Tax
Considerations, page XX.)
Interest. Loans will accrue interest on a daily basis at a rate of 5.0% per
year, 3% on preferred loans. Interest is due and payable on each Policy
anniversary date or when the loan is paid back if that occurs first. If unpaid
when due, interest will be added to the amount of the loan and bear interest at
the same rate.
Amounts held in the General Account to secure Policy loans will earn interest
at the annual rate of 3.0% credited on the Policy anniversary. This interest
will be allocated to the Subaccounts and the Fixed Account on each Policy
anniversary in the same proportion that premiums are being allocated to those
Subaccounts and the Fixed Account at that time.
Effect of Policy Loans. When a loan is made, Accumulation Value equal to the
amount of the loan will be transferred from the Accumulation Value in the
Separate Account and the Fixed Account to American National's General Account as
security for the indebtedness. The Accumulation Value transferred out will be
deducted from the Subaccounts and the Fixed Account in accordance with the
instructions given by the Policyowner when the loan is requested. The minimum
amount which can remain in a Subaccount or the Fixed Account as a result of a
loan is $100. In the event no allocation instructions are provided, the loan
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
prior to the loan bears to the total. In the event the allocation instructions
conflict with the $100 minimum described above, American National reserves the
right to allocate the loan among the Subaccounts and the Fixed Account in the
same proportion as the Accumulation Value in each Subaccount and the Fixed
Account prior to the loan bears to the total. American National will also
transfer Accumulation Value from the Subaccounts and the Fixed Account to the
General Account to secure indebtedness if loan interest is not paid when due in
any Policy Year. American National will allocate this deduction among the
Subaccounts and the Fixed Account as described above. No charge will be imposed
for these transfers. A Policy loan may have tax consequences. (See Federal
Income Tax Considerations, page XX.)
A Policy loan may 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 Subacccount(s)/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)/Fixed Account, and greater if the General
Account interest rate is higher than the investment performance of the
Subaccount(s)/Fixed Account. A Policy Loan may affect the amount of the Death
Benefit, even if the loan is repaid.
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<PAGE>
Policy Debt. The Policy Debt equals the total of all Policy loans and accrued
interest thereon. Policy Debt reduces the amount of Death Benefit Proceeds and
Surrender Value. 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 which 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 Payment and Allocation of Premiums-Policy Lapse, Grace Period
and Reinstatement, page XX.)
Repayment of Policy Debt. Payments received by American National while a
Policy loan is outstanding are treated as repayment of Policy Debt and not
premiums only if the Policyowner so requests. As Policy Debt is repaid,
Accumulation Value equal to the loan amount repaid will be transferred from the
General Account to the Subaccounts and the Fixed Account. Such transfer will be
allocated among the Subaccounts and the Fixed Account in the same proportion
that premiums are being allocated at the time of repayment. The repayment of
Policy Debt will be allocated 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.
SURRENDERS
At any time during the lifetime of the Insured and while the Policy is in
force, the Policyowner may partially or totally surrender the Policy by sending
a written request to American National. The maximum amount available for
surrender is the Surrender Value at the end of the Valuation Period during which
the surrender request is received at American National's Home Office. Surrenders
will generally be paid within seven days of receipt of the written request. (See
General Provisions-Postponement of Payments, page XX.) Surrenders may have tax
consequences. (See Federal Income Tax Considerations, page XX.)
Full Surrenders. 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.
Partial Surrenders. Partial surrenders are irrevocable. The amount of a
partial surrender may not exceed the Surrender Value at the end of the Valuation
Period during which the request is received less an amount sufficient to cover
Monthly Deductions for three months. The minimum partial surrender is $100.
The Accumulation Value will be reduced by the sum of the amount of partial
surrender, a $25 fee for each partial surrender and any applicable partial
surrender charge. (See Charges and Deductions-Partial Surrender Charge, page
XX.) This amount will be deducted from the Policy's Accumulation Value, and
values in connection therewith determined, at the end of the Valuation Period
during which the request is received. The deduction will be allocated to the
Subaccounts and the Fixed Account according to the instructions of the
Policyowner when the withdrawal is requested, provided that the minimum amount
remaining in a Subaccount as a result of the allocation is $100. In the event no
allocation instructions are provided, the partial surrender 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 prior to the partial
surrender bears to the total. In the event the allocation instructions conflict
with the $100 minimum described above, American National reserves the right to
allocate the partial surrender among the Subaccounts and the Fixed Account in
the same proportion as the Accumulation Value in each Subaccount and the Fixed
Account prior to the partial surrender bears to the total.
The Death Benefit will be reduced by the amount by which the Accumulation
Value is reduced due to any partial surrender. If Option A is in effect, the
Specified Amount will be reduced. Where increases in the Specified Amount
occurred previously, a partial surrender will reduce the last increase first,
and then each other increase in order of the more recent increase first, and
finally the initial Specified Amount. Thus, partial surrenders may affect the
cost of insurance charge and the amount of pure insurance protection under the
Policy. (See Charges and Deductions - Cost of Insurance, page XX; Policy
Benefits - Methods of Affecting Insurance Protection, page XX.) If Option B is
in effect, the Specified Amount will not change, but the Accumulation Value will
be reduced.
The Specified Amount remaining in force after a partial surrender may not be
less than the minimum
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Specified Amount shown in the following schedule:
DURING MINIMUM
POLICY YEAR SPECIFIED AMOUNT
1 50,000
2 45,000
3 40,000
4 35,000
Thereafter 25,000
The minimum Specified Amount for an Insured to maintain a preferred risk class
is $100,000.
The amount of any partial surrender will generally be paid within seven (7)
days after receipt of the Policyowner's written request therefor. (See General
Provisions-Postponement of Payments, page XX.)
TRANSFERS
Accumulation Value may be transferred among the Subaccounts or from the
Subaccounts to the Fixed Account as often as desired. The transfers may be
ordered in person, by mail, or by telephone. The total amount of each transfer
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 therefrom is $100.
American National will effectuate transfers and determine all values in
connection with transfers on the later of the end of the Valuation Period which
includes the transfer date designated in the request or the end of the Valuation
Period during which the transfer request is received. Accumulation Value on the
date of a transfer will not be affected except to the extent of the transfer
charge, if applicable. The first twelve transfers per Policy Year will be
permitted free of charge. A $10 transfer charge will be imposed each additional
time amounts are transferred and will be deducted from the amount transferred.
(See Charges and Deductions-Transfer Charge, page XX.) Transfers resulting from
Policy loans, the dollar cost averaging program or the rebalancing program will
not be subject to a transfer charge. In addition, such transfers will not be
counted for purposes of determining the number of transfers allowed without
charge in each year.
Once each Policy Year, and only during the thirty day period beginning on the
Policy anniversary, transfers may be made from the Fixed Account to the
Subaccounts. This transfer is without charge. The maximum amount which may be
transferred from the Fixed Account to the Subaccounts is the greater of twenty-
five percent of the amount in the Fixed Account or $1,000. Such transfer request
received prior to the Policy anniversary will be effected at the end of the
Valuation Period during which the Policy anniversary occurs. Transfer request
received within the 30 day period beginning on the Policy anniversary will be
effective as of the end of the Valuation Period in which a proper transfer
request is received.
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 those 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.
REFUND PRIVILEGE
The Policyowner may cancel the Policy within 10 days after receiving the
Policy . If the Policy is canceled within this time period a refund will be
paid. The amount of the refund will be the amount of the premiums paid adjusted
by investment gains during the 15-day period such premiums have been allocated
to the AN Money Market Portfolio and by investment gains and losses thereafter.
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 General Provisions-Postponement of
Payments, page XX.)
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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 Fixed
Account, to any Subaccount(s) or Fixed Account. The automatic transfers can
occur monthly, quarterly, semi-annually or annually, and the amount transferred
each time must be at least $1,000 in total. The minimum 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. Transfers under dollar
cost averaging will be effectuated, and values in connection therewith
determined, at the end of the Valuation Period that includes the transfer date
designated in the instructions.
Dollar cost averaging results in the purchase of more units when the unit
value is low, and fewer units when the 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 applying for the Policy or after the Policy's Date of Issue. Transfers will
begin as specified by the Policyowner. 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, if on a transfer date, the Accumulation Value is less than
$5,000.
The Policyowner can increase or decrease the amount of transfers or
discontinue the program by sending written notice to American National or by the
telephone, if a telephone transfer authorization form is on file. There is no
charge for participation in this program. In addition, transfers made pursuant
to this program will not be counted in determining the number of transfers
allowed without charge each year.
REBALANCING
American National will rebalance a Policy by allocating 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 quarter, semi-annual or annual basis as specified by the
Policyowner. Rebalancing will be effectuated, and values in connection therewith
determined, at the end of the Valuation Period that includes the rebalancing
date designated in the request. There is no charge for participation in this
program. In addition, transfers of Accumulation Value made pursuant to this
program will not be counted in determining the number of transfers allowed
without charge each year. 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 rebalancing program when
applying for the Policy or after the Policy's Date of Issue. The Policyowner can
discontinue the program by sending written notice or calling American National
by telephone.
SPECIALIZED USES OF THE POLICY
The Policy provides Accumulation Value and Death Benefits. The Policy can be
used for various individuals and business financial planning purposes.
Purchasing the Policy in part for such purposes entails certain risks.
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PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A POLICY
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 80 years of age or less on their last birthday who supply
satisfactory evidence of insurability to American National. Acceptance is
subject to American National's underwriting rules.
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The Date of Issue is used to determine Policy anniversary dates, Policy Years
and Policy months.
The Policy Date is the Effective Date for all coverage applied for in the
original application and any supplemental applications.
The initial premium payment will be allocated to the AN 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 or the Fixed
Account as selected by the Policyowner.
PREMIUMS
The initial premium is due no later than the Policy Date. No insurance will
take effect before the initial premium is paid. The initial premium must be at
least 1/2 of the first year Guaranteed Coverage Premium. The initial premium and
all other premiums are payable at American National's Home Office. The amounts
and frequency of the Planned Periodic Premiums are shown on the Policy Data
Page. Subject to certain limitations, a Policyowner has flexibility in
determining the frequency and amount of premiums since the Planned Periodic
Premium schedule is not binding on the Policyowner. However, the Planned
Periodic Premium must include the Guaranteed Coverage Premium during the first
three (3) Policy Years. Thereafter, unless the Policyowner has paid sufficient
premiums to pay the Monthly Deduction, the Policy may have no Surrender Value
and will lapse.
American National agrees to keep the Policy in force during the first three
years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid and other Policy provisions are met even though, in
certain instances, these minimum premiums will not, after payment of the Monthly
Deduction, generate positive Surrender Value at one or more points during such
period.
Premium Flexibility. A Policyowner may make unscheduled premium payments at
any time in any amount, or skip premium payments, subject to the premium
limitations described herein. Therefore, unlike conventional insurance policies,
this Policy does not obligate the Policyowner to pay premiums in accordance with
a rigid and inflexible premium schedule. American National reserves the right to
limit the amount of additional or unscheduled premium payments.
Planned Periodic Premiums. At the time the Policy is issued each Policyowner
may determine a Planned Periodic Premium schedule. During the first 3 Policy
Years the Planned Periodic Premium schedule must include the Guaranteed Coverage
Premium. The Policyowner is not required to pay premiums in accordance with this
schedule. The Policyowner has considerable flexibility to alter the amount and
frequency of premiums paid.
Policyowners can also change the frequency and amount of Planned Periodic
Premiums by sending a written request to American National's Home Office,
although American National reserves the right to limit any increase in order to
comply with applicable federal tax law. Premium payment notices will be sent
annually, semi-annually, quarterly or monthly depending upon the frequency of
the Planned Periodic Premiums. Payment of the Planned Periodic Premiums does not
guarantee that the Policy will remain in force unless the Guaranteed Coverage
Benefit provision is in effect. Instead, the duration of the Policy depends upon
the Policy's Surrender Value. (See Policy Benefits-Duration of the Policy, page
XX.) Unless the Guaranteed Coverage Benefit provision is in effect, even if
Planned Periodic Premiums are paid by the Policyowner, the Policy will lapse any
time Surrender Value is insufficient to pay the Monthly Deduction and a grace
period expires without a sufficient payment.
Any premium received in an amount different from the Planned Periodic Premium
will be considered an unscheduled premium.
Premium Limitations. In no event may the total of all premiums paid, both
planned and unscheduled, exceed the current maximum premium limitations
established by federal tax laws. If at any time a premium is paid which would
result in total premiums exceeding such current maximum premium limitations,
American National will only accept that portion of the premium which will make
total premiums equal the maximum. Any part of the premium in excess of that
amount will be returned or applied as otherwise agreed and no further premiums
will be accepted until allowed by the current maximum premium limitations
prescribed by law. American National may require additional evidence of
insurability if any premium payment would result in an increase in the Policy's
net amount at risk on the date the premium is received. American National may
also establish a minimum acceptable
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premium amount.
Premiums Upon Increase in Specified Amount. Depending upon the Accumulation
Value of the Policy at the time of an increase in the Specified Amount of the
Policy and the amount of the increase requested by the Policyowner, an
additional premium payment may be required. American National will notify the
Policyowner of any premium required to fund the increase.
ALLOCATION OF PREMIUMS AND ACCUMULATION VALUE
Allocation of Premiums. In the application for a Policy, the Policyowner
allocates premiums to one or more Subaccounts of the Separate Account or to the
Fixed Account. Thereafter, the amount in such account and premiums are allocated
as directed by the Policyowner. The minimum percentage that may be allocated to
any one Subaccount or to the Fixed Account is 10% of the premium, and fractional
percentages may not be used. The allocations must total 100%. The allocation for
future premiums may be changed without charge by providing proper notification
to the Home Office. The notice must include the policy number to which the
instructions apply. The revised allocation instructions will apply to future
premiums received by American National on or after the date proper notification
is received.
Premium payments received within 15 days after the Date of Issue are allocated
to the Subaccount for the AN Money Market Portfolio. Any initial premium payment
received with the application will be allocated to the AN Money Market
Portfolio as of the Date of Issue, for 15 days. After the expiration of such
period, the Accumulation Value will be allocated to the Subaccounts and the
Fixed Account as selected by the Policyowner. Premium payments received by
American National prior to the Date of Issue are held in American National's
General Account, without interest, until the Date of Issue. Premiums received by
American National sixteen (16) or more days after the Date of Issue are
allocated to the selected Subaccounts and the Fixed Account. If there is any
Policy Debt at the time of payment, American National will treat the payment as
a premium payment unless otherwise instructed in proper written notice.
Accumulation Value. The value of amounts allocated to Subaccounts of the
Separate Account will vary with the investment performance of these Subaccounts
and the Policyowner bears the entire investment risk. This will affect the
Policy's Accumulation Value, and may affect the Death Benefit as well.
Policyowners should periodically review their allocations of premiums and values
in light of market conditions and overall financial planning requirements.
POLICY LAPSE, GRACE PERIOD AND REINSTATEMENT
Policy Lapse. Unlike conventional life insurance policies, the failure to make
a Planned Periodic Premium payment will not itself cause the Policy to lapse.
Unless the Guaranteed Coverage Benefit is in effect, lapse will occur when the
Surrender Value is insufficient to cover the Monthly Deduction, or Policy Debt
exceeds the Accumulation Value less any surrender charge, and a grace period
expires without a sufficient payment.
Grace Period. A grace period is granted for the payment of a premium
sufficient to cover the Monthly Deduction if the Surrender Value is insufficient
or the excess of Policy Debt over Accumulation Value less any surrender charge.
The grace period begins on the date Surrender Value is insufficient to cover the
Monthly Deduction or the date Policy Debt exceeds the Accumulation Value less
any surrender charge. American National will notify the Policyowner at the
beginning of the grace period by mail addressed to the last known address on
file with American National. The notice will specify the premium required to be
paid. The grace period ends 61 days after the notice is mailed. Failure to pay
the required amount within the grace period will result in lapse of the Policy.
If the Insured dies during the grace period, any overdue Monthly Deductions and
Policy Debt will be deducted from the Death Benefit Proceeds.
Reinstatement. A lapsed Policy may be reinstated any time within five years
after the date coverage is terminated. A Policy can not be reinstated if it was
surrendered. 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
(including evidence of insurability of any person covered by a rider to
reinstate the rider);
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b. Reinstatement or repayment of any Policy Debt;
c. Payment of the amount of any Monthly Deductions not collected during the
grace period;
d. Payment of the premium sufficient to pay the Monthly Deduction for three
months after the date of reinstatement; and
e. The surrender charge schedule will be restored as of the Date of Issue and
for any increase in Specified Amount as of the date of increase.
The original Date of Issue, and the Effective Dates of increases in Specified
Amount (if applicable), will be used for purposes of calculating Monthly
Deductions and the surrender charge. If any Policy Debt was reinstated, the
amount thereof will be held in American National's General Account. Accumulation
Value will then be calculated as described under Policy Benefits-Accumulation
Value on page XX. The Effective 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.
Charges and Deductions
Charges will be deducted in connection with the Policy to compensate American
National for: (1) providing the insurance benefits set forth in the Policy and
any optional insurance benefits added by rider; (2) administering the Policy;
(3) assuming certain risks in connection with the Policy; and (4) incurring
expenses in distributing the Policy. Routine Policy administration includes
premium billings, record keeping, processing Death Benefit claims, surrenders,
policy changes, and preparing and mailing reports. Risks assumed by American
National in connection with the Policy include mortality risk and expense risk.
The mortality risk assumed by American National is that Insureds may live for a
shorter time than assumed, and that an aggregate amount of Death Benefits
greater than assumed will be paid. The expense risk is that expenses incurred in
issuing and administering the Policies will exceed those assumed would be paid.
The nature and amount of these charges are described more fully below.
PREMIUM CHARGES
No charges will be deducted from any premium payment before allocating such
premiums among the Subaccounts and the Fixed Account.
CHARGES FROM ACCUMULATION VALUE
Monthly Deduction. The Monthly Deduction is the sum of the cost of insurance
charge, applicable charge for any riders, and the monthly policy charge. The
Monthly Deduction will be deducted from the Accumulation Value as of the Date of
Issue and on each Monthly Deduction Date thereafter if current. It 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 on that date. The cost of insurance and the monthly policy charge are
described in more detail below. 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.
Monthly Policy Charge. The Monthly Deduction includes a monthly policy charge.
Such charge shall range from a maximum of $7.50 plus $XX per $1,000 of Specified
Amount at age 0 to a maximum of $7.50 plus $XX per $1,000 of Specified Amount at
age 80.
Cost of Insurance. Because the cost of insurance depends upon several
variables, the cost for each Policy month can vary from month to month. American
National will determine the monthly cost of insurance charges by multiplying the
applicable cost of insurance rate by the net amount at risk for each Policy
month. The net amount at risk on any Monthly Deduction Date is the amount by
which the Death Benefit on that Monthly Deduction Date exceeds the Accumulation
Value after deduction of the
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monthly policy charge and the applicable charge for
any riders.
The monthly cost of insurance rate is based on the Insured's sex (if Policy is
issued on a sex distinct basis), Attained Age, Specified Amount and underwriting
risk class. The rate may vary if the Insured is a tobacco user or tobacco non-
user, is considered a preferred or standard risk classification, or is
considered a substandard risk classification and rated with a tabular extra
rating. For the initial Specified Amount, the cost of insurance rate will not
exceed those in the Schedule of Monthly Guaranteed Maximum Cost of Insurance
Rates shown on the Policy Data Page. These guaranteed rates are based on the
Insured's age last birthday. The current rates range between XX% and XX% of the
guaranteed rates. Any change in the current cost of insurance rates will apply
to all persons of the same age, sex, risk class, and Specified Amount.
Guaranteed maximum cost of insurance rates for issue or increase ages 15 and
above are calculated based on the 1980 Commissioners Standard Ordinary (CSO)
Smoker or Nonsmoker Mortality Tables (Age Last Birthday). For issue or increase
ages 0-14, the 1980 CSO Mortality Table (Age Last Birthday) was used through
attained age 14 and the 1980 CSO Nonsmoker Mortality Table (Age Last Birthday)
for attained ages 15 and above.
Guaranteed maximum cost of insurance rates for Policies issued on a non-sex
distinct basis are calculated based on the 1980 CSO-SB the 1980 CSO-NB Mortality
Tables (Age Last Birthday) for issue or increase ages 15 and above. For issue or
increase ages 0-14, the 1980 CSO-B Mortality Table (Age Last Birthday) was used
through attained age 14 and the 1980 CSO-NB Mortality Table (Age Last Birthday)
for attained ages 15 and above.
The underwriting risk class for the initial Specified Amount and the Specified
Amount for any increase may be different. As a result the cost of insurance rate
for the initial Specified Amount and each increase in Specified Amount may be
different. Decreases will also be reflected in the cost of insurance rate. (See
Policy Benefits-Change in Specified Amount, page XX.)
The actual charges made during the Policy Year will be shown in the annual
report delivered to Policyowners.
The rate class of an Insured may affect the cost of insurance rate. American
National currently places insureds into either a preferred rate class, standard
rate class, or substandard rate class that involves a higher mortality risk. In
an otherwise identical Policy, an Insured in the standard rate class will
typically have a lower cost of insurance than an Insured in a substandard rate
class. Similarly, in an otherwise identical Policy, an Insured in a preferred
rate class typically has a lower cost of insurance than one in a standard class.
If a Policy is rated at issue with a tabular extra rating, the guaranteed rate
is generally a multiple of the guaranteed rate for a standard issue.
Insureds may also be assigned a flat extra rating to reflect certain
additional risks. The flat extra rating will not impact the cost of insurance
rate but 1/2 of any annualized flat extra cost will be deducted as part of the
Monthly Deduction on each Monthly Deduction Date.
SURRENDER CHARGE
If a Policy is surrendered, American National may assess a surrender charge.
Surrender charges are calculated separately for the initial Specified Amount and
for each increase in Specified Amount. The surrender charge for the initial
Specified Amount is applicable until the 14th Policy anniversary. For an
increase in Specified Amount, the surrender charge is applicable for 14 years
after the Effective Date of such increase. Thereafter, there is no surrender
charge.
The surrender charge is assessed based on a rate per $1,000 of initial or
increase in Specified Amount. This rate is the same for the five years since
issue or increase, as applicable, grading to zero
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after fourteen years.
A surrender charge may be assessed upon decreases in Specified Amount or upon
Death Benefit option changes that result in a decrease in Specified Amount. (See
Policy Benefits-Change in Specified Amount, page XX.)
Because the surrender charge may be significant upon early surrender,
prospective Policyowners should purchase a Policy only if they do not intend to
surrender it for a substantial period.
The surrender charge will not exceed the maximum amount permitted under
applicable law.
TRANSFER CHARGE
A transfer charge of $10 will be imposed for each additional transfer among
the Subaccounts or from the Subaccounts to the Fixed Account after twelve per
Policy Year to compensate American National for the costs of effecting the
transfer. This charge will be deducted from the amount transferred. The transfer
charge will not be imposed on transfers that occur as a result of Policy loans,
the dollar cost averaging program, or the rebalancing program. In addition, such
transfers will not be counted for purposes of determining the number of
transfers allowed without charge in each year. The amount of the transfer charge
is guaranteed not to be increased.
PARTIAL SURRENDER CHARGE
A $25 fee will be imposed for each partial surrender. In addition, if Death
Benefit Option A is in effect, a partial surrender charge will be assessed
consistent with the method for a decrease in Specified Amount. (See Policy
Benefits-Change in Specified Amount, page XX.)
DAILY CHARGES AGAINST THE SEPARATE ACCOUNT
On each Valuation Date, a Daily Asset Charge will be deducted from the
Separate Account. Such charge shall not exceed 1.25% annually of the average
daily Accumulation Value of each Subaccount, but not the Fixed Account. The
daily charge will be deducted from the Accumulation Value of the Separate
Account, and therefore the Subaccounts, on each Valuation Date. The deduction on
each Valuation Date will be calculated using a rate derived by dividing the
1.25% annual rate by 365 and multiplying the result by the number of days since
the last Valuation Date. No Daily Asset Charge will be deducted from the Fixed
Account.
FEES AND EXPENSES INCURRED BY ELIGIBLE PORTFOLIOS
In addition to the charges by American National against the Separate Account
described just above, SM&R, FMR and T. Rowe Price Associates will assess certain
fees against the amount invested in the various Eligible Portfolios. In
addition, certain other expenses will be incurred by the American National Fund,
the Fidelity Funds and the T. Rowe Price Funds. (See the American National
Fund's, Fidelity Funds' and T. Rowe Price Funds' Prospectuses.)
For managing the investments and business affairs of the Eligible Portfolios
of the T. Rowe Price Funds, each such Eligible Portfolio pays T. Rowe Price
Associates, Inc. a monthly fee. Detailed information about such fee is in the T.
Rowe Price Funds' Prospectuses.
For managing the investments and business affairs of the Eligible Portfolios
of the Fidelity Funds, each such Eligible Portfolio pays FMR a monthly fee.
Detailed information about such fee is in the Fidelity Funds' Prospectuses.
No portfolio fees will be assessed against amounts placed in the Fixed Account.
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
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state or local 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 tax charges with
respect to the Policies.
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. Any changes must be approved in writing by the
President, Vice President or Secretary of American National. 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.
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 Policyowner 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
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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 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 for two years from the
Date of Issue during the lifetime of the Insured. An increase in the Specified
Amount or addition of a rider after the Date of Issue shall be incontestable
after such increase or addition has been in force for two years from its Policy
Date during the lifetime of the Insured. However, this two year provision shall
not apply to riders that provide disability or accidental Death Benefits. Any
reinstatement of a Policy shall be incontestable during the lifetime of the
Insured only after having been in force for two years after the Policy Date of
the reinstatement.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Insured or any person insured by rider has been
misstated, the amount of the Death Benefit will be adjusted as provided for in
the Policy.
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 its total cost
of insurance applied to 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 refund, full surrender, partial surrender, Policy
loans, benefits payable at death, and transfers, which require valuation of a
Subaccount, 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 Accumulation Value. Surrenders, loans or partial surrenders
from the Fixed Account may be deferred for up to 6 months from the date of
written request.
ADDITIONAL INSURANCE BENEFITS (RIDERS)
Subject to certain requirements, certain additional optional benefits may be
obtained. The cost of any such additional insurance benefits, which will be
provided by "riders" to the Policy, will be deducted as part of the Monthly
Deduction. Riders in force during the time the Guaranteed Coverage Benefit is in
effect will increase the Guaranteed Coverage Premium requirement.
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.
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DISTRIBUTION OF THE POLICIES
SM&R, 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, commissions to the Registered Representative will equal, at most,10% of
the total premium contribution in Policy Years one through five. In years six
and thereafter the Registered Representative will receive renewal commissions at
an annual rate of at most .25% of the Accumulation Value. Further, American
National may pay Registered Representatives who meet certain production
standards additional compensation, and may pay managers bonuses with respect to
the Policies. SM&R will pay overriding commissions to managers with respect to
the Policies. SM&R and American National may authorize other registered
broker/dealers and its Registered Representatives to sell the Policies subject
to applicable law.
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FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
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 advisors 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.
TAX STATUS OF THE POLICY
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
sets forth a definition of a life insurance contract for Federal tax purposes.
Although the Secretary of the Treasury (the "Treasury") is authorized to
prescribe regulations implementing Section 7702, while proposed regulations and
other interim guidance has been issued, final regulations have not been adopted.
Guidance as to how Section 7702 is to be applied is limited. If a Policy were
determined not to be a life insurance contract for purposes of Section 7702,
such Policy would not provide the tax advantages normally provided by a life
insurance policy.
With respect to a Policy issued on the basis of a standard premium class,
American National believes (largely in reliance on IRS Notice 88-128 and the
proposed regulations under Section 7702, issued on July 5, 1991) that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a
premium class with extra rating involving higher than standard mortality risk),
there is less guidance, in particular as to how the mortality and other expense
requirements of Section 7702 are to be applied in determining whether such a
Policy meets the Section 7702 definition of a life insurance contract. Thus, it
is not clear whether or not such a Policy would satisfy Section 7702,
particularly if the Policyowner pays the full amount of premiums permitted under
the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
American National may take whatever steps are appropriate and reasonable to
attempt to cause such a Policy to comply with
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Section 7702. For these reasons, American National reserves the right to
restrict Policy transactions as necessary to attempt to qualify it as a life
insurance contract under Section 7702.
Section 817(h) of the Code requires that the investments of each of the
Subaccounts must be "adequately diversified" in accordance with Treasury
regulations in order for the Policy to qualify as a life insurance contract
under Section 7702 of the Code (discussed above). 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, thus, meet the diversification requirement, 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 subaccounts 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 policy owners were not owners of subaccount assets. For example, the
Policyowner has additional flexibility in allocating premium payments and Policy
values and the investment objective of certain Eligible Portfolios may be
narrower. 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.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
In General. American National believes that the proceeds and Accumulation
Value increases of a Policy should be treated in manner consistent with a fixed-
benefit life insurance policy 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 change in the
Policy's Death Benefit Option (i.e., a change from Death Benefit Option A to
Death Benefit Option B or vice versa), a Policy loan, a partial surrender, a
full surrender, the addition of an Accelerated Death Benefit Rider, the receipt
of an Accelerated Death Benefit, the continuation of the Policy beyond the
Insured's 100th birthday, a change in ownership, or an assignment of the Policy
may have Federal income tax consequences. In addition, Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policyowner or Beneficiary.
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
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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 advisor 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
tax advisor.
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. The tax consequences of distributions from, and loans taken from
or secured by, a Policy depend on whether the Policy is classified as a
"Modified Endowment Contract.'' Whether a Policy is or is not a Modified
Endowment Contract, upon a complete surrender or lapse of a Policy or when
benefits are paid at a Policy's maturity date, if the amount received plus the
amount of indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax.
Modified Endowment Contracts. Section 7702A establishes a class of life
insurance contracts designated as "Modified Endowment Contracts".
Due to the Policy's flexibility, classification as a Modified Endowment
Contract will depend on the individual circumstances of each Policy. In general,
a Policy will be a Modified Endowment Contract if the accumulated premiums paid
at any time during the first seven Policy Years 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. A
Policy can also become a Modified Endowment Contract if it is materially
changed. The determination of whether a Policy will be a Modified Endowment
Contract 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. At
the time a premium is credited that in American National's view would cause the
Policy to become a Modified Endowment Contract, American National will notify
the Policyowner that unless a refund of the excess premium is requested by the
Policyowner, the Policy will become a Modified Endowment Contract. The
Policyowner will have 30 days after receiving such notification to request the
refund.
The rules relating to whether a Policy will be treated as a Modified Endowment
Contract are complex and cannot be fully described in the limited confines of
this summary. For example, a Policy can also become a Modified Endowment
Contract in the event of certain reductions in Policy benefits. Therefore, a
current or prospective Policyowner should consult with a competent tax advisor
to determine whether a Policy transaction will cause the Policy to be treated as
a Modified Endowment Contract.
Distributions from Policies Classified as Modified Endowment Contracts.
Policies classified as Modified Endowment Contract will be subject to the
following tax rules: First, all distributions, including distributions upon
surrender and partial surrenders from such a Policy are treated as ordinary
income subject to tax up to the amount equal to the excess (if any) of the
Policy Accumulation Value immediately before the distribution over the
investment in the Policy (described below) at such time. Second, loans taken
from or secured by such a Policy are treated as distributions from such a Policy
and taxed accordingly. Past due loan interest that is added to the loan amount
will be treated as a loan. Third, a 10 percent additional income tax is imposed
on the portion of any distribution from, or loan taken from or secured by, such
a Policy that is included in income except where the distribution or loan 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.
If a Policy becomes a Modified Endowment Contract after it is issued,
distributions made during the Policy Year in which it becomes a Modified
Endowment Contract, distributions in any subsequent Policy Year and
distributions within two years before the Policy becomes a Modified Endowment
Contract will be subject to the tax treatment described above. This means that a
distribution from a Policy that is not a Modified Endowment Contract could later
become taxable as a distribution from a
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Modified Endowment Contract.
Distributions From Policies Not Classified as Modified Endowment Contracts.
Distributions from a Policy that is not a Modified Endowment Contract are
generally treated as first recovering the investment in the Policy (described
below) and then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued 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 Modified Endowment Contract
are not treated as distributions. Instead, such loans are treated as
indebtedness of the Policyowner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment Contract
are subject to the 10 percent additional tax.
Policy Loan Interest. Interest paid on any loan under a Policy generally is
not deductible. A Policyowner should consult a tax advisor before deducting any
Policy loan interest.
Investment in the Policy.Investment in the Policy means: (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount of distributions 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 Modified Endowment Contract, to the extent
such amount is excluded from gross income, will be disregarded), plus (iii) the
amount of any loan from, or secured by, a Policy that is a Modified Endowment
Contract to the extent that such amount is included in the gross income of the
Policyowner.
Multiple Policies. All Modified Endowment Contracts that are issued by
American National (or its affiliates) to the same Policyowner during any
calendar year are treated as one Modified Endowment Contract for purposes of
determining the amount includible in the gross income under Section 72(e) of the
Code.
POSSIBLE CHARGE FOR AMERICAN NATIONAL'S TAXES
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 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 Accumulation Value held in the General
Account securing Policy loans. American National maintains records of all
purchases and redemptions of shares of Eligible Portfolios by each of the
Subaccounts.
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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 American National Fund, the Fidelity Funds and the
T. Rowe Price Funds, 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 shareholder's meeting. To the
extent required by law, American National will vote all shares of the Eligible
Portfolios held in the Separate Account at regular and special shareholders'
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 or the T. Rowe Price Funds, 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
Policy's Accumulation Value held in that Subaccount by the net asset value of
one share in the corresponding Eligible Portfolio. Fractional shares will be
counted. Eligible Portfolio shares held in each Subaccount for which no timely
instructions from Policyowners are received and shares 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 American National Fund, the Fidelity Funds or the T. Rowe
Price Funds in its own right.
Matters on which Policyowners may give voting instructions include the
following: (1) election of Boards of Directors, (2) ratification of independent
accountants (3) approval of investment advisory agreements for the Eligible
Portfolio(s) corresponding to the Policyowner's selected Subaccount; (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 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
44
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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 National to offer a
Policy in one or more states which has suicide, incontestability, refund
provisions, surrender charges or other provisions which are more favorable to a
Policyowner than provisions in a Policy offered in other states.
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SENIOR EXECUTIVE OFFICERS AND DIRECTORS
AMERICAN NATIONAL INSURANCE COMPANY
NAME AND POSITION(S) WITH PRINCIPAL OCCUPATIONS LAST FIVE YEARS
AMERICAN NATIONAL INSURANCE COMPANY AND OTHER POSITIONS HELD
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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, July
CHIEF EXECUTIVE OFFICER 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 to
AND CHIEF OPERATING OFFICER 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.
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.
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<PAGE>
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.
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<PAGE>
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.
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.
47
<PAGE>
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.
48
<PAGE>
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
SENIOR VICE PRESIDENT Planning 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.
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.
49
<PAGE>
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.
50
<PAGE>
The principal business address of each person listed above is American National
Insurance Company, One Moody Plaza, Galveston, Texas 77550-7999.
- --------------------------------------------------------------------------------
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
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. American National is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
- --------------------------------------------------------------------------------
EXPERTS
The consolidated financial statements of American National Insurance Company
and subsidiaries as of December 31, 1997 and 1996, and for the years then ended,
included in this prospectus and elsewhere 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 reports.
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.
51
<PAGE>
- --------------------------------------------------------------------------------
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 Separate 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 which are included in this
Prospectus 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.
- --------------------------------------------------------------------------------
APPENDIX
ILLUSTRATIONS OF DEATH BENEFITS, ACCUMULATION VALUES AND SURRENDER VALUES
THE PURPOSE OF THE TABLES ON PAGESXX AND XX IS TO ILLUSTRATE HOW THE
ACCUMULATION VALUE, SURRENDER VALUE AND DEATH BENEFIT OF A POLICY (THE "VALUES")
MAY CHANGE WITH THE INVESTMENT EXPERIENCE OF THE AMERICAN NATIONAL FUND, THE
FIDELITY FUNDS AND THE T. ROWE PRICE FUNDS. THESE ILLUSTRATIONS ARE HYPOTHETICAL
AND MAY NOT BE USED TO PROJECT OR PREDICT INVESTMENT RESULTS.
The tables illustrate how the Values of a Policy issued to an Insured of a
given age and specified underwriting risk classification who pays the given
premium at the beginning of each Policy Year would vary over time if, in each
Policy Year, the gross annual investment rate of return (i.e. investment income
and capital gains and losses, realized and unrealized) on the assets held in
each Eligible Portfolio equaled a hypothetical annual rate of 0%, 6% or 12%. The
tables illustrate a Policy of $100,000 Specified Amount issued to a male, age
45, under a preferred tobacco non-user underwriting risk classification. The
Values would be different from those shown if the gross annual investment rates
of return averaged 0%, 6% or 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
elects to stop paying premiums or makes unscheduled premium payments or
otherwise varies the amount, frequency, or timing of premium payments.
The second column of the tables shows the value of the premiums paid
52
<PAGE>
accumulated at a 5% annual interest rate. Other columns show the Death Benefit,
Accumulation Value and Surrender Value. The table on pageXX is based on the
current schedule of Monthly Deductions. These reflect the basis on which
American National currently sells its policies. This is not to be construed as
guarantees or estimates of amounts to be paid in the future. American National
reserves the right to change the current schedule of Monthly Deductions at any
time and for any reason. The Values shown in the table on page XX are based on
the assumption that the maximum allowable Monthly Deductions are made throughout
the life of the Policy.
The Values illustrated reflect the fact that the net investment return of each
Subaccount is lower than the gross return of the assets held in its
corresponding Eligible Portfolio as a result of investment advisory fees,
management fees and other expenses incurred by the Eligible Portfolios and
charges levied against the Subaccounts. Illustrations assume investment advisory
and management fees equivalent to a hypothetical annual rate of .XX% and other
expenses equivalent to a hypothetical annual rate of .XX% of net assets for each
Eligible Portfolio. The investment advisory and management fees assumption and
the other expenses assumption equal simple averages, for all Eligible
Portfolios, of the "Management Fees" and "Other Expenses", respectively,
indicated for each Eligible Portfolio in the table "Eligible Portfolio Annual
Expenses" in this Prospectus. Certain expense reimbursement arrangements exist
and are reflected in these assumptions. Under its Administrative Service
Agreement with the American National Fund, Securities Management and Research,
Inc. ("SM&R"), the American National Fund's investment advisor and manager, has
agreed to pay (or to reimburse each portfolio for) each portfolio's expenses
(including the advisory fee and administrative services fee paid to SM&R, but
exclusive of interest, commissions and other expenses incidental to portfolio
transactions) in excess of XX% per year of such portfolio's average daily net
assets. In addition, SM&R has entered into a separate undertaking with the
American National Fund effective May 1, 1994 until April 30, 1999, pursuant to
which SM&R has agreed to reimburse the AN Money Market Portfolio and the AN
Growth Portfolio for expenses in excess of XX%; the AN Balanced Portfolio for
expenses in excess of XX% and the AN Managed Portfolio for expenses in excess of
XX%, of each of such portfolio's average daily net assets during such period.
SM&R is under no obligation to renew this undertaking for any portfolio at the
end of such period. Without reimbursement, management fees and the total
portfolio annual expense would have been XX% and XX%, respectively, for AN Money
Market Portfolio; XX% and XX%, respectively, for AN Growth Portfolio; XX% and
XX%, respectively, for AN Balanced Portfolio; and XX% and XX%, respectively, for
AN Managed Portfolio, of each of such portfolio's average daily net assets. The
VIP II Index 500 Portfolio's expenses were voluntarily reduced by the
portfolio's investment advisor. Absent reimbursement, management fee, other
expenses and total expenses would have been XX%, XX% and XX%, respectively. A
portion of the brokerage commissions that certain funds pay was used to reduce
fund expenses. In addition, certain funds have entered into arrangements with
their custodian and transfer agent whereby interest earned on uninvested cash
balances was used to reduce custodian and transfer agent expenses. Including
these reductions, the total operating expenses would have been XX% for the VIP
II Asset Manager Portfolio, XX% for the VIP II Contrafund Portfolio, XX% for the
VIP II Asset Manager: Growth Portfolio and XX% for the VIP Growth Portfolio. As
long as such agreements continue for an Eligible Portfolio, it will lower such
Eligible Portfolio's expenses and increase its net rate of return. Illustrations
also
53
<PAGE>
reflect the Daily Asset Charge, which is levied against each Subaccount at an
annual rate of 1.25% of average daily Accumulation Value. After adjustment to
reflect these amounts, the illustrated hypothetical gross annual investment
rates of return of 0%, 6% and 12% correspond to approximate hypothetical net
annual rates of XX%, XX% and XX%, respectively.
The illustrations do not reflect any charges for federal income tax burden
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 Values illustrated. (See Federal Income Tax Considerations, page XX.)
The tables illustrate the Values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated, if
all premiums are allocated to the Separate Account, if no Policy loans have been
made, and Death Benefit Option A had been selected. If a Policy Loan is
effectuated, both Surrender Value and Death Benefit Proceeds will be reduced by
the amount of outstanding Policy Debt. Even if repaid, Policy Debt may
permanently affect the Policy's Values. The effect could be favorable or
unfavorable depending on whether the investment performance of the
Subaccount(s)/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. The tables are also based on the assumption that the
Policyowner has not requested an increase or decrease in the Specified Amount,
that no partial surrenders have been made, no riders have been added, there have
been no transfers to the Fixed Account, and that no more than twelve transfers
among Subaccounts have been made in any Policy Year so that no transfer charges
have been incurred. If a partial surrender is effectuated, it will immediately
reduce the Policy Values by the sum of the amount of the partial surrender, a
$25 fee for each partial surrender and any applicable surrender charge. If the
Policy is surrendered, a surrender charge may be imposed and it is possible the
Policyowner may receive less than the total premium paid. In the illustrations,
the difference between the Accumulation Value and the Surrender Value in any
year is the surrender charge. A surrender charge may also be assessed if a
decrease in Specified Amount, a change in Death Benefit option that results in a
decrease in Specified Amount, or a partial surrender is effectuated. In
addition, a $25 partial surrender fee is assessed on each partial surrender.
Each Policy Year, the first twelve transfers among the Subaccounts or from the
Subaccounts to the Fixed Account are free of charge. A $10 charge is imposed
each additional time such transfers are made each Policy Year. Illustrated
Values would be different if the proposed Insured were female (unless the Policy
is not issued on a sex distinct basis), tobacco user, in a standard or
substandard risk classification or another Age at Issue; or if a higher or lower
premium was illustrated, another Specified Amount was selected, or Death Benefit
Option B had been selected.
Upon request, American National will provide a comparable illustration based
upon the proposed Insured's age, sex and underwriting classification, the
Specified Amount, the Death Benefit option, and Planned Periodic Premium
schedule requested, and any available riders requested.
54
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE II
DEATH BENEFIT OPTION A; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
CURRENT SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,800 PAID AT THE BEGINNING OF EACH POLICY YEAR
- --------------------------------------------------------------------------------
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- -----------------------------------------------------------------------------------------------------------------------
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 1,890 0 100,000 0 100,000 0 100,000
2 3,875 0 100,000 211 100,000 517 100,000
3 5,958 1,376 100,000 1,962 100,000 2,595 100,000
4 8,146 2,795 100,000 3,769 100,000 4,867 100,000
5 10,443 4,171 100,000 5,635 100,000 7,350 100,000
6 12,856 5,817 100,000 7,872 100,000 10,377 100,000
7 15,388 7,420 100,000 10,169 100,000 13,658 100,000
8 18,048 8,976 100,000 12,525 100,000 17,215 100,000
9 20,840 10,485 100,000 14,941 100,000 21,077 100,000
10 23,772 11,942 100,000 17,416 100,000 25,271 100,000
15 40,783 18,491 100,000 30,804 100,000 52,654 100,000
20 62,495 22,085 100,000 44,545 100,000 94,301 115,047
25 90,204 23,760 100,000 60,603 100,000 160,639 186,341
30 125,569 22,484 100,000 79,977 100,000 265,781 284,386
AGE 65 62,495 22,085 100,000 44,545 100,000 94,301 115,047
</TABLE>
* GUARANTEED COVERAGE PREMIUM $1,260
Until age 95, under Death Benefit Option A the Death Benefit is the current
Specified Amount of the Policy or, if greater, the applicable corridor
percentage or Accumulation Value at the end of the Valuation Period that
includes the date of the Insured's death. Corridor percentages are specified in
the Policy. The Death Benefit at age 95 and thereafer equals the Accumulation
Value.
American National agrees to keep the Policy in force during the first 3 Policy
Years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid and other Policy provisions are met even though, in
certain instances, the minimum payment allowed by the Policy will not, after the
payment of Monthly Deductions, generate positive Surrender Value at one or more
points during such period.
Accumulation Value, Surrender Value and Death Benefit may be different if
premiums are paid with a different frequency or timing or if of different
55
<PAGE>
amounts. Illustration assumes no Policy loan or partial surrender has been made.
Zero values in the Death Benefit column indicate Policy lapse in the absence of
sufficient additional premium payment.
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.
AMERICAN NATIONAL INSURANCE COMPANY
ONE MOODY PLAZA
GALVESTON, TEXAS 77550-7999
VARIABLE UNIVERSAL LIFE INSURANCE II
DEATH BENEFIT OPTION A; SPECIFIED AMOUNT - $100,000
PREFERRED MALE ISSUE AGE 45
TOBACCO NON-USER
GUARANTEED SCHEDULE OF CHARGES
PLANNED PERIODIC PREMIUM OF $1,800 PAID AT THE BEGINNING OF EACH
POLICY YEAR
- --------------------------------------------------------------------------------
VALUES BASED ON ASSUMED HYPOTHETICAL GROSS
ANNUAL INVESTMENT RATES OF RETURN OF
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
0% 6% 12%
- ------------------------------------------------------------------------------------------------------------------------
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 1,890 0 100,000 0 100,000 0 100,000
2 3,875 0 100,000 0 100,000 0 100,000
3 5,958 393 100,000 887 100,000 1,425 100,000
4 8,146 1,469 100,000 2,281 100,000 3,200 100,000
5 10,443 2,494 100,000 3,701 100,000 5,123 100,000
6 12,856 3,778 100,000 5,458 100,000 7,519 100,000
7 15,388 5,006 100,000 7,237 100,000 10,090 100,000
8 18,048 6,170 100,000 9,031 100,000 12,847 100,000
9 20,840 7,267 100,000 10,839 100,000 15,809 100,000
10 23,772 8,292 100,000 12,655 100,000 18,992 100,000
15 40,783 12,166 100,000 21,729 100,000 39,152 100,000
20 62,495 11,593 100,000 28,618 100,000 68,512 100,000
25 90,204 6,032 100,000 33,359 100,000 116,986 135,704
30 125,569 0 0 32,721 100,000 193,250 206,778
AGE 65 62,495 11,593 100,000 28,618 100,000 68,512 100,000
</TABLE>
56
<PAGE>
* GUARANTEED COVERAGE PREMIUM $1,260
Until age 95, under Death Benefit Option A the Death Benefit is the current
Specified Amount of the Policy or, if greater, the applicable corridor
percentage or Accumulation Value at the end of the Valuation Period that
includes the date of the Insured's death. Corridor percentages are specified in
the Policy. The Death Benefit at age 95 and thereafer equals the Accumulation
Value.
American National agrees to keep the Policy in force during the first 3 Policy
Years and provide a Guaranteed Coverage Benefit so long as the Guaranteed
Coverage Premium is paid and other Policy provisions are met even though, in
certain instances, the minimum payment allowed by the Policy will not, after the
payment of Monthly Deductions, generate positive Surrender Value at one or more
points during such period.
Accumulation Value, Surrender Value and Death Benefit may be different if
premiums are paid with a different frequency or timing or if of different
amounts. Illustration assumes no Policy loan or partial surrender has been made.
Zero values in the Death Benefit column indicate Policy lapse in the absence of
sufficient additional premium payment.
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.
57
<PAGE>
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 ___ 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
58
<PAGE>
<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................................. Keep with change to "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"
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(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>
60
<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 24th day of February, 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 E. 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:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael W. McCroskey Executive Vice President - February 23, 1998
________________________ Investments (Principal Financial __________________
Michael W. McCroskey Officer)
/s/ Stephen E. Pavlicek Senior Vice President and February 23, 1998
________________________ Controller (Principal __________________
Stephen E. Pavlicek Accounting Officer)
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert L. Moody Chairman of the Board, February 24, 1998
________________________ Director, President and Chief __________________
Robert L. Moody Executive Officer)
/s/ G. Richard Ferdinandtsen February 24, 1998
____________________________ Director __________________
G. Richard Ferdinandtsen
/s/ Irwin M. Herz, Jr. February 24, 1998
____________________________ Director __________________
Irwin M. Herz, Jr.
____________________________ Director __________________
R. Eugene Lucas
/s/ E. Douglas McLeod February 24, 1998
____________________________ Director __________________
E. Douglas McLeod
____________________________ Director __________________
Frances Anne Moody
____________________________ Director __________________
Russell S. Moody
____________________________ Director __________________
W. L. Moody IV
/s/ Joe Max Taylor February 24, 1998
____________________________ Director __________________
Joe Max Taylor
</TABLE>
62
<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
<PAGE>
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
<PAGE>
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
<PAGE>
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 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;
2
<PAGE>
(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 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-
3
<PAGE>
dealer;
(ii) It shall permit the offer and sale of Contracts only by
and through persons 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.
4
<PAGE>
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 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
5
<PAGE>
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.
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
6
<PAGE>
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:
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.
7
<PAGE>
AMERICAN NATIONAL INSURANCE COMPANY
By: __________________________________________________
Carl R. Robertson, Senior Executive Vice President
AMERICAN NATIONAL VARIABLE LIFE SEPARATE ACCOUNT
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.B5A
AMERICAN NATIONAL INSURANCE COMPANY
A STOCK LIFE INSURANCE COMPANY
INSURED JOHN DOE $100,000 SPECIFIED AMOUNT
POLICY NUMBER UVSPC226 FEBRUARY 26, 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 UNIVERSAL LIFE INSURANCE POLICY.
INVESTMENT EXPERIENCE REFLECTED IN SOME VALUES AND BENEFITS.
NONPARTICIPATING. NO DIVIDENDS
FORM VULIP
<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 6
POLICY ACCOUNTS 7
ACCUMULATION VALUE 8
SURRENDER OPTION 10
OWNERSHIP 11
BENEFICIARY INFORMATION 11
GENERAL PROVISIONS 11
SETTLEMENT OPTIONS 12
Additional benefit riders, if any, and a copy of the Application follow 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 $100,000 SPECIFIED AMOUNT
POLICY NUMBER UVSPC226 FEBRUARY 26, 1998 DATE OF ISSUE
FORM BENEFIT ANNUAL GUARANTEED
NUMBER DESCRIPTION COVERAGE PREMIUM
VULIP VARIABLE UNIVERSAL LIFE INSURANCE $612.00
TOTAL FIRST YEAR ANNUAL GUARANTEED COVERAGE PREMIUM $612.00
INSURED SEX MALE
INSURED CLASS PREFERRED TOBACCO NON-USER
DEATH BENEFIT OPTION A-SPECIFIED AMOUNT
INITIAL PREMIUM $1800.00
PLANNED PERIODIC PREMIUM $1800.00 ANNUALLY
MONTHLY DEDUCTION
A COST OF INSURANCE CHARGE
A CHARGE FOR ANY RIDERS
A CURRENT MONTHLY POLICY CHARGE OF $5.00
A MAXIMUM MONTHLY POLICY CHARGE OF $7.50
DAILY ASSET CHARGE
A DAILY ASSET CHARGE NOT TO EXCEED 1.25% ANNUALLY OF THE AVERAGE DAILY NET
ACCUMULATION VALUE OF EACH SUBACCOUNT, BUT NOT THE FIXED ACCOUNT
POLICY LOAN RATE 5.00%
MAXIMUM POLICY LOAN AMOUNT
FIRST 3 POLICY YEARS -- 75% OF SURRENDER VALUE
THEREAFTER -- 90% OF SURRENDER VALUE
PREMIUM ALLOCATION:
SUBACCOUNTS
AN GROWTH 25%
VIP II INDEX 500 25%
VIP III GROWTH AND INCOME 25%
MID-CAP GROWTH 25%
IT IS POSSIBLE THAT COVERAGE WILL EXPIRE IF SUBSEQUENT PREMIUMS ARE NOT PAID
FOLLOWING PAYMENT OF THE INITIAL PREMIUM OR IF THE SURRENDER VALUE IS NOT
SUFFICIENT TO CONTINUE COVERAGE
THE MAXIMUM COST OF INSURANCE RATE IS BASED ON THE 1980 CSO MALE NON-SMOKER
MORTALITY TABLE.
<PAGE>
INSURED JOHN DOE MALE AGE 35
MONTHLY GUARANTEED MAXIMUM COST OF INSURANCE RATES PER $1,000
ATTAINED ATTAINED
AGE VULIP AGE VULIP
30 .17771 63 2.68460
31 .18355 64 2.94650
32 .19107 65 3.22493
33 .20110 66 3.51745
34 .21279 67 3.82159
35 .22700 68 4.14189
36 .24372 69 4.49089
37 .26462 70 4.87787
38 .28804 71 5.31499
39 .31481 72 5.81208
40 .34578 73 6.36666
41 .37927 74 6.97905
42 .41612 75 7.63862
43 .45635 76 8.31871
44 .50079 77 9.00762
45 .54778 78 9.71025
46 .59647 79 10.45173
47 .64940 80 11.25816
48 .70657 81 12.15491
49 .76883 82 13.16081
50 .83788 83 14.26296
51 .91627 84 15.42767
52 1.00487 85 16.61724
53 1.10540 86 17.80317
54 1.21538 87 19.03928
55 1.33315 88 20.34823
56 1.45789 89 21.67168
57 1.58964 90 23.03011
58 1.72843 91 24.46830
59 1.87772 92 26.16955
60 2.04441 93 28.40685
61 2.23291 94 31.56338
62 2.44595 95 50.87689
TABLE OF SURRENDER CHARGES
DURING POLICY SURRENDER THE SURRENDER CHARGES SHOWN WILL ONLY
YEAR CHARGE APPLY TO THE POLICY AS ISSUED. AT THE TIME
1 $2,500 OF AN INCREASE, THE INCREASE WILL HAVE ITS
2 2,500 OWN SURRENDER CHARGES WHICH WILL BE
3 2,500 DIFFERENT THAN THE SURRENDER CHARGES
4 2,500 SHOWN BUT WHICH WILL APPLY FOR 14 YEARS
5 2,500 FROM THE EFFECTIVE DATE OF THE INCREASE.
6 2,300
7 2,100
8 1,900
9 1,700
10 1,500
11 1,000
12 750
13 250
14 100
THEREAFTER 0
DEFINITION OF POLICY TERMS
<PAGE>
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 or the addition of a rider.
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, other than that provided by any riders.
DATE OF ISSUE - the Date of Issue set forth in the Policy and any riders thereto
that is used to determine Policy anniversary dates, Policy Years and
Monthly Deduction Dates.
DEATH BENEFIT - the amount of insurance coverage provided under the selected
Death Benefit option of the Policy.
GUARANTEED COVERAGE PREMIUM - a specified premium which, if paid in advance as
required, will cause Us to keep the Policy in force during the first three
Policy Years so long as other Policy provisions are met, even if the
Surrender Value is zero or less.
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 or Policy Debt exceeds Accumulation Value
less any surrender charge, and a grace period expires without sufficient
payment, except that the Policy will not lapse during the first three
Policy Years if the requirements of the guaranteed coverage benefit
provision have been met. Coverage will terminate in accordance with the
grace period provision of this Policy.
MONTHLY DEDUCTION - the sum of the Cost of Insurance charge, plus the applicable
charge for any riders and the monthly policy charge as 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. The Date of Issue is the first Monthly Deduction Date.
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 and any riders are
payable.
PLANNED PERIODIC PREMIUM - a scheduled premium of a level amount at a fixed
interval as selected by You. You are not required to follow this schedule and
following this schedule does not necessarily ensure the Policy will remain in
force unless the requirements of the guaranteed coverage benefit provision are
met.
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.
Form VULIP
3
<PAGE>
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 minimum Death Benefit under the Policy until the Insured
reaches Attained Age of 95. The Specified Amount is an amount You select in
accordance with the Policy requirements.
SURRENDER VALUE - the Accumulation Value less any Policy Debt and surrender
charges.
YOU, YOUR - means 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 - The Death Benefit of the Policy is the amount provided by the
Death Benefit option in effect when the Insured dies. The Policy must be in
full force on the date of death; otherwise, there is no Death Benefit.
Adjustment in the Death Benefit will be made as provided in the following
paragraphs. The Death Benefit option elected in the Application is shown on the
Policy Data Page.
OPTION A. Until age 95, the Death Benefit is the greater of the following: (1)
the Specified Amount on the date of death; or (2) the Accumulation Value at the
end of the Valuation Period that includes the date of death multiplied by a
corridor percentage from the table on page 5.
OPTION B. Until age 95, the Death Benefit is the greater of the following: (1)
the Specified Amount on the date of death plus the Accumulation Value at the end
of the Valuation Period that includes the date of death; or (2) the Accumulation
Value at the end of the Valuation Period that includes the date of death
multiplied by a corridor percentage from the table on page 5.
The Death Benefit at age 95 and thereafter equals the Accumulation Value.
MONTHLY DEDUCTION DUE AT DEATH - If the Insured should die during the grace
period, from any Death Benefit, 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 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
DEATH BENEFIT PROCEEDS - The proceeds payable to the Beneficiary upon receipt by
us of Satisfactory Proof of Death of the Insured while the Policy is in force
equal to:
(1) the Death Benefit; plus
(2) any additional life insurance proceeds provided by riders; minus
(3) any Policy Debt; minus
(4) any unpaid Monthly Deduction that may apply during a grace period.
PAYMENT OF THE DEATH BENEFIT - The Death Benefit Proceeds may be paid in one sum
or under the settlement options of the Policy.
4
<PAGE>
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
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. The minimum amount of
increase in Specified Amount is $5,000. An increase in Specified Amount may not
be made if the Insured's Attained Age is over 80. 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. If the increase is made during the first three Policy Years a
new Guaranteed Coverage Premium will be shown. An increase in Specified Amount
does not start a new guaranteed coverage benefit period. You may cancel this
increase by following the Right to Cancel provision as stated on the front of
the Policy. Depending on the Accumulation Value at the time of an increase and
the amount of the increase you requested, We reserve the right to require an
additional premium payment.
DECREASE IN SPECIFIED AMOUNT - A decrease in the Specified Amount is allowed
after the first three Policy Years. A decrease in the Specified Amount will be
effective on the Monthly Deduction Date that coincides with or next follows the
date We receive Your written request. The minimum amount of decrease in
Specified Amount is $5,000. The Specified Amount remaining in force after a
decrease may not be less than the minimum Specified Amount shown in the
following schedule:
DURING MINIMUM
POLICY YEAR SPECIFIED AMOUNT
4 $35,000
thereafter 25,000
The minimum Specified Amount for an Insured to maintain a preferred risk
classification is $100,000.
If following the decrease in Specified Amount, the Policy would not comply with
the maximum premium limitations required by federal tax law, the decrease may be
limited or Accumulation Value may be returned to the Owner at the Owner's
election, to the extent necessary to meet these requirements. A decrease in the
Specified Amount will reduce the Specified Amount in the following order:
(1) The Specified Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) The initial Specified Amount.
If there is a decrease in Specified Amount, American National will deduct a
surrender charge from the Accumulation Value. Such deduction will be the sum of
surrender charges computed separately for each reduction in Specified Amount as
required in (1) - (3) above. The surrender charge for each reduction is a pro
rata portion of any surrender charge applicable to a full surrender of the
related increase or initial Specified Amount. This portion will be based on the
percentage reduction in the related increase or initial Specified Amount. The
surrender charges applicable to each increase or the initial Specified Amount
remaining in force will be reduced on a pro rata basis. No decrease in Specified
Amount can be made if the Insured's Attained Age exceeds 94. A decrease in
Specified Amount will take effect on the Monthly Deduction Date which coincides
with or next follows the date American National receives the written request
from the Owner.
CHANGE IN DEATH BENEFIT OPTION - The Death Benefit option in effect may be
changed at any time by sending a Written Request to Us. The effective date of
such a change will be the Monthly Deduction Date on or following the date the
written request is received by Us. If the Death Benefit option is changed from
option A to option B, the Specified Amount after the change will equal the
Specified Amount before the change minus the Accumulation Value on the effective
date of the change. If the Death Benefit option is changed from option B to
option A, the Specified Amount under option A after the change will equal the
Death Benefit under option B on the effective date of change. A change in Death
Benefit option will not be allowed if the Specified Amount remaining in force
after the change is less than the minimum allowed after a decrease in Specified
Amount. A change in Death Benefit option will not result in an immediate change
in the Accumulation Value. An increase in the Specified Amount due to a Death
Benefit option change will result in certain increases in the Monthly Deduction
and the Guaranteed Coverage Premium. A change in the Death Benefit option may
affect surrender charges, since these changes are assessed based on a rate per
$1,000 of Specified Amount. The minimum Specified Amount for an Insured to
maintain a preferred risk classification is $100,000.
DURING MINIMUM
POLICY YEAR SPECIFIED AMOUNT
1 $50,000
2 45,000
3 40,000
4 35,000
thereafter 25,000
Form VULIP 5
<PAGE>
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.
PLANNED PERIODIC PREMIUMS - Your Planned Periodic Premium and the payment
interval You have selected are shown on the Policy Data Page. You may change the
amount and frequency, but We have the right to limit the amount of the Planned
Periodic Premium. During the first three Policy Years the Planned Periodic
Premium Schedule must include the Guaranteed Coverage Premium.
UNSCHEDULED PREMIUMS - You may make unscheduled premium payments at any time
while the Policy is in force, but We have the right to limit the amount of any
unscheduled premium payments.
GUARANTEED COVERAGE BENEFIT - The Policy can not terminate during the first
three Policy Years after the Date of Issue if on each Monthly Deduction Date
within that period the sum of premiums paid within that period equals or
exceeds:
(1) the sum of the Guaranteed Coverage Premium for each month from the start of
the 3 year period, including the current month, plus;
(2) any partial surrenders and any increase in Policy Debt amount since the
start of the period.
The Guaranteed Coverage Premium payment must be paid to keep the Policy in
force, even if the Surrender Value is zero or less.
The Guaranteed Coverage Premium will be increased if a benefit rider is added or
increased during the first three Policy Years after the Date of Issue. If the
Specified Amount is increased during the first three Policy Years, a new
Guaranteed Coverage Premium will be calculated. Increases in Specified Amount or
rider changes made after the first three Policy Years will not have a Guaranteed
Coverage Benefit.
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 or before the Date of Issue
or within 15 days after the Date of Issue to a money market subaccount, as of
the Date of Issue, for fifteen days. 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.
GRACE PERIOD - A grace period is granted for the payment of a premium sufficient
to cover the Monthly Deduction if the Surrender Value is insufficient or the
excess of Policy Debt over Accumulation Value less any Surrender Charge, unless
during the first three Policy Years the requirements of the guaranteed coverage
benefit provision has been met. The grace period begins on the date the
Surrender Value is insufficient to cover the Monthly Deduction or the date
Policy Debt exceeds Accumulation Value less any Surrender Charge. 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. However, a termination will not occur
if the Policy is being continued under this guaranteed coverage benefit
provision. 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 after the
date coverage is terminated. 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, and
any person covered by rider, is then insurable for the Policy;
(2) You must pay a minimum premium sufficient to pay the Monthly Deduction for
three months after the date of reinstatement;
(3) any Policy Debt must be restored or paid back with compound interest;
(4) You must pay all of the Monthly Deductions that were not collected during
the grace period; and
6
<PAGE>
(5) the surrender charge schedule will be restored as of the original Date of
Issue and for any increase in Specified Amount as of the date of increase.
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.
POLICY ACCOUNTS
AMERICAN NATIONAL FIXED ACCOUNT - You may elect to allocate all or a part of
premiums paid or transfer all or a part of the Accumulation Value under the
Policy to the fixed account. Such amounts allocated or transferred become part
of American National's 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 American National's
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.
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 or Accumulation Value
has been transferred. 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 or the balance
in the subaccount, if less. You may make 12 transfers each Policy Year without
charge. The 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 at the end of the Valuation
Period during which the Policy anniversary occurs. 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 redeem 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.
Form VULIP 7
<PAGE>
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 in the general account as
security for Policy loans and held in the fixed account which includes interest
paid (1) any premium to be processed on that valuation date; less (2) any
partial surrenders plus applicable charges, to be processed on that valuation
date; less (3) any Monthly Deduction to be processed on that valuation date. The
entire investment risk of the American National Variable Life Separate Account
is borne by You. We do not guarantee minimum Accumulation Value.
On the Date of Issue or, if later, the date the first premium is received, the
Accumulation Value is the premium less the Monthly Deduction for the first
policy month. All values equal or exceed those required by law. Detailed
explanations of methods of calculations are on file with appropriate regulatory
authorities.
SEPARATE ACCOUNT ACCUMULATION VALUE - The Accumulation Value attributable to the
Policy in the subaccounts of the American National Variable Life Separate
Account will vary daily with the performance of the subaccounts in which You
have an Accumulation Value, any premiums paid, transfers, partial surrenders,
and charges assessed. There is no guaranteed minimum Surrender Value on these
separate account Accumulation Values.
On each valuation date, the Accumulation Value in a subaccount is the aggregate
of the values attributable to the Policy in each of the subaccounts on the
valuation date, determined for each subaccount by multiplying the subaccount's
unit value by the number of units allocated to the Policy.
In computing the Accumulation Value, the number of subaccount units allocated to
the Policy is determined after any transfers among subaccounts, or to the fixed
account (and deduction of transfer charges), but before any other Policy
transactions, such as receipt of premiums and partial surrenders, on the
valuation date. Because the Accumulation Value is dependent upon a number of
variables, including the investment performance of the chosen subaccounts, the
frequency and amount of premium payments, transfers, partial surrenders, loans,
and charges assessed in connection with the Policy, the Accumulation Value
cannot be predetermined.
THE UNIT VALUE - The unit value of each subaccount reflects the investment
performance of that subaccount. The unit value of each subaccount shall be
calculated by multiplying the per share net asset value of the corresponding
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; minus
the daily asset charge as stated on the Policy Data Page; and dividing the
result by the total number of units held in the subaccount on the valuation
date, after any transfers among subaccounts, or the fixed account (and
deduction of transfer charges), but before any other Policy transactions.
FIXED ACCOUNT ACCUMULATION VALUE - The fixed account Accumulation Value on any
Monthly Deduction Date shall be the sum of (a), (b), (c), and (d), less the sum
of (e) and (f), where:
8
<PAGE>
(a) is the fixed account Accumulation Value on the immediately preceding
Monthly Deduction Date;
(b) is one month interest on (a);
(c) is all premiums received and allocated to the fixed account prior to
current date but and any value transferred into the fixed account since the
immediately preceding Monthly Deduction Date;
(d) is interest accumulated on (c) from the date of receipt of the premium
allocated to the fixed account or the date any value was transferred into
the fixed account to the Monthly Deduction Date;
(e) is the sum of any partial surrenders from the fixed account prior to
current date but since the immediately preceding Monthly Deduction Date,
and applicable surrender charges plus accumulated interest on such
surrenders and charges;
(f) is any value transferred out of the fixed account since the immediately
preceding Monthly Deduction Date plus accumulated interest on such
transfers.
The fixed account Accumulation Value on any date other than a Monthly Deduction
Date, hereinafter referred to as the valuation date, shall be the sum of (a),
(b), (c), and (d), less (e) and (f), where:
(a) is the fixed account Accumulation Value on the Monthly Deduction Date
immediately preceding the valuation date;
(b) is interest on (a) accumulated to the valuation date;
(c) is all premiums received and allocated into the fixed account and any value
transferred to the fixed account prior to current date but since the
immediately preceding Monthly Deduction Date;
(d) is interest on (c) from the date of receipt of the premiums allocated to
the fixed account or the date any value was transferred into the fixed
account to the valuation date;
(e) is the sum of any partial surrenders from the fixed account, which occurred
prior to current date but since the Monthly Deduction Date immediately
preceding the valuation date, and applicable surrender charges plus
accumulated interest on such surrenders and charges; and
(f) is any value transferred out of the fixed account since the immediately
preceding Monthly Deduction Date plus accumulated interest on such
transfers.
The guaranteed interest rate applied in the calculation of the fixed account
Accumulation Value and Accumulation Value held in the General Account as
security for Policy loans is 3% per year, compounded daily. Fixed account
Accumulation Values may earn interest at a higher rate.
MONTHLY DEDUCTION - The Monthly Deduction is the sum of the Cost of Insurance
for the Policy plus the cost of any riders plus any monthly policy charge. We
will allocate the Monthly Deduction among the Subaccounts and the Fixed Account
in the same proportion as the Accumulation Value in each Subaccount and the
Fixed Account years to the total on that date.
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 monthly policy charge and the applicable charge for any riders
shown on the Policy Data Page. The Cost of Insurance is based on the Insured's
sex, Attained Age, risk class and Specified Amount. Any change in the Cost of
Insurance rates will be made on a uniform basis for Insureds of the same age,
sex, risk class and Specified Amount. The monthly guaranteed maximum rates for
the initial Specified Amount of this Policy are shown on the Policy Data Page.
Guaranteed maximum cost of insurance rates for issue or increase ages 15 and
above are calculated based on the 1980 Commissioners Standard Ordinary (CSO)
Smoker or Nonsmoker Mortality Tables (Age Last Birthday). For issue or increase
ages 0-14, the 1980 CSO Mortality Table (Age Last Birthday) was used through
attained age 14 and the 1980 CSO Nonsmoker Mortality Table (Age Last Birthday)
for attained ages 15 and above.
CONTINUATION OF INSURANCE - Insurance coverage under this Policy and any
benefits provided by rider will be continued until the Surrender Value will not
cover the Monthly Deduction or Policy Debt exceeds Accumulation Value less any
surrender charge as provided in the grace period provision, unless,
during the first three Policy Years, the requirements of the guaranteed coverage
benefit provision are met.
SURRENDER VALUE - The Surrender Value is the Accumulation Value on the date of
surrender less any surrender charge and any Policy Debt.
SURRENDER CHARGE -The surrender charge is a charge against the Accumulation
Value. Surrender charges are calculated separately for the initial Specified
Amount and for each increase in the Specified Amount. The surrender charge is
applicable for the first fourteen Policy Years after the Date of Issue and
fourteen years after the effective date of each increase. Thereafter, there is
no surrender charge. The surrender charge is assessed based on a rate per $1,000
of initial or increase in Specified Amount. This rate is the same for the five
years since issue or increase, as applicable, grading to zero after fourteen
years. A surrender charge may be assessed upon decreases in Specified Amount,
including Death Benefit option changes that result in a decrease in Specified
Amount. The surrender charge will not exceed the maximum amount permitted under
applicable law.
Form VULIP 9
<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.
In most cases We will pay the Surrender Value to You within seven days 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 minus an amount sufficient to cover Monthly
Deductions for 3 months. The minimum amount of any partial surrender is $100.
The Accumulation Value will be reduced by the sum of the amount of partial
surrender, a $25 fee for each partial surrender, and if Death Benefit Option A
is in effect, a partial surrender charge. This amount will be deducted from the
Accumulation Value, and values in connection therewith determined, at the end of
the Valuation Period during which the request is received. Unless You request
otherwise, We will allocate partial surrenders to the fixed account and
subaccounts in proportion to the value in the fixed account and in each
subaccount prior to the partial surrender.
A partial surrender will reduce both the Death Benefit and the Accumulation
Value by the amount of the Accumulation Value reduction. The reduction will
first reduce any past increases and the initial Specified Amount in the reverse
order in which they occurred. If the Specified Amount remaining in force after
the reduction would be less than the minimum shown on the Policy Data Page, the
partial surrender will not be permitted.
In most cases We will pay the partial surrender amount to You within seven days
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.
POLICY LOAN - You may request a policy loan at any time while Your Policy is
in force. The maximum amount You may borrow is the maximum policy loan amount
set forth on the Policy Data Page. 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, adjusted by partial surrenders. The minimum amount
You may borrow is $100 if that amount of loan value is available for loan. 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. In most
cases We will pay the loan amount to You within seven days after 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 does 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.
10
<PAGE>
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.
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 or rider addition or 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 or rider addition or increase occurs.
EFFECTIVE DATE - The Policy takes effect on the Date of Issue shown on the
Policy Data Page upon:
(1) payment of the initial 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.
Form VULIP 11
<PAGE>
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 Date of Issue, or any
reinstatement shall be incontestable, after it has been in force during the
Insured lifetime for 2 years after the effective 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.
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.
12
<PAGE>
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. Except as described in the next paragraph,
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>
Form VULIP 13
<PAGE>
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
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>
TABLE B TABLE C TABLE B TABLE C
AGE Guaranteed Guaranteed TABLE D AGE Guaranteed Guaranteed TABLE D
IN Period Period Life IN Period Period Life
YEARS 10 Years 20 Years Only YEARS 10 Years 20 Years Only
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
14
<PAGE>
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
INVESTMENT EXPERIENCE REFLECTED IN SOME VALUES AND
BENEFITS. NONPARTICIPATING. NO DIVIDENDS.
ALPHABETIC GUIDE PAGE PAGE
Accumulation Value 8
Addition, Deletion or Substitution of Investment 7
Age at Issue Policy Data Page
Allocation of Premiums 6
American National Fixed Account 7
American National Variable Life Separate Account 7
Annual Report 12
Assignment 12
Availability of Settlement Options 12
Basis of Calculations 13
Beneficiary Interest 11
Change of Beneficiary 11
Change of Death Benefit Option 5
Continuation of Insurance 9
Contract and Representations 11
Cost of Insurance 9
Date of Issue Policy Data Page
Death Benefit 4
Decrease in Specified Amount 5
Deferment of Payments and Emergency Procedure 10
Effective Date 11
Fixed Account Accumulation Value 8
Full Surrender 10
General Provisions for Settlement Options 13
Grace Period 6
Guaranteed Coverage Benefit 6
Incontestability 12
Increase in Specified Amount 5
Misstatement of Age or Sex 4
Modifications 12
Monthly Deduction 9
Monthly Deduction Due at Death 4
Owner 11
Partial Surrender 10
Payment of Death Benefit 4
Planned Periodic Premium 6
Policy Debt Adjustment 4
Policy Loan 10
Premiums Payments 6
Reinstatement 6
Separate Account Accumulation Value 8
Settlement Options 12
Settlement Option Tables 13
Specified Amount Policy Date Page
Subaccounts 7
Suicide 4
Surrender Charge 9
Surrender Value 9
Table of Corridor Percentages 5
Termination of Coverage 6
The Unit Value 8
Transfers 7
Unscheduled Premiums 6
Form VULIP 15
<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
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Exhibit 99.B6b
AMERICAN NATIONAL INSURANCE COMPANY
GALVESTON, TEXAS
BYLAWS
ARTICLE I
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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
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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.
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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
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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
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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
business 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.
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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
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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
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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
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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
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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
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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
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Corporate Seal
Section 1. The seal of the Company shall be as follows:
ARTICLE XII
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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
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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:
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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
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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;
<PAGE>
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:
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.
<PAGE>
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:
(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
<PAGE>
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.
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.
4
<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 received;
6
<PAGE>
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
7
<PAGE>
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
8
<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
9
<PAGE>
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
10
<PAGE>
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
11
<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.
12
<PAGE>
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
13
<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:
14
<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.
15
<PAGE>
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,
16
<PAGE>
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
17
<PAGE>
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
18
<PAGE>
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;
19
<PAGE>
(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
24
<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
25
<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.
26
<PAGE>
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.
4
<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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<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
10
<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
11
<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.
12
<PAGE>
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
13
<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:
14
<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.
15
<PAGE>
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,
16
<PAGE>
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
17
<PAGE>
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
18
<PAGE>
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;
19
<PAGE>
(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
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 relating to the proposals.)
24
<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
25
<PAGE>
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.B8D
PARTICIPATION AGREEMENT
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Among
VARIABLE INSURANCE PRODUCTS FUND III,
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FIDELITY DISTRIBUTORS CORPORATION
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and
AMERICAN NATIONAL INSURANCE COMPANY
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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
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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
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
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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 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
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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.
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.
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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 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.
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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 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
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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
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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).
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.
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ARTICLE IV. Sales Material and Information
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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 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.
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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
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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
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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 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,
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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 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.
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ARTICLE VIII. Indemnification
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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 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
12
<PAGE>
(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.
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
13
<PAGE>
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
(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.
14
<PAGE>
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:
(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
15
<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
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.
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,
16
<PAGE>
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, 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
17
<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 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 "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
18
<PAGE>
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.
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
19
<PAGE>
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 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.
20
<PAGE>
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
21
<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
22
<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.)
23
<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.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, 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.
25
<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.
26
<PAGE>
EXHIBIT 99.B8E
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
<PAGE>
WHEREAS, T. Rowe Price Associates, Inc. and Rowe Price-Fleming International,
Inc. (each 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
<PAGE>
-2-
light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such Designated
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 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
<PAGE>
-3-
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 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.
<PAGE>
-4-
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.
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
<PAGE>
-5-
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 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
<PAGE>
-6-
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, 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
<PAGE>
-7-
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, 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,
<PAGE>
-8-
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, 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
<PAGE>
-9-
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 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
<PAGE>
-10-
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.
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
<PAGE>
-11-
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 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,
<PAGE>
-12-
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
----------------------------------
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
<PAGE>
-13-
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 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
---------------------------
<PAGE>
-14-
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
(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.
<PAGE>
-15-
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.
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
<PAGE>
-16-
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
(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
<PAGE>
-17-
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.
<PAGE>
-18-
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
<PAGE>
-19-
time as such information 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.
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.
<PAGE>
-0-
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:_________________________________
<PAGE>
-1-
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:_________________________________
<PAGE>
SCHEDULE A
- ----------
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Separate Account and Contracts Funded by
Date Established by Board of Directors Separate Account Designated Portfolios
- -------------------------------------- ------------------- -----------------------
</TABLE>
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
