Registration Nos. 333-40637
811-2441
As filed with the Commission on February 12, 1998
--------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 X
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Post-Effective Amendment No.
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 65 X
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AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
(Exact Name of Registrant)
AMERICAN GENERAL LIFE INSURANCE COMPANY
(Name of Depositor)
2727-A Allen Parkway
Houston, Texas 77019-2191
(Address of Depositor's Principal Executive Officers) (Zip Code)
(713) 831-3632
(Depositor's Telephone Number, including Area Code)
Steven A. Glover, Esq.
American General Life Insurance Company
2727-A Allen Parkway, Houston, Texas 77019
(Name and Address of Agent for Service)
Copies of all communications to
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W., Suite 825
Washington, D.C. 20036
Attention: Gary O. Cohen, Esq.
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the Registration Statement
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file
another amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
SEPARATE ACCOUNT D
FORM N-4
Cross Reference Sheet
Pursuant to Rule 495(a)
Under the Securities Act of 1933
<TABLE>
PART A
Showing Location of Information in Prospectuses
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
1. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . Glossary
3. Synopsis or Highlights. . . . . . . . . . . . . . . . . . . . Not Applicable
4. Condensed Financial Information . . . . . . . . . . . . . . . Cover Page; Performance Information;
Financial Information
5. General Description of Registrant,
Depositor and Portfolio Companies . . . . . . . . . . . . . . AGL; Separate Account D; The Series;
Cover Page
6. Deductions and Expenses . . . . . . . . . . . . . . . . . . . Charges Under the Contracts
7. General Description of Variable
Annuity Contracts . . . . . . . . . . . . . . . . . . . . . . Communications to us; Transfer, Automatic
Rebalancing, Surrender and Partial
Withdrawal of Owner Account Value;
Owners, Annuitants and Beneficiaries;
Assignments; Rights Reserved by Us
</TABLE>
i
<PAGE>
<TABLE>
PART A
<CAPTION>
Form N-4
Item No. Prospectus Caption
-------- ------------------
<S> <C>
8. Annuity Period. . . . . . . . . . . . . . . . . . . . . . . . Annuity Period and Annuity Payment
Options
9. Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . Death Proceeds
10. Purchases and Contract Value. . . . . . . . . . . . . . . . . Contract Issuance and Purchase Payments;
Variable Account Value; Distribution
Arrangements; One-Time Reinstatement
Privilege
11. Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . Transfer, Automatic Rebalancing,
Surrender and Partial Withdrawal of Owner
Account Value; Annuity Payment Options;
Contract Issuance and Purchase Payments;
Payment and Deferment; Cancellations
12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal Income Tax Matters; Limitations
Imposed by Retirement Plans and Employers
13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Table of Contents of Statement
of Additional Information . . . . . . . . . . . . . . . . . . Contents of Statement of Additional
Information
</TABLE>
ii
<PAGE>
<TABLE>
PART B
<CAPTION>
Showing Location of Information in Statement of Additional Information
<CAPTION>
Caption in
Form N-4 Statement of
Item No. Additional Information
-------- ----------------------
<S> <C>
15. Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . . . . . . . . . . . . . . . Cover Page
17. General Information and
History . . . . . . . . . . . . . . . . . . . . . . . . . . . General Information; Regulation and Reserves
18. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Auditors; Services
19. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
20. Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . Principal Underwriter
21. Calculation of Performance
Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Performance Data for the Divisions; Effect of Tax-
Deferred Accumulation
22. Annuity Payments. . . . . . . . . . . . . . . . . . . . . . . Not Applicable*
23. Financial Statements. . . . . . . . . . . . . . . . . . . . . Financial Statements
<FN>
* All required information is included in Prospectus.
</FN>
</TABLE>
iii
<PAGE>
PART C
Information required to be set forth in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.
iv
<PAGE>
March 2, 1998
AMERICAN GENERAL LIFE INSURANCE COMPANY
PROFILE OF THE SELECT RESERVE(SM)
COMBINATION FIXED AND VARIABLE DEFERRED ANNUITY CONTRACT
This Profile is a summary of some of the more important points that you should
know and consider before purchasing the Contract. The Contract is more fully
described in the Prospectus that accompanies this Profile. Please read the
Prospectus carefully.
1. THE ANNUITY CONTRACT. The Select Reserve(sm) Contract ("Contract") is a
combination fixed and variable deferred annuity issued by American General
Life Insurance Company ("AGL"). It is primarily designed to provide for
retirement income through the investment of after-tax money in Non-Qualified
annuities during an accumulation phase. Due to the Contract's substantial
minimum initial purchase payment of $50,000, the Contract may not be suitable
for many tax-qualified plan programs. However, you may use the Contract for
such programs, such as a rollover individual retirement annuity.
Through the Divisions of AGL's Separate Account D, you may invest in one or
more of the investment series listed in Section 4, below. You may also invest
in Guarantee Periods in AGL's Fixed Account.
The Divisions offer an opportunity to realize better returns than those
guaranteed under the Guarantee Periods. However, the Divisions involve risk,
and you can lose money. The Guarantee Periods provide guaranteed interest
rates that we have set and a guarantee of principal. You may make transfers
among the Divisions and
Guarantee Periods.
The Contract has an accumulation phase and an annuity phase. During the
accumulation phase, earnings accumulate on a tax-deferred basis and are taxed
as income when you make a withdrawal. During the annuity phase, when you begin
receiving regular annuity payments, a portion of each payment is taxable. A
number of distribution methods are available during the accumulation phase and
during the annuity phase.
The amount accumulated under your Contract during the accumulation phase will
determine the amount of annuity payments during the annuity phase.
2. ANNUITY PAYMENTS. When you are ready to start receiving income, your
Contract's value may be applied to any one of the following annuity payout
options (these descriptions assume that you are the annuitant): (1) Life
Annuity - monthly payments during your life; (2) Life Annuity - Period Certain
monthly payments, during your life, but with payments continuing to the
beneficiary for the balance of the 10, 15 or 20 years (as you choose) if you
die before the end of the chosen period; (3) Joint and Last Survivor-Life
monthly payments during your life and the life of another payee, with payments
continuing during the lifetime of the survivor; (4) Certain Period - monthly
payments to you or another payee and on your death or the death of the other
payee to a beneficiary for a specified period of time between 5 and 40 years,
with no life contingencies; (5) Specified Dollar Amount - monthly payments in
amounts not less than $125 nor more than $200 per year for each $1,000 of the
original amount due, with the balance to a beneficiary if the person receiving
the payments dies prior to completion of the payments.
Page One
<PAGE>
With the exception of option 5, you may choose annuity payments under the
above options to be made on a fixed basis, or on a variable basis, where the
dollar amount of your payments will depend upon the investment performance of
the Divisions. Option 5 is available only on a fixed basis. A payee receiving
variable (but not fixed) annuity payments under option 4 may elect at any time
to terminate the option and receive the commuted value of the annuity.
3. PURCHASE. You can purchase a contract by submitting an application. The
minimum initial purchase payment under the Contract is $50,000. You may
contribute additional amounts of $5,000 or more at any time during the
accumulation phase.
4. INVESTMENT OPTIONS. Through the Divisions, you may invest in any or all of
the following series of the indicated funds:
<TABLE>
MUTUAL FUND SERIES
<S> <C> <C>
AMERICAN GENERAL SERIES HOTCHKIS AND WILEY LEVCO SERIES TRUST
PORTFOLIO COMPANY VARIABLE TRUST LEVCO Equity Value
Money Market Fund Equity Income VIP Fund
Portfolio
Low Duration VIP
Portfolio
</TABLE>
<TABLE>
<S> <C> <C> <C>
NAVELLIER VARIABLE OFFITBANK VARIABLE ROYCE CAPITAL FUND WRIGHT MANAGED BLUE
INSURANCE SERIES INSURANCE FUND, INC. Royce Premier CHIP SERIES TRUST
FUND, INC. OFFITBANK VIF- Portfolio Wright International
Navellier Growth Emerging Markets Royce Total Return Blue Chip Portfolio
Portfolio Fund Portfolio Wright Selected Blue
OFFITBANK VIF- Chip Portfolio
High Yield Fund
OFFITBANK VIF-
Total Return Fund
OFFITBANK VIF-
U.S. Government
Securities Fund
</TABLE>
You may also invest in a Guarantee Period. Currently, AGL offers a one-year
Guarantee Period.
5. EXPENSES. Contract expenses are as follows: A daily charge is deducted for
mortality and expense risks at an annual rate of 0.62%, and a daily charge is
deducted for administration expenses at an annual rate of 0.04%, of the
average daily net asset value of a Division.
There are also investment series charges, which range from 0.57% to 2.31% of
the average annual assets of the investment series listed in Section 4, above,
depending on the series involved. Charges for state premium and other
applicable taxes ("premium taxes") may also apply at the time you elect to
start receiving income annuity payments.
Page Two
<PAGE>
The following chart sets forth the charges in the Contract, as follows: The
first two columns show the Contract charges and the series charges,
respectively. The third column, the "Total Annual Charges" column, shows the
combined total of the charges in the first two columns. The last two columns
provide two examples of the charges, in dollars, that you would pay under a
Contract, assuming that you invested $1,000 in a Contract that earns 5%
annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. The column for year 1 shows the total annual charges
for that year. The column for year 10 shows the aggregate of all the annual
charges assessed for the 10 years. The examples assume that there are no
charges for premium taxes.
<TABLE>
<CAPTION>
Total Examples
Annual Total Annual Total Total Annual
Contract Portfolio Annual Charges at End of:
Investment Series Charges Charges Charges 1 Year 10 Years
----------------- -------- ------------ ------- -------------------
<S> <C> <C> <C> <C> <C>
Equity Income VIP 0.66% 1.15% 1.81% $18 $213
LEVCO Equity Value 0.66% 1.10% 1.76% 18 207
Low Duration VIP 0.66% 0.58% 1.24% 13 150
Navellier Growth 0.66% 1.50% 2.16% 22 249
OFFITBANK VIF-Emerging Markets 0.66% 1.50% 2.16% 22 249
OFFITBANK VIF-High Yield 0.66% 1.15% 1.81% 18 213
OFFITBANK VIF-Total Return 0.66% 0.80% 1.46% 15 175
OFFITBANK VIF-U.S. Government
Securities 0.66% 0.60% 1.26% 13 152
Royce Premier 0.66% 1.35% 2.01% 20 234
Royce Total Return 0.66% 1.35% 2.01% 20 234
Wright International Blue Chip 0.66% 2.31% 2.97% 30 329
Wright Selected Blue Chip 0.66% 1.27% 1.93% 20 225
Money Market 0.66% 0.57% 1.23% 13 149
</TABLE>
For newly formed series, charges have been estimated. The charges reflect any
expense reimbursement or waiver. For more detailed information, see the Fee
Table in the prospectus.
6. TAXES. Usually, you pay taxes on your earnings only when distributions are
made from your Contract. In addition, prior to age 59 1/2, you may pay a 10%
penalty on the taxable portion of distributions received.
7. ACCESS TO YOUR MONEY. Prior to the annuity starting date, you may receive
distributions under your Contract through the following withdrawal options:
(1) Partial Withdrawals of at least $100 may be taken at any time, and (2)
Systematic Withdrawals paid monthly, quarterly, semiannually or annually,
subject to a $100 minimum for each payment.
You also have access to your Contract's value by surrendering the Contract.
You may do this at any time prior to the annuity starting date. During the
annuity payout period, a person receiving variable payments, under a certain
period option, may also surrender the Contract. Withdrawals and surrenders may
be subject to income tax and a tax penalty.
8. PERFORMANCE. Prior to the annuity starting date, your Contract's value in
the Divisions may fluctuate, reflecting the investment performance of the
Divisions you have selected. The following chart shows total returns for each
Division for the time periods specified. The chart reflects all of the charges
in the third column of the chart in Section 5., above. If included, premium
taxes would reduce the performance numbers shown below. Past performance is
not a guarantee of future results.
Page Three
<PAGE>
<TABLE>
CALENDAR YEAR
<CAPTION>
DIVISION 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Equity Income VIP N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
LEVCO Equity Value N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Low Duration VIP N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Navellier Growth N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
OFFITBANK VIF- N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Emerging Markets
OFFITBANK VIF- N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
High Yield
OFFITBANK VIF- N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Total Return
OFFITBANK VIF- N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
U. S. Government Securities
Royce Premier N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Royce Total Return N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Wright International N/A N/A N/A N/A N/A N/A N/A
Blue Chip 16.62% 9.34% N/A N/A N/A N/A N/A N/A N/A N/A
Wright Selected
Blue Chip 21.99% 25.43% N/A N/A N/A N/A N/A N/A N/A N/A
Money Market 4.32% 4.85% 3.11% 2.01% 2.57% 4.83% 7.18% 8.24% 6.17% 5.37%
</TABLE>
9. DEATH BENEFIT. If you die before the annuity starting date, the beneficiary
will receive a death benefit. The death benefit is the Contract value at the
time we receive proof of death and written request of manner of payment, less
premium taxes. If death occurs prior to age 81, the death benefit is the
greater of (1) the death benefit in the preceding sentence or (2) the sum of
all purchase payments you have paid under the Contract, less any partial
withdrawals and premium taxes.
10. OTHER INFORMATION.
TAX-QUALIFIED PLANS. Please consult your tax adviser before purchasing a
Contract in a rollover from an existing Tax-Qualified retirement plan,
including another individual retirement account or annuity under Section 408
of the Internal Revenue Code. Any discussion of taxes in this Profile does not
apply to such a Contract.
FREE LOOK. You can examine the Contract for a period of 10 days after you
receive it, and return it to us for a refund. The free look period is longer
in some states. Your refund will equal your Contract's value, reflecting any
investment gain or loss in the Divisions you have specified.
AUTOMATIC REBALANCING. You can have your money automatically rebalanced among
the Divisions quarterly, semiannually, or annually in order to retain the
proportional investments you select.
REPORTS. We will mail to Contract owners or annuitants any reports and
communications required by applicable law or regulation. The toll-free number
for daily Division values is 1-800-813-5065.
11. INQUIRIES. If you need more information, please contact your registered
representative. You may also contact us, at:
American General Life Insurance Company
Annuity Administration Department
P.O. Box 1401
Houston, Texas 77251-1401
Telephone 1-800-813-5065 and 1-713-831-3505
Page Four
<PAGE>
SELECT RESERVE(SM)
COMBINATION FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-813-5065 713/831-3505
American General Life Insurance Company ("AGL") is offering the flexible
payment deferred individual annuity SELECT RESERVE(sm) contracts (the
"Contracts") described in this Prospectus.
You may use AGL's Separate Account D for a variable investment return under
the Contracts based on one or more of the following mutual fund series of the
following investment companies:
<TABLE>
MUTUAL FUND SERIES
<S> <C> <C>
AMERICAN GENERAL SERIES HOTCHKIS AND WILEY LEVCO SERIES TRUST
PORTFOLIO COMPANY VARIABLE TRUST LEVCO Equity Value
Money Market Fund Equity Income VIP Fund
Portfolio
Low Duration VIP
Portfolio
</TABLE>
<TABLE>
<S> <C> <C> <C>
NAVELLIER VARIABLE OFFITBANK VARIABLE ROYCE CAPITAL FUND WRIGHT MANAGED BLUE
INSURANCE SERIES INSURANCE FUND, INC. Royce Premier CHIP SERIES TRUST
FUND, INC. OFFITBANK VIF- Portfolio Wright International
Navellier Growth Emerging Markets Royce Total Return Blue Chip Portfolio
Portfolio Fund Portfolio Wright Selected Blue
OFFITBANK VIF- Chip Portfolio
High Yield Fund
OFFITBANK VIF-
Total Return Fund
OFFITBANK VIF-
U.S. Government
Securities Fund
</TABLE>
You may also use AGL's guaranteed interest accumulation option. This option
currently has one guarantee period, with a guaranteed interest rate.
This Prospectus is designed to provide information about the Contracts that
you should know before investing. Please read it carefully and keep it for
future reference. Information about certain aspects of the Contracts, in
addition to that found in this Prospectus, has been filed with the Securities
and Exchange Commission in the Statement of Additional Information (the
"Statement"). The Statement, dated March 2, 1998, is incorporated by reference
into this Prospectus. The "Table of Contents" of the Statement appears at page
37 of this Prospectus. You may obtain a free copy of the Statement upon
written or oral request to AGL's Annuity Administration Department in our Home
Office, which is located at 2727-A Allen Parkway, Houston, Texas 77019-2191.
The mailing address and telephone numbers are set forth above.
1
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND THE RELATED
STATEMENT (OR ANY SALES LITERATURE APPROVED BY AGL) IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE
CONTRACTS ARE NOT AVAILABLE IN ALL STATES AND THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY JURISDICTION TO ANY PERSON TO WHOM SUCH OFFER WOULD
BE UNLAWFUL THEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY CURRENT FUND PROSPECTUSES OF
THE AMERICAN GENERAL SERIES PORTFOLIO COMPANY, HOTCHKIS AND WILEY VARIABLE
TRUST, LEVCO SERIES TRUST, NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.,
OFFITBANK VARIABLE INSURANCE FUND, INC., ROYCE CAPITAL FUND, AND WRIGHT
MANAGED BLUE CHIP SERIES TRUST.
PROSPECTUS DATED MARCH 2, 1998.
2
<PAGE>
<TABLE>
CONTENTS
<S> <C>
Glossary.................................................................. 5
Fee Table................................................................. 8
Communications to Us...................................................... 10
Performance Information................................................... 10
Financial Ratings....................................................... 11
Other Information....................................................... 12
Financial Information..................................................... 12
AGL....................................................................... 12
Separate Account D........................................................ 12
The Series ............................................................... 12
Voting Privileges....................................................... 16
The Fixed Account......................................................... 17
Contract Issuance and Purchase Payments................................... 18
Cancellations............................................................. 19
Owner Account Value....................................................... 19
Variable Account Value.................................................. 19
Fixed Account Value..................................................... 20
Transfers, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner ................................................................... 20
Transfers............................................................... 20
Automatic Rebalancing................................................... 21
Surrenders and Partial Withdrawals...................................... 21
Annuity Period and Annuity Payment Options................................ 22
Annuity Commencement Date............................................... 22
Application of Owner Account Value...................................... 22
Fixed and Variable Annuity Payments..................................... 22
Annuity Payment Options................................................. 23
Transfers............................................................... 25
Death Proceeds............................................................ 25
Death Proceeds Prior to the Annuity Commencement Date................... 25
Death Proceeds After the Annuity Commencement Date...................... 26
Proof of Death.......................................................... 27
Charges Under the Contracts............................................... 27
Premium Taxes........................................................... 27
Transfer Charges........................................................ 27
Charge to Separate Account D............................................ 27
Miscellaneous........................................................... 28
Reduction in Administrative Expense Charge.............................. 28
Other Aspects of the Contracts............................................ 28
Owners, Annuitants and Beneficiaries; Assignments....................... 28
Reports................................................................. 29
Rights Reserved by Us................................................... 29
Payment and Deferment................................................... 29
Federal Income Tax Matters................................................ 30
3
<PAGE>
General................................................................. 30
Limitations Imposed by Retirement Plans and Employers................... 30
Non-Qualified Contracts................................................. 30
Individual Retirement Annuities ("IRAs")................................ 32
Roth IRAs............................................................... 33
Simplified Employee Pension Plans....................................... 33
Simple Retirement Accounts.............................................. 34
Other Qualified Plans................................................... 34
Private Employer Unfunded Deferred Compensation Plans................... 35
Federal Income Tax Withholding and Reporting............................ 35
Taxes Payable by AGL and Separate Account D............................. 35
Distribution Arrangements................................................. 36
Legal Matters............................................................. 36
Other Information on File................................................. 36
Contents of Statement of Additional Information........................... 37
</TABLE>
4
<PAGE>
GLOSSARY
WE, OUR, AND US. American General Life Insurance Company ("AGL").
YOU, YOUR, OWNER. The Owner of the Contract. The "Owner" is the person,
persons or entity entitled to the ownership rights stated in the Contract. The
Owner may designate a trustee or custodian of a retirement plan which meets
the requirements of Section 401, Section 408(c), or Section 408(k) of the
Internal Revenue Code to serve as legal owner of assets of a retirement plan.
The term "Owner" as used herein, shall refer to the organization entering into
the Contract.
ACCOUNT VALUE. The sum of the Fixed Account Value and the Variable Account
Value after deduction of any fees. The Fixed Account Value is the sum of net
purchase payments and transfers into the Fixed Account, plus accumulated
interest, less any partial withdrawals and transfers out of the Fixed Account.
The Variable Account Value is the sum of the values of the Separate Account
Divisions. The value of a Separate Account Division is the value of a
Division's Accumulation Unit multiplied by the number of Accumulation Units in
that Division.
ACCUMULATION UNIT. A measuring unit used in calculating your interest in a
Division of Separate Account D prior to the Annuity Commencement Date.
ADMINISTRATIVE EXPENSE CHARGE. An annual charge incurred by Separate Account D
which we receive to reimburse us for administrative expenses.
AGE. Age last birthday unless otherwise stated.
ANNUITANT. The person upon whose date of birth and gender income payments are
based. (Upon whose date of birth income payments are based if issued on a
Unisex basis).
ANNUITY COMMENCEMENT DATE. The date on which we begin making payments under an
Annuity Payment Option, unless a lump-sum distribution is elected instead.
ANNUITY PAYMENT OPTION. One of the several forms in which you can request us
to make annuity payments.
ANNUITY PERIOD. The period during which we make annuity payments under an
Annuity Payment Option.
ANNUITY UNIT. A measuring unit used in calculating the amount of Variable
Annuity Payments.
BENEFICIARY. The person entitled to receive benefits in the event the Owner or
Annuitant dies. If no named Beneficiary or Contingent Beneficiary is living at
the time any payment is to be made, the Owner shall be the Beneficiary, or if
the Owner is not living, the Owner's estate shall be the Beneficiary.
CODE. The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT. A person named by the Owner of a Non-Qualified Contract
to become the Annuitant if: (1) the Annuitant dies before the Annuity
Commencement Date; and (2) the Contingent Annuitant is then living. A
Contingent Annuitant may not be named except at the time of application. Once
named, the choice may not be revoked or replaced. If a Contingent Annuitant
dies, a new Contingent Annuitant may not be named. After Annuity Payments
start, a Contingent Annuitant may not become the Annuitant.
CONTINGENT BENEFICIARY. A person that you designate to receive any proceeds
due under a Contract following the death of an Owner or an Annuitant, if the
Beneficiary has died but the Contingent Beneficiary survives at the time such
proceeds become payable.
5
<PAGE>
CONTRACT. An individual annuity Contract offered by this Prospectus.
CONTRACT ANNIVERSARY. Each anniversary of the Date of Issue of the Contract.
CONTRACT YEAR. A period of 12 consecutive months beginning on the Date of
Issue or any anniversary thereof before the Annuity Commencement Date.
DIVISION. One of the several different investment options into which Separate
Account D is divided. Each Division invests in shares of a corresponding
series.
FIXED ACCOUNT. An investment account providing for allocations to earn
interest at a guaranteed rate for a guaranteed period.
FIXED ACCOUNT VALUE. The amount of your Account Value which is in the Fixed
Account.
FIXED ANNUITY PAYMENTS. Annuity payments that are fixed in amount and do not
vary with the investment experience of any Division of Separate Account D.
GENERAL ACCOUNT. All assets of AGL other than those in Separate Account D or
any other legally-segregated separate account established by AGL.
GUARANTEED INTEREST RATE. The rate of interest we credit during any Guarantee
Period, on an effective annual basis.
GUARANTEE PERIOD. The period for which a Guaranteed Interest Rate is credited.
HOME OFFICE. Our office at the following addresses and phone numbers: American
General Life Insurance Company, Annuity Administration Department, 2727-A
Allen Parkway, Houston, Texas 77019-2191; mailing address - P.O. Box 1401,
Houston, Texas 77251-1401; 1-800-813-5065 or 713-831-3505.
INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). A federal law governing the
operations of investment companies such as the Series and Separate Account D.
NON-QUALIFIED. Not eligible for the special federal income tax treatment
applicable in connection with retirement plans pursuant to Sections 401, 403,
or 408 of the Code.
OWNER. The holder of record of a Contract, except that the employer or trustee
may be the Owner of the Contract in connection with a retirement plan.
QUALIFIED. Eligible for the special federal income tax treatment applicable in
connection with retirement plans pursuant to sections 401, 403, or 408 of the
Code.
SEPARATE ACCOUNT AND SEPARATE ACCOUNT D. The segregated asset account referred
to as American General Life Insurance Company Separate Account D established
to receive and invest purchase payments under the Contracts.
SERIES. An individual portfolio or fund of a mutual fund available for
investment under the Contracts. Currently, the Series available under the
Contracts are part of the American General Series Portfolio Company, Hotchkis
and Wiley Variable Trust, , LEVCO Series Trust, Navellier Variable Insurance
Series Fund, Inc., OFFITBANK Variable Insurance Fund, Inc., Royce Capital
Fund, and Wright Managed Blue Chip Series Trust.
6
<PAGE>
VALUATION DATE. All days on which we are open for business except, with
respect to any Division, days on which the related Series does not value its
shares.
VALUATION PERIOD. The period that starts at the close of regular trading on
the New York Stock Exchange on a Valuation Date and ends at the close of
regular trading on the exchange on the next succeeding Valuation Date.
VARIABLE ACCOUNT VALUE. The amount of your Account Value that is in Separate
Account D.
VARIABLE ANNUITY PAYMENTS. Annuity payments that vary in amount based on the
investment experience of one or more of the Divisions of Separate Account D.
WRITTEN. Signed, dated, in form and substance satisfactory to us and received
at our Home Office. See "Synopsis of Contract Provisions - Communications to
Us." You must use special forms provided by us or your sales representative to
authorize telephone transfers, elect an Annuity Option or exercise your
one-time reinstatement privilege.
7
<PAGE>
FEE TABLE
The purpose of this Fee Table is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly pursuant
to a Contract and in connection with the Series. The table reflects expenses
of the Separate Account as well as the Series. Amounts for state premium taxes
or similar assessments may also be deducted, where applicable.
<TABLE>
PARTICIPANT TRANSACTION CHARGES
<S> <C>
Front-End Sales Charge Imposed on Purchases......................... 0%
Surrender Charge.................................................... 0%
Transfer Charge..................................................... $0 (1)
ANNUAL CONTRACT FEE...................................................... $0
SEPARATE ACCOUNT D ANNUAL EXPENSES (as a percentage of average daily net
asset value)
Mortality and Expense Risk Charge.................................. 0.62%
Administrative Expense Charge...................................... 0.04%
Total Separate Account D Annual Expenses........................... 0.66%
<FN>
(1) This charge is $25 after the twelfth transfer during each Contract Year
prior to the Annuity Commencement Date. There is an exception to this
charge. See "Automatic Rebalancing."
</FN>
</TABLE>
8
<PAGE>
<TABLE>
THE SERIES' ANNUAL EXPENSES (1) (as a percentage of average net assets)
<CAPTION>
Management Other
Fees After Expenses
Expense After Expense Total Series
Reimbursement Reimbursement Operating
and Waiver and Waiver Expenses
------------- ------------- ------------
<S> <C> <C> <C>
Equity Income VIP 0.75% 0.40% 1.15%
LEVCO Equity Value 0.85% 0.25% 1.10%
Low Duration VIP 0.46% 0.12% 0.58%
Navellier Growth 0.85% 0.65% 1.50%
OFFITBANK VIF-Emerging Markets 0.90% 0.60% 1.50%
OFFITBANK VIF-High Yield 0.85% 0.30% 1.15%
OFFITBANK VIF-Total Return (2) 0.00% 0.80% 0.80%
OFFITBANK VIF-U. S. Government Securities 0.00% 0.60% 0.60%
Royce Premier 0.00% 1.35% 1.35%
Royce Total Return 0.00% 1.35% 1.35%
Wright International Blue Chip (3) 0.00% 2.31% 2.31%
Wright Selected Blue Chip (3) 0.00% 1.27% 1.27%
Money Market 0.50% 0.07% 0.57%
<FN>
(1) The annual expenses are estimated for the current fiscal year for the
Equity Income VIP, LEVCO Equity Value, Low Duration VIP, Navellier
Growth, OFFITBANK VIF-Emerging Markets, OFFITBANK VIF-High Yield,
OFFITBANK VIF-Total Return, OFFITBANK VIF-U.S. Government Securities,
Royce Premier and Royce Total Return Series, because none of the Series
has financial statements covering a period of at least ten months.
(2) OFFITBANK VIF-Total Return may invest a portion of its assets into
shares of OFFITBANK VIF-High Yield, OFFITBANK VIF-Emerging Markets and
OFFITBANK VIF-U.S. Government Securities, and, consequently,
shareholders of OFFITBANK VIF-Total Return will also indirectly bear the
expenses of such underlying funds at the rates specified above.
(3) If certain voluntary fee waivers and expense reimbursements from the
investment adviser were terminated, management fees and other expenses
would have been as set out in the following table. Information about
annual expenses excluding voluntary fee waivers and expense
reimbursements is not available for the other Portfolios because none of
the other Series has financial statements covering a period of at least
ten months.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Management Other Total
Fees Expenses Expenses
------------- ------------- ------------
<S> <C> <C> <C>
Wright International Blue Chip 0.80% 3.57% 4.37%
Wright Selected Blue Chip 0.65% 1.32% 1.97%
</TABLE>
EXAMPLE (3) Whether or not you surrender or annuitize at the end of the
applicable time period, a $1,000 investment would be subject to
the following expenses, assuming a 5% annual return on assets:
<TABLE>
<CAPTION>
If all amounts are allocated
to a Division that invests in
one of the Following Series: 1 Year 3 Years 5 Years 10 Years
----------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Equity Income VIP 18 57 N/A N/A
LEVCO Equity Value 18 55 N/A N/A
Low Duration VIP 13 39 N/A N/A
Navellier Growth 22 68 N/A N/A
OFFITBANK VIF-Emerging Markets 22 68 N/A N/A
OFFITBANK VIF-High Yield 18 57 N/A N/A
OFFITBANK VIF-Total Return 15 46 N/A N/A
9
<PAGE>
OFFITBANK VIF-U. S. Government
Securities 13 40 N/A N/A
Royce Premier 20 63 N/A N/A
Royce Total Return 20 63 N/A N/A
Wright International Blue Chip 30 92 156 329
Wright Selected Blue Chip 20 61 104 225
Money Market 13 39 68 149
<FN>
(3) In this Example, "N/A" indicates that SEC rules require that the Equity
Income VIP, LEVCO Equity Value, Low Duration VIP, Navellier Growth,
OFFITBANK VIF-Emerging Markets, OFFITBANK VIF-High Yield, OFFITBANK
VIF-Total Return, OFFITBANK VIF-U.S. Government Securities, Royce
Premier and Royce Total Return complete the Example for only the one and
three year periods.
</FN>
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Similarly,
the assumed 5% annual rate of return is not an estimate or a guarantee of
future investment performance. The Examples are based, with respect to all of
the Series, on an estimated Average Account Value of $50,000.
COMMUNICATIONS TO US
All communications to us should include your Contract number, your name
and, if different, the Annuitant's name. Communications may be directed to the
addresses and phone numbers on the first page of this Prospectus.
Except as otherwise specified in this Prospectus, purchase payments or
other communications are deemed received at our Home Office on the actual date
of receipt there in proper form unless received (1) after the close of regular
trading on the New York Stock Exchange or (2) on a date that is not a
Valuation Date. In either of these cases, the date of receipt will be deemed
to be the next Valuation Date.
PERFORMANCE INFORMATION
From time to time, Separate Account D may include in advertisements and
other sales materials several types of performance information for the
Divisions, including "average annual total return" and "cumulative total
return." The Low Duration VIP Division, OFFITBANK VIF-High Yield Division and
OFFITBANK VIF-U.S. Government Securities Division may also advertise "yield."
The Money Market Division may advertise "yield" and "effective yield."
The performance information that may be presented is not an estimate or
guarantee of future investment performance and does not represent the actual
experience of amounts invested by a particular Owner. Additional information
concerning a Division's performance appears in the Statement.
TOTAL RETURN AND YIELD QUOTATIONS. Average annual total return and
cumulative total return calculations measure the net income of a Division plus
the effect of any realized or unrealized appreciation or depreciation of the
underlying investments in the Division for the period in question. Average
annual total return figures are annualized and, therefore, represent the
average annual percentage change in the value of an investment in a Division
over the applicable period. Cumulative total return figures represent the
cumulative change in value of an investment in a Division for various periods.
10
<PAGE>
Yield is a measure of the net dividend and interest income earned over a
specific one month or 30 day period (seven day period for the Money Market
Division) expressed as a percentage of the value of the Division's
Accumulation Units. Yield is an annualized figure, which means that it is
assumed that the Division generates the same level of net income over a one
year period which is compounded on a semi-annual basis. The effective yield
for the Money Market Division is calculated similarly but includes the effect
of assumed compounding. The Money Market Division's effective yield will be
slightly higher than its yield due to this compounding effect.
Average annual total return figures include the deduction of all
recurring charges and fees applicable under the Contract to all Owner
accounts, including the Mortality and Expense Risk Charge and the
Administrative Expense Charge.
DIVISION PERFORMANCE. The investment performance for each Division that
invests in a corresponding Series of the Trust will generally reflect the
investment performance of that corresponding Series for the periods stated.
This information will appear in the Statement. For periods prior to the date
the Contracts became available, the performance information for a Division
will be calculated on a hypothetical basis by applying current Separate
Account fees and charges under the Contract to the historical performance of
the corresponding Series. We may waive or reimburse certain fees or charges
applicable to the Contract and such waivers or reimbursements will affect each
Divisions's performance results.
Information about the experience of the investment advisers to the
Series of the Fund appears in the prospectus for the Fund.
FINANCIAL RATINGS
AGL may also advertise or report to Owners its ratings as an insurance company
by the A. M. Best Company. Each year, A. M. Best reviews the financial status
of thousands of insurers, culminating in the assignment of Best's Ratings.
These ratings reflect their current opinion of the relative financial strength
and operating performance of an insurance company in comparison to the norms
of the life/health industry. Best's Ratings range from A++ to F. An A++ rating
means, in the opinion of A. M. Best, that the insurer has demonstrated the
strongest ability to meet its respective policyholder and other contractual
obligations. A. M. Best publishes Best's Insurance Reports, Life-Health
Edition. The 1997 Edition reaffirmed AGL's rating of A++ (Superior), as of
July 1997, for financial position and operating performance.
In addition, the claims-paying ability of AGL as measured by the Standard &
Poor's Corporation may be referred to in advertisements or in reports to
Owners. A Standard & Poor's insurance claims-paying ability rating is an
assessment of an operating insurance company's financial capacity to meet the
obligations of its insurance policies in accordance with their terms. Standard
& Poor's ratings range from AAA to D. The Company's claims-paying ability is
AA+ (Excellent), reaffirmed as of June 1997.
AGL may additionally advertise its rating from Duff & Phelps Credit Rating Co.
A Duff & Phelps rating is an assessment of a company's insurance claims-paying
ability. Duff & Phelps ratings range from AAA to CCC. Duff & Phelps rates the
claims-paying ability of AGL as AAA, the highest level, reaffirmed as of
August 1997.
The ratings from A. M. Best, Standard & Poors, and Duff & Phelps reflect the
claims-paying ability and financial strength of AGL. THEY ARE NOT A RATING OF
INVESTMENT PERFORMANCE THAT PURCHASERS OF INSURANCE PRODUCTS FUNDED THROUGH
SEPARATE ACCOUNTS, SUCH AS THE SEPARATE ACCOUNT, HAVE EXPERIENCED OR ARE
LIKELY TO EXPERIENCE IN THE FUTURE.
11
<PAGE>
OTHER INFORMATION
In addition, AGL may include in certain advertisements endorsements in
the form of a list of organizations, individuals or other parties that
recommend the Company or the Contracts. AGL may occasionally include in
advertisements comparisons of currently taxable and tax-deferred investment
programs, based on selected tax brackets, or discussions of alternative
investment vehicles and general economic conditions.
FINANCIAL INFORMATION
The financial statements of AGL are located in the Statement. See the
cover page of the Prospectus for information on how to obtain a copy of the
Statement. The financial statements of AGL should be considered only as
bearing on the ability of AGL to meet its contractual obligations under the
Contracts; they do not bear on the investment performance of Separate Account
D. See "Contents of Statement of Additional Information."
AGL
AGL is a stock life insurance company organized under the laws of the
State of Texas, which is a successor in interest to a company originally
organized under the laws of the State of Delaware in 1917. AGL is an indirect,
wholly-owned subsidiary of American General Corporation (formerly American
General Insurance Company), a diversified financial services holding company
engaged primarily in the insurance business. The commitments under the
Contracts are AGL's, and American General Corporation has no legal obligation
to back those commitments.
SEPARATE ACCOUNT D
Separate Account D was originally established on November 19, 1973 and
consists of 56 Divisions, 13 of which are available under the Contracts
offered by this Prospectus, and 43 of which are available under contracts
funded through Separate Account D, but not offered by this Prospectus.
Separate Account D is registered with the Securities and Exchange Commission
as a unit investment trust under the 1940 Act.
Each Division of Separate Account D is part of AGL's general business
and the assets of Separate Account D belong to AGL. Under Texas law and the
terms of the Contracts, the assets of Separate Account D will not be
chargeable with liabilities arising out of any other business which AGL may
conduct, but will be held exclusively to meet AGL's obligations under variable
annuity contracts. Furthermore, the income, gains, and losses, whether or not
realized, from assets allocated to Separate Account D, are, in accordance with
the Contracts, credited to or charged against the Separate Account without
regard to other income, gains, or losses of AGL.
THE SERIES
The variable benefits under the Contracts are funded by 13 Divisions of
the Separate Account. These Divisions invest in shares of one series of
American General Series Portfolio Company, two series of Hotchkis and Wiley
Variable Trust, one series of LEVCO Series Trust, one series of Navellier
Variable Insurance Series Fund, Inc., four series of OFFITBANK Variable
Insurance Fund, Inc., two series of Royce Capital Fund and two series of
Wright Managed Blue Chip Series Trust (collectively, the "Underlying Funds").
The Underlying Funds offer shares of these Series, without sales charges,
exclusively to insurance company variable annuity and variable life insurance
separate accounts and not directly to the public. The Underlying Funds offer
shares to
12
<PAGE>
variable annuity and variable life insurance separate accounts of insurers
that are not affiliated with AGL.
We do not foresee any disadvantage to Owners of Contracts arising out of
these arrangements. Nevertheless, differences in treatment under tax and other
laws, as well as other considerations, could cause the interests of various
owners to conflict. For example, violation of the federal tax laws by one
separate account investing in one of the Underlying Funds could cause the
contracts funded through another separate account to lose their tax deferred
status, unless remedial action were taken. If a material irreconcilable
conflict arises between separate accounts, a separate account may be required
to withdraw its participation in one of the Underlying Funds. If it becomes
necessary for any separate account to replace shares of one of the Underlying
Funds with another investment, one of the Underlying Funds may have to
liquidate portfolio securities on a disadvantageous basis. At the same time,
the Boards of Directors or Boards of Trustees of the Underlying Funds and we
will monitor events for any material irreconcilable conflicts that may
possibly arise and determine what action, if any, should be taken to remedy or
eliminate the conflict.
13
<PAGE>
The Series of the investment companies, along with management and investment
objective information, are as follows:
<TABLE>
<CAPTION>
INVESTMENT
INVESTMENT SERIES ADVISER/MANAGER
COMPANY
----------------------------------------------- ----------------------------------- --------------------------------------
<S> <C> <C>
American General Series Portfolio Company o Money Market Fund The Variable Annuity Life Insurance
Company
Hotchkis and Wiley Variable Trust o Equity Income VIP Hotchkis and Wiley
Portfolio
o Low Duration VIP
Portfolio
LEVCO Series Trust o LEVCO Equity Value John A. Levin and Co., Inc.
Fund
Navellier Variable Insurance Series Fund, Inc. o Navellier Growth Navellier & Associates, Inc.
Portfolio
OFFITBANK Variable Insurance Fund, Inc. o OFFITBANK VIF-Emerging OFFITBANK
Markets Fund
o OFFITBANK VIF-High Yield
Fund
o OFFITBANK VIF-Total
Return Fund
o OFFITBANK VIF-U.S.
Government Securities
Fund
Royce Capital Fund o Royce Premier Portfolio Royce & Associates, Inc.
o Royce Total Return
Portfolio
Wright Managed Blue Chip Series Trust o Wright International Blue Wright Investors' Service, Inc.
Chip Portfolio
o Wright Selected Blue Chip
Portfolio
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
SERIES INVESTMENT OBJECTIVE
------ --------------------
<S> <C>
Equity Income VIP This Portfolio seeks to provide current income
Portfolio and long term growth of income, accompanied by
growth of capital. The Portfolio invests in
domestic equity securities.
LEVCO Equity Value This Fund seeks to achieve long term growth of
Fund capital by emphasizing the preservation of Fund
capital and control of volatility. It utilizes a
research intensive, value oriented stock
selection process in constructing a diversified
portfolio.
Low Duration VIP This Portfolio seeks to maximize total return,
Portfolio consistent with preservation of capital. The
Portfolio Portfolio invests in a diversified
portfolio of fixed-income securities of varying
maturities with a portfolio duration of one to
three years.
Navellier Growth This Portfolio seeks to achieve long-term growth
Portfolio of capital primarily through investment in
companies with appreciation potential.
OFFITBANK VIF- This Fund seeks to provide investors with a
Emerging Markets competitive total investment return by focusing
Fund Emerging Markets on current yield and
opportunities for capital appreciation primarily
by investing in Fund corporate and sovereign debt
securities of emerging market countries.
OFFITBANK VIF- This Fund seeks high current income with capital
High Yield Fund appreciation as a secondary objective. It seeks
to achieve this objective by investing primarily
in U.S. corporate fixed income securities which
are rated below investment grade or unrated at
the time of investment.
OFFITBANK VIF- This Fund seeks to maximize total return from a
Total Return Fund combination of capital appreciation and Total
Return Fund current income by investing in a
diversified portfolio of fixed income securities,
including U.S. Government or agencies
obligations, investment grade fixed income, high
yield and fixed income securities and securities
of other investment companies. Pursuant to an
exemptive order from the SEC, this Fund may
purchase shares of any of the existing or any new
Series of the OFFITBANK Variable Insurance Fund,
Inc.
OFFITBANK VIF- This Fund seeks current income consistent with
U.S. Government preservation of capital. It seeks to achieve this
Securities Fund objective by investing at least 80% of its assets
in U.S. Government obligations.
Royce Premier This Portfolio seeks primarily long-term growth
Portfolio and secondarily current income. It seeks to
achieve these objectives through investments in a
limited portfolio of common stocks and
convertible securities of companies viewed by
Royce & Associates, Inc. as having superior
financial characteristics and/or unusually
attractive business prospects.
Royce Total Return This Portfolio seeks an equal focus on both
Portfolio long-term growth of capital and current income.
It seeks to achieve this objective through
investments in a broadly diversified portfolio of
dividend-paying common stocks of companies
selected on a value basis.
Wright International This Portfolio seeks long-term capital
Blue Chip Portfolio appreciation by investing primarily in equity
securities of well-established, non-U.S.
companies that meet the Advisor's quality
standards.
Wright Selected Blue This Portfolio seeks long-term capital
Chip Portfolio appreciation and, as a secondary objective,
reasonable current income by investing primarily
in equity securities of well-established U.S.
companies that meet the Advisor's quality
standards.
Money Market Fund This Fund seeks liquidity, protection of capital
and current income through investments in
short-term money market instruments. Shares of
the Money Market Fund are neither insured nor
guaranteed by the U.S. Government. There is no
assurance that this Fund will be able to maintain
a stable net asset value of $1.00 per share.
</TABLE>
Any dividends or capital gain distributions attributable to Contracts
are automatically reinvested in shares of the Series from which they are
received at the Series' net asset value on the date payable. Such dividends
and distributions will have the effect of reducing the net asset value of each
share of the corresponding Series and increasing, by an equivalent value, the
number of shares outstanding of the Series. However, the value of your
interest in the corresponding Division will not change as a result of any such
dividends and distributions.
15
<PAGE>
Before selecting any Division, you should carefully read the Fund
Prospectus for the Underlying Fund that includes more complete information
about the Series in which that Division invests, including investment
objectives and policies, charges and expenses. An Underlying Fund may
accompany its Prospectus with a summary of the Prospectus called a "Profile."
You can find information about the investment performance of a Series of the
Underlying Funds and information about the business experience of the
investment advisers to that Series of the Underlying Funds in the Fund Profile
and Fund Prospectus for that particular Underlying Fund that accompanies this
Prospectus. Additionally, you may obtain, free of charge, copies of the full
prospectus and Statement of Additional Information for an Underlying Fund by
contacting AGL's Annuity Administration Department at the addresses and phone
number set forth on the cover page of this Prospectus. When making your
request, please specify the single or the several Series of the Underlying
Fund in which you are interested.
High yielding fixed-income securities such as those in which the
OFFITBANKVIF-High Yield, Emerging Markets and Total Return Divisions invest
are subject to greater market fluctuations and risk of loss of income and
principal than investments in lower yielding fixed-income securities.
Potential investors in these Divisions should carefully read the underlying
Fund Profiles and underlying Fund Prospectuses that pertain to each Series and
consider their ability to assume the risks of making an investment in these
Divisions.
VOTING PRIVILEGES
The Owner prior to the Annuity Commencement Date and the Annuitant or
other payee during the Annuity Period will be entitled to give us instructions
as to how Series shares held in the Divisions of Separate Account D
attributable to their Contract should be voted at meetings of shareholders of
the Series. Those persons entitled to give voting instructions and the number
of votes for which they may give directions will be determined as of the
record date for a meeting. Separate Account D will vote all shares of each
Series that it holds of record in accordance with instructions received with
respect to all AGL annuity contracts participating in that Series.
Separate Account D will also vote all shares of each Series for which no
instructions have been received for or against any proposition in the same
proportion as the shares for which voting instructions were received.
Prior to the Annuity Commencement Date, the number of votes each Owner
is entitled to direct with respect to a particular Series is equal to (a) the
Owner's Variable Account Value attributable to that Series divided by (b) the
net asset value of one share of that Series. In determining the number of
votes, fractional votes will be recognized. While a variable Annuity Payment
Option is in effect, the number of votes an Annuitant or payee is entitled to
direct with respect to a particular Series will be computed in a comparable
manner, based on our liability for future Variable Annuity Payments with
respect to that Annuitant or payee as of the record date. Such liability for
future payments will be calculated on the basis of the mortality assumptions
and the assumed interest rate used in determining the number of Annuity Units
under a Contract and the applicable value of an Annuity Unit on the record
date.
Series shares held by insurance company separate accounts other than
Separate Account D will generally be voted in accordance with instructions of
participants in such other separate accounts.
We believe that AGL's voting instruction procedures comply with current
federal securities law requirements and interpretations thereof. However, AGL
reserves the right to modify these procedures in any manner consistent with
applicable legal requirements and interpretations as in effect from time to
time.
16
<PAGE>
THE FIXED ACCOUNT
AMOUNTS IN THE FIXED ACCOUNT OR SUPPORTING FIXED ANNUITY PAYMENTS BECOME
PART OF OUR GENERAL ACCOUNT. BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS,
INTERESTS IN THE GENERAL ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, NOR IS THE GENERAL ACCOUNT REGISTERED AS AN INVESTMENT COMPANY
UNDER THE 1940 ACT. WE HAVE BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS THAT
RELATE TO THE FIXED ACCOUNT OR FIXED ANNUITY PAYMENTS. DISCLOSURES REGARDING
THESE MATTERS, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY-APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS IN PROSPECTUSES.
Our obligations with respect to the Fixed Account are legal obligations
of AGL and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of AGL, and Owners have no legal rights in such investments.
The Fixed Account is not available under Contracts purchased in Oregon.
Account Value that is allocated by the Owner to the Fixed Account earns
a Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years selected by the Owner
from among the Guarantee Periods that we then offer. At the end of a Guarantee
Period, the Owner's Account Value in that Guarantee Period, including interest
accrued thereon, will be allocated to a new Guarantee Period of the same
length unless AGL has received a Written request from the Owner to allocate
this amount to a different Guarantee Period or Periods or to one or more of
the Divisions of Separate Account D. We must receive this Written request at
least 15 days prior to or 15 days after the end of the Guarantee Period. If
the Owner has not provided such Written request and the renewed Guarantee
Period extends beyond the scheduled Annuity Commencement Date, we will
nevertheless contact the Owner regarding the scheduled Annuity Commencement
Date. The first day of the new Guarantee Period (or other reallocation) will
be the day after the end of the prior Guarantee Period. We will notify the
Owner at least 30 days and not more than 60 days prior to the end of any
Guarantee Period. If the Owner's Account Value in a Guarantee Period is less
than $500, we reserve the right to automatically transfer without charge, the
balance to the Money Market Division at the end of that Guarantee Period,
unless we have received in good order Written instructions to transfer such
balance to a different Division.
We declare the Guaranteed Interest Rates from time to time as market
conditions dictate. We advise an Owner of the Guaranteed Interest Rate for a
chosen Guarantee Period at the time a purchase payment is received, a transfer
is effectuated or a Guarantee Period is renewed. A different rate of interest
may be credited to one Guarantee Period than to another Guarantee Period that
is the same length but that began on a different date. The minimum Guaranteed
Interest Rate is an effective annual rate of 3%.
Each Guarantee Period has its own Guaranteed Interest Rate, which may
differ from those for other Guarantee Periods. From time to time we will, at
our discretion, change the Guaranteed Interest Rate for future Guarantee
Periods of various lengths. These changes will not affect the Guaranteed
Interest Rates being paid on Guarantee Periods that have already commenced.
Each allocation or transfer of an amount to a Guarantee Period commences the
running of a new Guarantee Period with respect to that amount, which will earn
a Guaranteed Interest Rate that will continue unchanged until the end of that
Period. The Guaranteed Interest Rate will never be less than the minimum
Guaranteed Interest Rate stated in your Contract. Currently we make available
a one year Guarantee Period, and no others. However we reserve the right to
change the Guarantee Periods that we are making available at any time.
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AGL'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. AGL CANNOT PREDICT OR ASSURE THE LEVEL OF ANY
FUTURE GUARANTEED INTEREST RATES IN EXCESS OF THE MINIMUM GUARANTEED INTEREST
RATE STATED IN YOUR CONTRACT.
Information concerning the Guaranteed Interest Rates applicable to the
various Guarantee Periods at any time may be obtained from your sales
representative or from the addresses or phone numbers set forth on the cover
page of this Prospectus.
CONTRACT ISSUANCE AND PURCHASE PAYMENTS
The minimum initial purchase payment is $50,000. The amount of any
subsequent purchase payment must be at least $5,000. We reserve the right to
modify these minimums at our discretion.
An application to purchase a Contract must be made by signed Written
application form provided by AGL or by such other medium or format as may be
agreed to by AGL and American General Securities Incorporated ("AGSI," a
subsidiary of AGL) as distributor of the Contracts. When a purchase payment
accompanies an application to purchase a Contract and the application is
properly completed, we will either process the application, credit the
purchase payment, and issue the Contract or reject the application and return
the purchase payment within two Valuation Dates after receipt of the
application at our Home Office.
If the application is not complete or is incorrectly completed, we will
request additional documents or information within five Valuation Dates after
receipt of the application at our Home Office. If a correctly-completed
application is not received within five Valuation Dates after receipt of the
purchase payment at our Home Office, we will return the purchase payment
immediately unless the prospective purchaser specifically consents to our
retaining the purchase payment until the application is made complete, in
which case the initial purchase payment is credited as of the end of the
Valuation Period in which we receive at our Home Office the last information
required to process the application. Subsequent purchase payments are credited
as of the end of the Valuation Period in which they and any required Written
identifying information, are received at our Home Office. We reserve the right
to reject any application or purchase payment for any reason.
If the Owner's Account Value in any Division falls below $500 because of
a partial withdrawal from the Contract, we reserve the right to transfer,
without charge, the remaining balance to the Money Market Division. If the
Owner's Account Value in any Division falls below $500 because of a transfer
to another Division or to the Fixed Account, we reserve the right to transfer
the remaining balance in that Division, without charge and pro rata, to the
Division, Divisions or Fixed Account to which the transfer was made. These
minimum requirements are waived for transfers under the Automatic Rebalancing
program. See "Automatic Rebalancing." If the Owner's total Account Value falls
below $10,000, we may cancel the Contract. Such a cancellation would be
considered a full surrender of the Contract. We will provide you with 60 days'
advance notice of any such cancellation.
So long as the Account Value does not fall below $10,000, you need make
no further purchase payments. You may, however, elect to make subsequent
purchase payments at any time prior to the Annuity Commencement Date and while
the Owner and Annuitant are still living. Checks for subsequent purchase
payments should be made payable to American General Life Insurance Company and
forwarded directly to our Home Office. We also accept purchase payments by
wire or by exchange from another insurance company. You may obtain further
information about how to make purchase payments by either of these methods
from your sales representative or from us at the addresses and telephone
numbers on the cover page of this Prospectus. Purchase payments pursuant to
salary deduction or salary reduction plans may be made only with our
agreement.
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Your purchase payments begin to earn a return in the Divisions of
Separate Account D or the Guarantee Periods of the Fixed Account as of the
date we credit the purchase payments to your Contract. In your application
form, you select (in whole percentages) the amount of each purchase payment
that is to be allocated to each Division and each Guarantee Period. You can
change these allocation percentages at any time by Written notice to us.
CANCELLATIONS
You may cancel your Contract by delivering it or mailing it with a
Written cancellation request to our Home Office or to the sales representative
through whom it was purchased, before the close of business on the 10th day
after you receive the Contract. (In some cases, the Contract may provide for a
20 or 30 day, rather than a 10 day period.) If the foregoing items are sent by
mail, properly addressed and postage prepaid, they will be deemed to be
received by us on the date actually received.
We will refund to you the Owner Account Value plus any premium taxes
that have been deducted. In states where the law so requires, however, we will
refund the greater of that amount or the amount of your purchase payments or,
if the law permits, the amount of your purchase payments.
OWNER ACCOUNT VALUE
Prior to the Annuity Commencement Date, your Account Value under a
Contract is the sum of your Variable Account Value and Fixed Account Value, as
discussed below.
VARIABLE ACCOUNT VALUE
Your Variable Account Value as of any Valuation Date prior to the
Annuity Commencement Date is the sum of your Variable Account Values in each
Division of Separate Account D as of that date. Your Variable Account Value in
any such Division is the product of the number of your Accumulation Units in
that Division multiplied by the value of one such Accumulation Unit as of that
Valuation Date. There is no guaranteed minimum Variable Account Value. To the
extent that your Account Value is allocated to Separate Account D, you bear
the entire risk of investment losses.
Accumulation Units in a Division are credited to you when you allocate
purchase payments or transfer amounts to that Division. Similarly, such
Accumulation Units are canceled to the extent you transfer or withdraw amounts
from a Division or to the extent necessary to pay certain charges under the
Contract. The crediting or cancellation of Accumulation Units is based on the
value of such Accumulation Units at the end of the Valuation Date as of which
the related amounts are being credited to or charged against your Variable
Account Value, as the case may be.
The value of an Accumulation Unit for a Division on any Valuation Date
is equal to the previous value of that Division's Accumulation Unit multiplied
by that Division's net investment factor for the Valuation Period ending on
that Valuation Date.
The net investment factor for a Division is determined by dividing (1)
the net asset value per share of the Series shares held by the Division,
determined at the end of the current Valuation Period, plus the per share
amount of any dividend or capital gains distribution made with respect to the
Series shares held by the Division during the current Valuation Period, by (2)
the net asset value per share of the Series shares held in the Division as
determined at the end of the previous Valuation Period, and subtracting from
that result a factor representing the mortality risk, expense risk and
administrative expense charge.
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FIXED ACCOUNT VALUE
Your Fixed Account Value as of any Valuation Date prior to the Annuity
Commencement Date is the sum of your Fixed Account Value in each Guarantee
Period as of that date. Your Fixed Account Value in any Guarantee Period is
equal to the following amounts, in each case increased by accrued interest at
the applicable Guaranteed Interest Rate: (1) the amount of net purchase
payments, renewals and transferred amounts allocated to the Guarantee Period
less (2) the amount of any transfers or withdrawals out of the Guarantee
Period, including withdrawals to pay applicable charges.
The Fixed Account Value is guaranteed by AGL. Therefore, AGL bears the
investment risk with respect to amounts allocated to the Fixed Account, except
to the extent that AGL may vary the Guaranteed Interest Rate for future
Guarantee Periods (subject to the minimum Guaranteed Interest Rate stated in
your Contract).
TRANSFERS, AUTOMATIC REBALANCING, SURRENDER AND PARTIAL
WITHDRAWAL OF OWNER ACCOUNT VALUE
TRANSFERS
Commencing 30 days after the Contract's date of issue and prior to the
Annuity Commencement Date, you may transfer your Account Value at any time
among the available Divisions of Separate Account D and Guarantee Periods,
subject to the conditions described below. Such transfers will be effective at
the end of the Valuation Period in which we receive your Written or telephone
transfer request.
If a transfer would cause your Account Value in any Division or
Guarantee Period to fall below $500, we reserve the right to also transfer the
remaining balance in that Division or Guarantee Period in the same proportions
as the transfer request.
Prior to the Annuity Commencement Date and after the first 30 days
following the date the Contract was issued, you may make up to 12 transfers
each Contact Year without charge, but additional transfers will be subject to
a $25 charge. After the Annuity Commencement Date, you may make up to six
transfers each contract year. There will be no charge for such transfers.
Also, no more than 25% of the Account Value you allocated to a Guarantee
Period at its inception may be transferred during any Contract Year. This 25%
limitation does not apply to transfers in connection with an automatic
transfer plan, also known as dollar cost averaging, described in the next
paragraph, to transfers within 15 days before or after the end of the
Guarantee Period in which the transferred amounts were being held or to a
renewal at the end of the Guarantee Period to the same Guarantee Period. We
reserve the right to defer any transfer from the Fixed Account to the variable
Divisions for up to six months.
Subject to the above general rules concerning transfers, you may
establish an automatic transfer plan, whereby amounts are automatically
transferred by us from the Money Market Division or the one-year Guarantee
Period to one or more other Divisions on a monthly, quarterly, semi-annual or
annual basis. This kind of automatic transfer plan is also referred to as a
dollar cost averaging plan, under which the owner will select the amount to be
transferred and the period of time over which transfers are to occur.
Transfers under such automatic transfer plan will not count towards the 12
free transfers each Contract Year, and will not incur a $25 charge. You may
obtain additional information about how to establish an automatic transfer
plan from your sales representative or from us at the telephone numbers and
addresses on the front cover of this Prospectus.
If the person or persons that are entitled to make transfers have
completed a Telephone Transfer Privilege form and the form is on file with us,
transfers may be made pursuant to telephone instructions, subject to the terms
of the Telephone Transfer Privilege authorization. We will honor telephone
transfer instructions from any person who provides the correct information, so
there is a risk of possible loss to you if unauthorized
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persons use this service in your name. Currently we attempt to limit the
availability of telephone transfer instructions only to the Owner of the
Contract for which instruction is received. Under the Telephone Transfer
Privilege we are not liable for any acts or omissions based upon instructions
that we reasonably believe to be genuine, including losses arising from errors
in the communication of transfer instructions. We have established procedures
for accepting telephone transfer instructions, which include verification of
the Contract number, the identity of the caller, both the Annuitant's and
Owner's names, and a form of personal identification from the caller. We will
mail to the Owner a written confirmation of the transaction. If several
persons seek to effect telephone transfers at or about the same time, or if
our recording equipment malfunctions, it may be impossible for you to make a
telephone transfer at the time you wish. If this occurs, you should submit a
Written transfer request. Also, if, due to malfunction or other circumstances,
the recording of your telephone request is incomplete or not fully
comprehensible, we will not process the transaction. The phone number for
telephone exchanges is 1-800-813-5065.
The Contracts are not designed for professional market timing
organizations or other entities utilizing programmed and frequent transfers.
We reserve the right at any time and without prior notice to any party to
terminate, suspend, or modify our policy regarding transfers.
AUTOMATIC REBALANCING
Automatic Rebalancing within the Separate Account is available for
Contracts with an Account Value of $25,000 and larger at the time the
application for Automatic Rebalancing is received. Application for Automatic
Rebalancing can be made either at issue or after issue, and may subsequently
be discontinued.
Automatic Rebalancing occurs when funds are transferred by us among the
Separate Account Divisions so that the values in each Division match the
Owner's percentage allocation for Automatic Rebalancing then in effect
Automatic Rebalancing is available on a quarterly, semi-annual or annual
basis, measured from the Contract Anniversary date. A Contract Anniversary
date which falls on the 29th, 30th, or 31st of the month will result in
Automatic Rebalancing as of the first of the next month. Automatic Rebalancing
does not permit transfers to or from any Guarantee Period. Transfers under
Automatic Rebalancing will not count towards the twelve free transfers each
Contract Year, and will not incur a $25 charge.
SURRENDERS AND PARTIAL WITHDRAWALS
At any time prior to the Annuity Commencement Date and while the
Annuitant is still living, the Owner may make a full surrender of or partial
withdrawal from his or her Contract.
The amount payable to the Owner upon full surrender is the Owner's
Account Value at the end of the Valuation Period in which we receive a Written
surrender request in good order, minus any applicable state and local premium
tax. Our current practice is to require that you return the Contract with any
request for a full surrender. All collateral assignees of record must consent
to any full surrender or partial withdrawal.
Your Written request for a partial withdrawal should specify the
Divisions of Separate Account D, or the Guarantee Periods of the Fixed
Account, from which you wish the partial withdrawal to be made. If you do not
specify, or if the withdrawal cannot be made in accordance with your
specification, to the extent necessary the withdrawal will be taken pro-rata
from the Divisions and Guarantee Periods, based on your Account Value in each.
Partial withdrawal requests must be for at least $100 or, if less, all of your
Account Value. If your remaining Account Value in a Division or Guarantee
Period would be less than $500 as a result of the withdrawal (except for the
Money Market Division), we reserve the right to transfer, without charge, the
remaining balance to the Money Market Division. Your request for a partial
withdrawal may not be honored
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if it would reduce the Account Value below $10,000. Unless you request
otherwise, upon a partial withdrawal, your Accumulation Units and Fixed
Account interests that are cancelled will have a total value equal to the
amount of the withdrawal request plus premium tax if applicable, payable upon
the partial withdrawal. The amount payable to you, therefore, will be the
amount of the withdrawal request.
We also make available a systematic withdrawal plan under which you may
make automatic partial withdrawals at periodic intervals in a specified
amount, subject to the terms and conditions applicable to other partial
withdrawals. Additional information about how to establish such a systematic
withdrawal plan may be obtained from your sales representative or from us at
the addresses and phone numbers set forth on the cover page of this
Prospectus. We reserve the right to modify or terminate our procedures for
systematic withdrawals at any time.
The Code provides that a penalty tax will be imposed on certain
premature surrenders or withdrawals. For a discussion of this and other tax
implications of total surrenders and systematic and other partial withdrawals,
including withholding requirements, see "Federal Income Tax Matters."
ANNUITY PERIOD AND ANNUITY PAYMENT OPTIONS
ANNUITY COMMENCEMENT DATE
The Owner may select the Annuity Commencement Date when applying to
purchase a Contract and may change a previously-selected date at any time
prior to the beginning of an Annuity Payment Option by submitting a Written
request, subject to Company approval. The Annuity Commencement Date may be any
day of any month between the Annuitant's 50th and 99th birthday, inclusive,
but at least ten years after issue date. With AGL approval, the Annuity
Commencement Date may occur prior to the Annuitant's 50th birthday.
(Pennsylvania has special limitations which may require the Annuity
Commencement Date to be as early as age 85 but in no event beyond age 90.) See
"Federal Income Tax Matters" for a description of the penalties that may
attach to distributions prior to the Annuitant's attaining age 59 1/2 under
any Contract or after April 1 of the year following the calendar year in which
the Annuitant attains age 70 1/2 under Qualified Contracts.
APPLICATION OF OWNER ACCOUNT VALUE
We will automatically apply your Variable Account Value in any Division
to provide Variable Annuity Payments based on that Division and your Fixed
Account Value to provide Fixed Annuity Payments. However, if you give us other
Written instructions at least thirty days prior to the Annuity Commencement
Date, we will apply your Account Value in different proportions.
We deduct any applicable state and local premium taxes from the amount
of Account Value being applied to an Annuity Payment Option. Subject to any
such adjustments, your Variable and Fixed Account Values are applied to an
Annuity Payment Option, as discussed below, as of the end of the Valuation
Period that contains the tenth day prior to the Annuity Commencement Date.
FIXED AND VARIABLE ANNUITY PAYMENTS
The amount of the first monthly Fixed or Variable Annuity Payment will
be at least as favorable as that produced by the annuity tables set forth in
the Contract, based on the amount of your Account Value that is applied to
provide the Fixed or Variable Annuity Payments. Thereafter, the amount of each
monthly Fixed
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Annuity Payment is fixed and specified by the terms of the Annuity Payment
Option selected.
The Account Value that is applied to provide Variable Annuity Payments
is converted to a number of Annuity Units by dividing the amount of the first
Variable Annuity Payment by the value of an Annuity Unit of the relevant
Division as of the end of the Valuation Period that includes the tenth day
prior to the Annuity Commencement Date. This number of Annuity Units
thereafter remains constant with respect to any Annuitant, and the amount of
each subsequent Variable Annuity Payment is determined by multiplying this
number by the value of an Annuity Unit as of the end of the Valuation Period
that contains the tenth day prior to the date of each payment. If the Variable
Annuity Payments are based on more than one Division, these calculations are
performed separately for each Division. The value of an Annuity Unit at the
end of a Valuation Period is the value of the Annuity Unit at the end of the
previous Valuation Period, multiplied by the net investment factor (see
"Variable Account Value") for the Valuation Period, with an offset for the
3.5% assumed interest rate used in the Contract's annuity tables.
As a result of the foregoing computations, if the net investment return
for a Division for any month is at an annual rate of more than the assumed
interest rate used in the Contract's annuity tables, any Variable Annuity
Payment based on that Division will be greater than the Variable Annuity
Payment based on that Division for the previous month. If the net investment
return for a Division for any month is at an annual rate of less than the
assumed interest rate used in the Contract's annuity tables, any Variable
Annuity Payment based on that Division will be less than the Variable Annuity
Payment based on that Division for the previous month.
ANNUITY PAYMENT OPTIONS
The Owner may elect to have annuity payments made beginning on the
Annuity Commencement Date under any one of the Annuity Payment Options
described below. We will notify the Owner 60 to 90 days prior to the scheduled
Annuity Commencement Date that the Contract is scheduled to mature, and
request that an Annuity Payment Option be selected. If the Owner has not
selected an Annuity Payment Option ten days prior to the Annuity Commencement
Date, we will proceed as follows: (1) if the scheduled Annuity Commencement
Date is any date prior to the Annuitant's ninety-ninth birthday, we will
extend the Annuity Commencement Date to the Annuitant's ninety-ninth birthday;
or (2) if the scheduled Annuity Commencement Date is the Annuitant's
ninety-ninth birthday, the Account Value less any applicable charges and
premium taxes will be paid in one sum to the Owner. This procedure is
different in Pennsylvania because the Annuity Commencement Date cannot exceed
age 90.
The Code imposes minimum distribution requirements that have a bearing
on the Annuity Payment Option that should be chosen in connection with
Qualified Contracts. See "Federal Income Tax Matters." We are not responsible
for monitoring or advising Owners as to whether the minimum distribution
requirements are being met, unless we have received a specific Written request
to do so.
No election of any Annuity Payment Option may be made unless an initial
annuity payment of at least $100 would be provided, where only Fixed or only
Variable Annuity Payments are elected, and $50 on each basis when a
combination of Variable and Fixed Annuity Payments is elected. If these
minimums are not met, we will first reduce the frequency of annuity payments,
and if the minimums are still not met, we will make a lump-sum payment to the
Annuitant or other properly-designated payee in the amount of the Owner's
Account Value, less any applicable state and local premium tax.
The Owner, or if the Owner has not done so, the Beneficiary may, within
60 days after the death of the Owner or Annuitant, elect that any amount due
to the Beneficiary be applied under any option described below,
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subject to certain tax law requirements. See "Death Proceeds." Thereafter, the
Beneficiary will have all the remaining rights and powers under the Contract
and be subject to all the terms and conditions thereof. The first annuity
payment will be made at the beginning of the second month following the month
in which we approve the settlement request. Annuity Units will be credited
based on Annuity Unit Values at the end of the Valuation Period that contains
the tenth day prior to the beginning of said second month.
When an Annuity Payment Option becomes effective, the Contract must be
delivered to our Home Office, in exchange for a payment contract providing for
the option elected.
Information about the relationship between the Annuitant's sex and the
amount of annuity payments, including requirements for gender-neutral annuity
rates in certain states and in connection with certain employee benefit plans
is set forth under "Gender of Annuitant" in the Statement. See "Contents of
Statement of Additional Information."
OPTION 1 - LIFE ANNUITY - Annuity payments are payable monthly during the
lifetime of the Annuitant, ceasing with the last payment due prior to the
death of the Annuitant. It would be possible under this arrangement for the
Annuitant or other payee to receive only one annuity payment if the Annuitant
died prior to the second annuity payment, since no minimum number of payments
is guaranteed.
OPTION 2 - LIFE ANNUITY WITH 120, 180, OR 240 MONTHLY PAYMENTS CERTAIN -
Annuity payments are payable monthly during the lifetime of an Annuitant;
provided, that if the Annuitant dies during the period certain, the
Beneficiary is entitled to receive monthly payments for the remainder of the
period certain.
OPTION 3 - JOINT AND LAST SURVIVOR LIFE ANNUITY - Annuity payments are payable
monthly during the lifetime of the Annuitant and another payee and continue
during the lifetime of the survivor, ceasing with the last payment prior to
the death of the survivor. It is possible under this option for the Annuitant
or other payee to receive only one annuity payment if both die before the
second annuity payment, since no minimum number of payments is guaranteed. If
one of these persons dies before the Annuity Commencement Date, the election
of this option is revoked, the survivor becomes the sole Annuitant, and no
death proceeds are payable by virtue of the death of the other Annuitant.
OPTION 4 - PAYMENTS FOR DESIGNATED PERIOD - Annuity payments are payable
monthly to an Annuitant or other properly-designated payee, or at his or her
death, the Beneficiary, for a selected number of years ranging from five to
40. If this option is selected on a variable basis, the designated period may
not exceed the life expectancy of such Annuitant or other properly-designated
payee.
OPTION 5 - PAYMENTS OF A SPECIFIC DOLLAR AMOUNT - The amount due is paid in
equal monthly installments of a designated dollar amount (not less than $125
nor more than $200 per annum per $1,000 of the original amount due) until the
remaining balance is less than the amount of one installment. If the person
receiving these payments dies, the remaining payments continue to be made to
the Beneficiary. Payments under this option are available on a fixed basis
only. To determine the remaining balance at the end of any month, such balance
at the end of the previous month is decreased by the amount of any installment
paid during the month and the result will be accumulated at an interest rate
not less than 3.5% compounded annually. If the remaining balance at any time
is less than the amount of one installment, such balance will be paid and will
be the final payment under the option.
Under the fourth option there is no mortality guarantee by us, even
though Variable Annuity Payments will be reduced as a result of a charge to
Separate Account D which is partially for mortality risks. See "Charge
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to Separate Account D."
A payee receiving Variable (but not Fixed) Annuity Payments under the
fourth option can elect at any time to commute (terminate) such option and
receive the current value of the annuity, which would be based on the values
next determined after the Written request for payment is received by us. The
current value of the annuity under the fourth option is the value of all
remaining annuity payments, assumed to be level, discounted to present value
at an annual rate of 3.5%. Other than by election of such a lump-sum payment
under the fourth option, an Annuity Payment Option may not be terminated once
annuity payments have commenced.
Under federal tax regulations, the election of the fourth or fifth
options may be treated in the same manner as a surrender of the total account.
For tax consequences of such treatment, see "Federal Income Tax Matters."
Also, in such a case, tax-deferred treatment of subsequent earnings may not be
available.
ALTERNATIVE AMOUNT UNDER FIXED LIFE ANNUITY OPTIONS - Each Contract
provides that when Fixed Annuity Payments are to be made under one of the
first three Annuity Payment Options described above, the Owner (or if the
Owner has not elected a payment option, the Beneficiary) may elect monthly
payments to the Annuitant or other properly-designated payee equal to the
monthly payment available under similar circumstances based on single payment
immediate fixed annuity rates then in use by us. The purpose of this provision
is to assure the Annuitant that, at retirement, if the fixed annuity purchase
rate then offered by us for new single payment immediate annuity contracts is
more favorable than the annuity rates guaranteed by the Contract, the
Annuitant or other properly-designated payee will be given the benefit of the
new annuity rates.
In lieu of monthly payments, payments may be elected on a quarterly,
semi-annual or annual basis, in which case the amount of each annuity payment
will be determined on a basis consistent with that described above for monthly
payments.
TRANSFERS
After the Annuity Commencement Date, the Annuitant or other
properly-designated payee may make six transfers every contract year among the
available Divisions of Separate Account D or from the Divisions to a fixed
Annuity Payment Option. No charge will be assessed for such transfer. No
transfers from a fixed to a variable Annuity Payment Option are permitted. If
a transfer would cause the value that is attributable to a Contract in any
Division to fall below $500, we reserve the right to transfer the remaining
balance in that Division in the same proportion as the transfer request.
Transfers will be effected at the end of the Valuation Period in which we
receive the Written transfer request at our Home Office. We reserve the right
to terminate or restrict transfers at any time.
DEATH PROCEEDS
DEATH PROCEEDS PRIOR TO THE ANNUITY COMMENCEMENT DATE
The death proceeds described below are payable to the Beneficiary under
the Contract if, prior to the Annuity Commencement Date, any of the following
events occurs: (a) the Annuitant dies and no Contingent Annuitant has been
named under a Non-Qualified Contract; (b) the Annuitant dies and we also
receive proof of death of any named Contingent Annuitant; or (c) the Owner
(including the first to die in the case of joint Owners) of a Non-Qualified
Contract dies, regardless of whether said deceased Owner was also the
Annuitant (however, if the Beneficiary is the Owner's surviving spouse, or the
Owner's surviving spouse is a joint Owner,
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then the surviving spouse may elect to continue the Contract as described in
the fourth paragraph below).
If the deceased Owner was a joint Owner, then the death proceeds are
payable to the surviving joint Owner. In this case, the surviving joint Owner
will be treated as the Beneficiary, and we will not recognize any other
designation of Beneficiary. However, joint Owners may provide written
instructions that death proceeds are to be paid in a different manner.
The death proceeds, prior to the deceased's 81st birthday and prior to
deduction of any applicable state and local premium taxes, will equal the
greater of (1) or (2), as follows: (1) the sum of all net purchase payments
made (gross purchase payment less any previously-deducted premium taxes and
all prior partial withdrawals), or (2) the Owner's Account Value as of the end
of the Valuation Period in which we receive, at our Home Office, proof of
death and the Written request as to the manner of payment (less any previously
deducted state and local premium taxes).
On or after the deceased's 81st birthday, the death proceeds will be the
Owner's Account Value (less any previously deducted state and local premium
taxes) as of the end of the Valuation Period in which we receive, at our Home
Office, proof of death and the direction as to the manner of payment. We will
pay the death proceeds to the Beneficiary as of the date the proceeds become
payable. Such date is the end of the Valuation Period in which we receive
proof of the Owner's or Annuitant's death and direction from the Beneficiary
as to the manner of payment.
If the Owner has not already done so, the Beneficiary may, within 60
days after the date the death proceeds become payable, elect to receive the
death proceeds as a lump sum or in the form of one of the Annuity Payment
Options provided in the Contract. See "Annuity Payment Options." If we receive
no request as to the manner of payment, we will make a lump-sum payment, based
on values determined at that time.
If the Owner under a Non-Qualified Contract dies prior to the Annuity
Commencement Date, the Code requires that all amounts payable under the
Contract be distributed (a) within five years of the date of death or (b) as
annuity payments beginning within one year of the date of death and continuing
over a period not extending beyond the life expectancy of the Beneficiary. If
the Beneficiary is the Owner's surviving spouse, the spouse may elect to
continue the Contract as the new Owner and, if the original Owner was the
Annuitant, as the new Annuitant. This election is also available to the
surviving spouse who is a joint Owner, though not the Beneficiary. In this
case, the surviving spouse will be treated as the Beneficiary, and any other
designation of Beneficiary will not be recognized by the Company. If the Owner
is not a natural person, these requirements apply upon the death of the
primary Annuitant within the meaning of the Code. Failure to satisfy these
Code distribution requirements may result in serious adverse tax consequences.
Under a parallel section of the Code, similar requirements apply to retirement
plans in connection with which Qualified Contracts are issued.
DEATH PROCEEDS AFTER THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies following the Annuity Commencement Date, the only
amounts payable to the Beneficiary or other properly-designated payee are any
continuing payments provided for under the Annuity Payment Option selected.
See "Annuity Payment Options." Also, any remaining amounts payable under the
terms of the Annuity Payment Option must be distributed at least as rapidly as
under the method of distribution then in effect. If the payee is not a natural
person, this requirement applies upon the death of the primary Annuitant
within the meaning of the Code. Under a parallel section of the Code, similar
requirements apply to the retirement plans in connection with which Qualified
Contracts are issued. In such a case, the payee will have all the remaining
rights and powers under a Contract and be subject to all the terms and
conditions thereof. Also, if the Annuitant dies following the Annuity
Commencement Date, no previously named Contingent
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Annuitant can become the Annuitant.
PROOF OF DEATH
We accept the following as proof of any person's death: a copy of a
certified death certificate; a copy of a certified decree of a court of
competent jurisdiction as to the finding of death; a written statement by a
medical doctor who attended the deceased at the time of death; or any other
proof satisfactory to us.
Once we have paid the death proceeds, the Contract terminates and we
have no further obligations thereunder.
CHARGES UNDER THE CONTRACTS
PREMIUM TAXES
When applicable, we will deduct an amount to cover any state or local
premium taxes. We may deduct such amount either at the time the tax is imposed
or later. Such deduction may be made, in accordance with applicable state or
local law:
(1) from purchase payment(s) when received; or
(2) from the Owner's Account Value at the time annuity payments begin; or
(3) from the amount of any partial withdrawal; or
(4) from proceeds payable upon termination of the Contract for any other
reason, including death of the Annuitant or Owner, or surrender of the
Contract.
If premium tax is paid, AGL may reimburse itself for such tax when
deduction is being made under items 2, 3, or 4 above calculated by multiplying
the sum of Purchase Payments being withdrawn by the applicable premium tax
percentage.
Applicable premium tax rates depend upon the Owner's then-current place
of residence. Applicable rates currently range from 0% to 3.5% and are subject
to change by legislation, administrative interpretations or judicial acts. We
will not make a profit on this charge.
TRANSFER CHARGES
The charges to defray the expense of effecting transfers are described
under "Transfer, Automatic Rebalancing, Surrender and Partial Withdrawal of
Owner Account Value - Transfers" and "Annuity Period and Annuity Payment
Options - Transfers." These charges are designed not to yield a profit to us.
CHARGE TO SEPARATE ACCOUNT D
To compensate us for assuming mortality and expense risks, and
administrative expenses incurred, under the Contracts, Separate Account D will
incur a daily charge at an annualized rate of 0.66% (which we may change, but
which will never exceed 0.66%) of the average daily net asset value of
Separate Account D attributable to the Contracts. Of this amount, 0.04% is for
administrative expenses and 0.62% is for the assumption of mortality and
expense risks. We do not expect to earn a profit on that portion of the charge
which is for Administrative Expenses (the "Administrative Expense Charge"),
but we do expect to derive a profit from the portion which is for the
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assumption of mortality and expense risks. There is not necessarily a
relationship between the amount of administrative charges imposed on a given
Contract and the amount of expenses actually attributable to that Contract.
In assuming the mortality risk, we are subject to the risk that our
actuarial estimate of mortality rates may prove erroneous and that Annuitants
will live longer than expected, or that more Owners or Annuitants than
expected will die at a time when the death benefit guaranteed by us is higher
than the net surrender value of their interests in the Contracts. In assuming
the expense risk, we are subject to the risk that the revenues from the
Administrative Expense Charge under the Contracts (which charge is guaranteed
not to be increased) will not cover our expense of administering the
Contracts.
MISCELLANEOUS
Charges and expenses are paid out of the assets of each Series, as
described in the prospectus relating to that Series. We reserve the right to
impose charges or establish reserves for any federal, state or local taxes
incurred or that may be incurred by us, and that may be deemed attributable to
the Contracts.
Each of the investment advisers or managers listed in "The Series"of
this Prospectus reimburses us, on a monthly basis, for certain administrative,
Contract and Contract owner support expenses, up to an annual rate of 0.25% of
the average daily net asset value of shares of the Series purchased by the
Divisions at the instruction of Owners. These reimbursements are by the
investment advisers or managers, and will not be paid by the Series, the
Divisions or the Owners.
REDUCTION IN ADMINISTRATIVE EXPENSE CHARGE
We may reduce the Administrative Expense Charge imposed under certain
Qualified Contracts in connection with employer-sponsored plans. Any such
reductions will reflect differences in costs or services (due to such factors
as reduced sales expenses or administrative efficiencies relating to serving a
large number of employees of a single employer and functions assumed by the
employer that we otherwise would have to perform) and will not be unfairly
discriminatory as to any person.
OTHER ASPECTS OF THE CONTRACTS
Only an officer of AGL can agree to change or waive the provisions of
any Contract. The Contracts are non-participating and are not entitled to
share in any dividends, profits or surplus of AGL.
OWNERS, ANNUITANTS, AND BENEFICIARIES; ASSIGNMENTS
The Owner of a Contract will be the same as the Annuitant, unless the
purchaser designates a different Owner when applying to purchase a Contract.
In the case of joint ownership, both Owners must join in the exercise of any
rights or privileges under the Contract. The Annuitant and any Contingent
Annuitant are designated in the application for a Contract and may not
thereafter be changed.
The Beneficiary and any Contingent Beneficiary are designated when
applying to purchase a Contract. A Beneficiary or Contingent Beneficiary may
be changed by the Owner prior to the Annuity Commencement Date, while the
Annuitant is still alive, and by the payee following the Annuity Commencement
Date. Any designation of a new Beneficiary or Contingent Beneficiary is
effective as of the date it is signed but will not
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affect any payments we make or action we take before receiving the Written
request. We also need the Written consent of any irrevocably-named Beneficiary
or Contingent Beneficiary before making a change. Under certain retirement
programs, spousal consent may be required to name a Beneficiary other than the
spouse or to change a Beneficiary to a person other than the spouse. We are
not responsible for the validity of any designation of a Beneficiary or
Contingent Beneficiary.
In the case of joint ownership, the surviving joint Owner will be
treated as the Beneficiary upon the death of a joint Owner and we will not
recognize any other designation of Beneficiary. However, joint Owners may
provide written instructions that death proceeds are to be paid in a different
manner.
Rights under a Qualified Contract may be assigned only in certain narrow
circumstances referred to therein. Owners and other payees may assign their
rights under Non-Qualified Contracts, including their ownership rights. We
take no responsibility for the validity of any assignment. A change in
ownership rights must be made in Writing and a copy must be sent to our Home
Office. The change will be effective on the date it was made, although we are
not bound by a change until the date we record it. The rights under a Contract
are subject to any assignment of record at our Home Office. An assignment or
pledge of a Contract may have adverse tax consequences. See "Federal Income
Tax Matters."
REPORTS
We will mail to Owners (or persons receiving payments following the
Annuity Commencement Date), at their last known address of record, any reports
and communications required by applicable law or regulation. You should
therefore give us prompt written notice of any address change.
RIGHTS RESERVED BY US
Upon notice to the Owner, a Contract may be modified by us, to the
extent necessary in order to (1) operate Separate Account D in any form
permitted under the 1940 Act or in any other form permitted by law; (2)
transfer any assets in any Division to another Division, or to one or more
separate accounts, or the Fixed Account; (3) add, combine or remove Divisions
in Separate Account D, or combine the Separate Account with another separate
account; (4) add, restrict or remove Guarantee Periods of the Fixed Account;
(5) make any new Division available to you on a basis to be determined by us;
(6) substitute, for the shares held in any Division, the shares of another
Series or the shares of another investment company or any other investment
permitted by law; (7) make any changes required by the Code or by any other
applicable law, regulation or interpretation in order to continue treatment of
the Contract as an annuity; (8) commence deducting premium taxes or adjust the
amount of premium taxes deducted in accordance with applicable state law; or
(9) make any changes required to comply with the rules of any Series. When
required by law, we will obtain your approval of changes and the approval of
any appropriate regulatory authority.
PAYMENT AND DEFERMENT
Amounts surrendered or withdrawn from a Contract will normally be paid
within seven calendar days after the end of the Valuation Period in which we
receive the Written surrender or withdrawal request in good order. In the case
of payment of death proceeds, if we do not receive a Written request as to the
manner of payment within 60 days after the death proceeds become payable, any
death benefit proceeds will be paid as a lump sum, normally within seven
calendar days after the end of the Valuation Period that contains the last day
of said 60 day period. We reserve the right, however, to defer payment or
transfers of amounts out of the Fixed Account for up to six months. Also, we
reserve the right to defer payment of that portion of your Account
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Value that is attributable to a purchase payment made by check for a
reasonable period of time (not to exceed 15 days) to allow the check to clear
the banking system.
Finally, we reserve the right to defer payment of any surrender and
annuity payment amounts or death benefit amounts of any portion of the
Variable Account Value if (a) the New York Stock Exchange is closed other than
customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted; (b) an emergency exists, as a result of which disposal
of securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Variable Account Value; or (c) the
Securities and Exchange Commission by order permits the delay for the
protection of Owners. Transfers and allocations of Account Value among the
Divisions and the Fixed Account may also be postponed under these
circumstances.
FEDERAL INCOME TAX MATTERS
GENERAL
It is not possible to comment on all of the federal income tax
consequences associated with the Contracts. Federal income tax law is complex
and its application to a particular person may vary according to facts
peculiar to such person. Consequently, this discussion is not intended as tax
advice, and you should consult with a competent tax adviser before purchasing
a Contract.
The discussion is based on the law, regulations and interpretations
existing on the date of this Prospectus. Congress has in the past and may
again in the future enact legislation changing the tax treatment of annuities
in both the Qualified and the Non-Qualified markets. The Treasury Department
may issue new or amended regulations or other interpretations of existing tax
law. Judicial interpretations may also affect the tax treatment of annuities.
It is possible that such changes could have retroactive effect. We suggest
that you consult your legal or tax adviser on these issues.
The discussion does not address state or local tax, estate and gift tax,
or social security tax consequences associated with the Contracts.
The Contract has a $50,000 per Contract minimum initial purchase payment
(see "Contract Issuance and Purchase Payments.") Therefore, the Contract will
be of interest to Individual Retirement Annuity purchasers only in connection
with rollovers. Similarly, the Contract will be of interest to purchasers of
Simplified Employee Pension Plans, Simple Retirement Accounts, other Qualified
plans, and private employer deferred compensation plans as an alternative
investment for existing assets that would satisfy the $50,000 per Contract
minimum.
LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
Certain rights you would otherwise have under a Contract may be limited
by the terms of any applicable employee benefit plan. These limitations may
restrict such things as total and partial surrenders, the amount or timing of
purchase payments that may be made, when annuity payments must start and the
type of annuity options that may be selected. Accordingly, you should
familiarize yourself with these and all other aspects of any retirement plan
in connection with which a Contract is used. We are not responsible for
monitoring or assuring compliance with the provisions of any retirement plan.
NON-QUALIFIED CONTRACTS
PURCHASE PAYMENTS. Purchasers of a Contract that does not qualify for
special tax treatment and is therefore "Non-Qualified" may not deduct from
their gross income the amount of purchase payments made.
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TAX DEFERRAL PRIOR TO ANNUITY COMMENCEMENT DATE. Owners who are natural
persons are not taxed currently on increases in their Account Value resulting
from interest earned in the Fixed Account or, if certain diversification
requirements are met, the investment experience of Separate Account D. This
treatment applies to Separate Account D only if it invests in Series that are
"adequately diversified" in accordance with Treasury Department regulations.
Although we do not control the Series, the investment advisers to the Series
have undertaken to use their best efforts to operate the Series in compliance
with these diversification requirements. A Contract investing in a Series that
failed to meet the diversification requirements would subject Owners to
current taxation of income in the Contract that has not previously been taxed.
Income means the excess of the Account Value over the Owner's investment in
the Contract (discussed below).
Current regulations do not provide guidance as to any circumstances in
which control over allocation of values among different investment
alternatives may cause Owners or persons receiving annuity payments to be
treated as the owners of Separate Account D assets for tax purposes. We
reserve the right to amend the Contracts in any way necessary to avoid any
such result. The Treasury Department has stated that it may establish
standards in this regard through regulations or rulings. Such standards may
apply only prospectively, although retroactive application is possible if such
standards are considered not to embody a new position.
Owners that are not natural persons -- that is, Owners such as
corporations -- are taxed currently on annual increases in their Account Value
unless an exception applies. Exceptions exist for, among other things, Owners
that are not natural persons but that hold the Contract as an agent for a
natural person.
TAXATION OF ANNUITY PAYMENTS. Each annuity payment received after the
Annuity Commencement Date is excludible from gross income in part. In the case
of Fixed Annuity Payments, the excludible portion is determined by multiplying
the amount paid by the ratio of the investment in the Contract (discussed
below) to the expected return under the fixed Annuity Payment Option. In the
case of Variable Annuity Payments, the excludible portion is determined by
multiplying the amount paid by the ratio of the investment in the Contract to
the number of expected payments. In both cases, the remaining portion of each
annuity payment, and all payments made after the investment in the Contract
has been reduced to zero, are included in the payee's income. Should annuity
payments cease on account of the death of the Annuitant before the investment
in the Contract has been fully recovered, the payee is allowed a deduction for
the unrecovered amount. If the payee is the Annuitant, the deduction is taken
on the final tax return. If the payee is a Beneficiary, that Beneficiary may
recover the balance of the total investment as payments are made or on the
Beneficiary's final tax return. An Owner's "investment in the Contract" is the
amount equal to the portions of purchase payments made by or on behalf of the
Owner that have not been excluded or deducted from the individual's gross
income, less amounts previouly received under the Contract that were not
included in income.
TAXATION OF PARTIAL WITHDRAWALS AND TOTAL SURRENDERS. Partial
withdrawals from a Contract are includible in income to the extent that the
Owner's Account Value exceeds the investment in the Contract. In the event a
Contract is surrendered in its entirety, any amount received in excess of the
investment in the Contract is includible in income, and any remaining amount
received is excludible from income. All annuity contracts issued by us to the
same Owner during any calendar year are to be aggregated for purposes of
determining the amount of any distribution that is includible in gross income.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A penalty tax is imposed on
distributions under a Contract equal to 10% of the amount includible in
income. The penalty tax will not apply, however, to (1) distributions made on
or after the recipient attains age 59 1/2, (2) distributions on account of the
recipient's becoming disabled, (3) distributions that are made after the death
of the Owner prior to the Annuity Commencement Date or the payee after the
Annuity Commencement Date (or if such person is not a natural person, that are
made after the
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death of the primary Annuitant, as defined in the Code), and (4) distributions
that are part of a series of substantially equal periodic payments made over
the life (or life expectancy) of the Annuitant or the joint life (or joint
life expectancies) of the Annuitant and the Beneficiary. Premature
distributions may result, for example, from an early Annuity Commencement
Date, an early surrender, partial withdrawal from or assignment of a Contract,
or the early death of an Annuitant, unless clause (3) above applies.
PAYMENT OF DEATH PROCEEDS. Special rules apply to the distribution of
any death proceeds payable under the Contract. See "Death Proceeds."
ASSIGNMENTS AND LOANS. An assignment, loan, or pledge with respect to a
Non-Qualified Contract is taxed in the same manner as a partial withdrawal, as
described above. Repayment of a loan or release of an assignment or pledge is
treated as a new purchase payment.
INDIVIDUAL RETIREMENT ANNUITIES ("IRAS")
PURCHASE PAYMENTS. Individuals who are not active participants in a tax
qualified retirement plan may, in any year, deduct from their taxable income
purchase payments for an IRA equal to the lesser of $2,000 or 100% of the
individual's earned income. In the case of married individuals filing a joint
return, the deduction will, in general, be the lesser of $4,000 or 100% of the
combined earned income of both spouses, reduced by any deduction for an IRA
purchase payment allowed to the spouse. Single persons who participate in a
tax-qualified retirement plan and who have adjusted gross income not in excess
of $30,000 may fully deduct their IRA purchase payments. Those who have
adjusted gross income in excess of $40,000 will not be able to deduct purchase
payments, and for those with adjusted gross income between $30,000 and $40,000
the deduction is phased out based on the amount of income. Beginning in 1999,
the income range over which the otherwise deductible portion of an IRA
purchase payment will be phased out for single persons will increase, as
follows: 1999--$31,000 to $41,000; 2000--$32,000 to $42,000; 2001--$33,000 to
$43,000; 2002--$34,000 to $44,000; 2003--$40,000 to $50,000; 2004--$45,000 to
$55,000; and 2005 and thereafter--$50,000 to $60,000.
Similarly, the otherwise deductible portion of an IRA purchase payment will be
phased out, in the case of married individuals filing joint tax returns, with
adjusted gross income between $50,000 and $60,000, and in the case of married
individuals filing separately, with adjusted gross income between $0 and
$10,000. Beginning in 1999, the income range over which the otherwise
deductible portion of an IRA purchase payment will be phased out for married
individuals filing joint tax returns will increase as follows: 1999--$51,000
to $61,000; 2000--$52,000 to $62,000; 2001--$53,000 to $63,000; 2002-- $54,000
to $64,000; 2003--$60,000 to $70,000; 2004--$65,000 to $75,000; 2005--$70,000
to $80,000; 2006--$75,000 to $85,000; and 2007 and thereafter-- $80,000 to
$100,000.
A married individual filing a joint tax return, who is not an active
participant in a tax qualified retirement plan, but whose spouse is an active
participant in such a plan, may, in any year, deduct from his or her taxable
income purchase payments for an IRA equal to the lesser of $2,000 or 100% of
the individual's earned income. For such an individual, the income range over
which the otherwise deductible portion of an IRA purchase payment will be
phased out is $150,000 to $160,000.
TAX FREE ROLLOVERS. Subject to the $50,000 per Contract minimum initial
purchase payment (see "Contract Issuance and Purchase Payments"), amounts may
be transferred in a tax-free rollover from a tax-qualified plan to an IRA (and
from one IRA to another IRA) if certain conditions are met. All taxable
distributions ("eligible rollover distributions") from tax qualified plans are
eligible to be rolled over with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more,
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and (3) required minimum distributions under section 401(a)(9) of the Code.
Rollovers may be accomplished in two ways. First, an eligible rollover
distribution may be paid directly to an IRA (a "direct rollover"). Second, the
distribution may be paid directly to the Annuitant and then, within 60 days of
receipt, the amount may be rolled over to an IRA. However, any amount that was
not distributed as a direct rollover will be subject to 20% income tax
withholding
DISTRIBUTIONS FROM AN IRA. Amounts received under an IRA as annuity
payments, upon partial withdrawal or total surrender, or on the death of the
Annuitant, are included in the Annuitant's or other recipient's income. If
nondeductible purchase payments have been made, a pro rata portion of such
distributions may not be included in income. A 10% penalty tax is imposed on
the amount includible in gross income from distributions that occur before the
Annuitant attains age 59 1/2 and that are not made on account of death or
disability, with certain exceptions, including distributions for qualified
first-time home purchases for the individual, a spouse, children,
grandchildren or ancestor, subject to a $10,000 lifetime maximum, and
distributions for higher education expenses for the individual, a spouse,
children, or grandchildren. These exceptions include distributions that are
part of a series of substantially equal periodic payments made over the life
(or life expectancy) of the Annuitant or the joint lives (or joint life
expectancies) of the Annuitant and the Beneficiary. Distributions of minimum
amounts specified by the Code must commence by April 1 of the calendar year
following the calendar year in which the Annuitant attains age 70 1/2.
Additional distribution rules apply after the death of the Annuitant. These
rules are similar to those governing distributions on the death of an Owner
(or other payee during the Annuity Period) under a Non-Qualified Contract. See
"Death Proceeds." Failure to comply with the minimum distribution rules will
result in the imposition of a penalty tax of 50% of the amount by which the
minimum distribution required exceeds the actual distribution.
ROTH IRAS
Beginning in 1998, individuals may purchase a new type of non-deductible
IRA, known as a Roth IRA. Purchase payments for a Roth IRA are limited to
$2,000 per year. This limitation is reduced for adjusted gross income
beginning at $95,000 and is eliminated at $110,000 in the case of single
taxpayers, between $150,000 and $160,000 in the case of married taxpayers
filing joint returns, and between $0 and $15,000 in the case of married
taxpayers filing separately. An overall $2,000 annual limitation continues to
apply to all of a taxpayer's IRA contributions, including Roth IRAs and
non-Roth IRAs.
An individual may make a rollover contribution from a non-Roth IRA to a
Roth IRA, unless the individual has adjusted gross income over $100,000 or the
individual is a married taxpayer filing a separate return. The individual must
pay tax on any portion of the IRA being rolled over that represents income or
a previously deductible IRA contribution. For rollovers in 1998, the
individual may pay that tax ratably in 1998 and over the succeeding three
years. There are no similar limitations on rollovers from a Roth IRA to
another Roth IRA.
Qualified distributions from Roth IRAs are entirely tax free. A
qualified distribution requires that the individual has held the Roth IRA for
at least five years and, in addition, that the distribution is made either
after the individual reaches age 59 1/2 on the individual's death or
disability, or as a qualified first-time home purchase, subject to a $10,000
lifetime maximum, for the individual, a spouse, child, grandchild, or
ancestor.
SIMPLIFIED EMPLOYEE PENSION PLANS
Employees and employers may establish an IRA plan known as a simplified
employee pension plan ("SEP"), if certain requirements are met. An employee
may make contributions to a SEP in accordance with
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the rules applicable to IRAs discussed above. Employer contributions to an
employee's SEP are deductible by the employer and are not currently includible
in the taxable income of the employee. However, total employer contributions
are limited to 15% of an employee's compensation or $30,000, whichever is
less.
SIMPLE RETIREMENT ACCOUNTS
Employees and employers may establish an IRA plan known as a simple
retirement account ("SRA"), if certain requirements are met. Under an SRA, the
employer contributes elective employee compensation deferrals up to a maximum
of $6,000 a year. The employer must, in general, make a fully vested matching
contribution for employee deferrals up to 3% of compensation.
OTHER QUALIFIED PLANS
PURCHASE PAYMENTS. Purchase payments made by an employer under a
pension, profit-sharing, or annuity plan qualified under section 401 or 403(a)
of the Code, not in excess of certain limits, are deductible by the employer.
Such purchase payments are also excluded from the current income of the
employee.
DISTRIBUTIONS PRIOR TO THE ANNUITY COMMENCEMENT DATE. To the extent that
purchase payments are includible in an employee's taxable income, they (less
any amounts previously received that were not includible in the employee's
taxable income) represent his or her "investment in the Contract." Amounts
received prior to the Annuity Commencement Date under a Contract in connection
with a section 401 or 403(a) plan are generally allocated on a pro-rata basis
between the employee's investment in the Contract and other amounts. A
lump-sum distribution will not be includible in income in the year of
distribution if the employee transfers, within 60 days of receipt, all amounts
received, less the employee's investment in the Contract), to another
tax-qualified plan or to an individual retirement account or an IRA in
accordance with the rollover rules under the Code. However, any amount that is
not distributed as a direct rollover will be subject to 20% income tax
withholding. See "Tax Free Rollovers." Special tax treatment may be available
in the case of certain lump-sum distributions that are not rolled over to
another plan or IRA.
A 10% penalty tax is imposed on the amount includible in gross income
from distributions that occur before the employee's attaining age 59 1/2 and
that are not made on account of death or disability, with certain exceptions.
These exceptions include distributions that are (1) part of a series of
substantially equal periodic payments beginning after the employee separates
from service and made over the life (or life expectancy) of the employee or
the joint lives (or joint life expectancies) of the employee and the
Beneficiary, (2) made after the employee's separation from service on account
of early retirement after attaining age 55, or (3) made to an alternate payee
pursuant to a qualified domestic relations order.
ANNUITY PAYMENTS. A portion of annuity payments received under Contracts
in connection with section 401 and 403(a) plans after the Annuity Commencement
Date may be excludible from the employee's income, in the manner discussed
above, in connection with Variable Annuity Payments, under "Non-Qualified
Contracts - Taxation of Annuity Payments," except that the number of expected
payments is determined under a provision in the Code. Distributions of minimum
amounts specified by the Code generally must commence by April 1 of the
calendar year following the calendar year in which the employee attains age 70
1/2 or retires, if later. Failure to comply with the minimum distribution
rules will result in the imposition of a penalty tax of 50% of the amount by
which the minimum distribution required exceeds the actual distribution.
SELF-EMPLOYED INDIVIDUALS. Various special rules apply to tax-qualified
plans established by self-employed individuals.
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PRIVATE EMPLOYER UNFUNDED DEFERRED COMPENSATION PLANS
PURCHASE PAYMENTS. Private taxable employers may establish unfunded,
Non-Qualified deferred compensation plans for a select group of management or
highly compensated employees and/or for independent contractors.
These types of programs allow individuals to defer receipt of up to 100%
of compensation that would otherwise be includible in income and therefore to
defer the payment of federal income taxes on such amounts, as well as earnings
thereon. Purchase payments made by the employer, however, are not immediately
deductible by the employer, and the employer is currently taxed on any
increase in Account Value.
Deferred compensation plans represent a contractual promise on the part
of the employer to pay current compensation at some future time. The Contract
is owned by the employer and is subject to the claims of the employer's
creditors. The individual has no right or interest in the Contract and is
entitled only to payment from the employer's general assets in accordance with
plan provisions.
TAXATION OF DISTRIBUTIONS. Amounts received by an individual from a
private employer deferred compensation plan are includible in gross income for
the taxable year in which such amounts are paid or otherwise made available.
FEDERAL INCOME TAX WITHHOLDING AND REPORTING
Amounts distributed from a Contract, to the extent includible in taxable
income, are subject to federal income tax withholding. The payee may, however,
elect to have no income tax withheld by submitting a withholding exemption
certificate to us.
In some cases, if you own more than one Qualified annuity contract, such
contracts may be aggregated for purposes of determining whether the federal
tax law requirement for minimum distributions after age 70 1/2, or retirement
in appropriate circumstances, has been satisfied. If, under this aggregation
procedure, you are relying on distributions pursuant to another annuity
contract to satisfy the minimum distribution requirement under a Qualified
Contract issued by us, you must sign a waiver releasing us from any liability
to you for not calculating and reporting the amount of taxes and penalties
payable for failure to make required minimum distributions under the Contract.
TAXES PAYABLE BY AGL AND SEPARATE ACCOUNT D
AGL is taxed as a life insurance company under the Code. The operations
of Separate Account D are part of the total operations of AGL and are not
taxed separately. Under existing federal income tax laws, AGL is not taxed on
investment income derived by Separate Account D (including realized and
unrealized capital gains) with respect to the Contracts. AGL reserves the
right to allocate to the Contracts any federal, state or other tax liability
that may result in the future from maintenance of Separate Account D or the
Contracts.
Certain Series may elect to pass through to AGL any taxes withheld by
foreign taxing jurisdictions on foreign source income. Such an election will
result in additional taxable income and income tax to AGL. The amount of
additional income tax, however, may be more than offset by credits for the
foreign taxes withheld which are also passed through. These credits may
provide a benefit to AGL.
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DISTRIBUTION ARRANGEMENTS
The Contracts will be sold by individuals who, in addition to being
licensed by state insurance authorities to sell the Contracts of AGL, are also
registered representatives of American General Securities Incorporated
("AGSI"), the principal underwriter of the Contracts or other broker-dealer
firms or representatives of other firms that are exempt from broker-dealer
regulation. AGSI and any such other broker-dealer firms are registered with
the Securities and Exchange Commission under the Securities Exchange Act of
1934 as broker-dealers and are members of the National Association of
Securities Dealers, Inc. AGSI is a wholly-owned subsidiary of AGL. AGSI's
principal business address is the same as that of our Home Office. The
interests under the Contracts are offered on a continuous basis. AGSI and
Independent Advantage Financial ("IAF") have entered into certain revenue and
cost-sharing arrangements in connection with the marketing of the Contracts.
AGL compensates AGSI by paying a maximum 0.25% distribution fee based on
the amount of purchase payments received. In addition, depending on the
schedule selected, AGL may pay continuing "trail" commissions of up to 0.25%
of Contract Account Value. These distribution expenses do not result in any
additional charges under the Contracts that are not described under "Charges
under the Contracts."
LEGAL MATTERS
The legality of the Contracts described in this Prospectus has been
passed upon by Steven A. Glover, Esquire, Senior Counsel of American General
Independent Producer Division. Freedman, Levy, Kroll & Simonds, Washington,
D.C., has advised AGL on certain federal securities law matters.
OTHER INFORMATION ON FILE
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933 with respect to the Contracts
discussed in this Prospectus. Not all of the information set forth in the
Registration Statement and exhibits thereto has been included in this
Prospectus. Statements contained in this Prospectus concerning the Contracts
and other legal instruments are intended to be summaries. For a complete
statement of the terms of these documents, reference should be made to the
instruments filed with the Securities and Exchange Commission.
36
<PAGE>
A Statement is available from us on request. Its contents are as
follows:
<TABLE>
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<S> <C>
General Information....................................................... 2
Regulation and Reserves .................................................. 2
Independent Auditors...................................................... 2
Principal Underwriter..................................................... 3
Annuity Payments.......................................................... 3
A. Gender of Annuitant................................................. 3
B. Misstatement of Age or Sex and Other Errors ........................ 3
Change of Investment Adviser or Investment Policy ........................ 4
Performance Data for the Divisions ....................................... 4
Effect of Tax-Deferred Accumulation....................................... 7
Financial Statements...................................................... 8
Index to Financial Statements ............................................ 9
</TABLE>
37
<PAGE>
(THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS.)
SELECT RESERVE VARIABLE ANNUITY
DISCLOSURES AND FORMS SECTION
<TABLE>
INDEX
<S> <C>
Individual Retirement Annuity Disclosure Statement
and Financial Disclosure............................................ page 1
1035 Exchange Instructions............................................ page 9
Qualified and Non-Qualified Funds Transfer Instructions............... page 10
Absolute Assignment Form.............................................. page 11
Qualified Funds Transfer Form......................................... page 13
Non-Qualified Funds Transfer Form..................................... page 14
Change Request Form................................................... page 15
Systematic Withdrawals Request Form................................... page 17
Automatic Additional Purchase Payment Form............................ page 19
Change of Beneficiary Form............................................ page 21
Statement of Additional Information Request Form...................... page 23
</TABLE>
<PAGE>
(THIS DOCUMENT IS NOT PART OF A PROSPECTUS)
INDIVIDUAL RETIREMENT ANNUITY DISCLOSURE STATEMENT
INTRODUCTION
THIS DISCLOSURE STATEMENT IS DESIGNED FOR OWNERS OF IRAS ISSUED BY AMERICAN
GENERAL LIFE INSURANCE COMPANY AFTER DECEMBER 31, 1997.
This Disclosure Statement is not part of your annuity contract but contains
general and standardized information which must be furnished to each person
who is issued an Individual Retirement Annuity. You must refer to your annuity
contract to determine your specific rights and obligations thereunder.
REVOCATION
If you are purchasing a new or rollover IRA, then if for any reason you, as a
recipient of this Disclosure Statement, decide within 20 days from the date
your annuity contract is delivered that you do not desire to retain your IRA,
written notification to the Company must be mailed, together with your annuity
contract, within that period. If such notice is mailed within 20 days, current
annuity contract value or contributions if required, without adjustments for
any applicable sales commissions or administrative expenses, will be refunded.
MAIL NOTIFICATION OF REVOCATION AND YOUR ANNUITY CONTRACT TO:
American General Life Insurance Company
Annuity Administration Department
P. O. Box 1401
Houston, Texas 77251-1401
(Phone No. (800) 247-6584).
ELIGIBILITY
Under Internal Revenue Code ("Code") Section 219, if you are not an active
participant (see A. below), you may make a contribution of up to the lesser of
$2,000 or 100% of compensation and take a deduction for the entire amount
contributed. If you are a married individual filing a joint return, and your
compensation is less than your spouse's, the total deduction will, in general,
be the lesser of $4,000 or 100% of the combined earned income of both spouses,
reduced by any deduction for an IRA purchase payment allowed to your spouse.
If you are an active participant, but have an adjusted gross income (AGI)
below a certain level (see B. below), you may still make a deductible
contribution. If, however, you or your spouse is an active participant and
your combined AGI is above the specified level, the amount of the deductible
contribution you may make to an IRA will be phased down and eventually
eliminated.
A. ACTIVE PARTICIPANT
You are an "active participant" for a year if you are covered by a retirement
plan. You are covered by a "retirement plan" for a year if your employer or
union has a retirement plan under which money is added to your account or you
are eligible to earn retirement credits. For example, if you are covered under
a profit-sharing plan, certain government plans, a salary reduction
arrangement (such
Page 1
<PAGE>
as a tax sheltered annuity arrangement or a 401(k) plan), a Simplified
Employee Pension program (SEP), any Simple Retirement Account or a plan which
promises you a retirement benefit which is based upon the number of years of
service you have with the employer, you are likely to be an active
participant. Your Form W-2 for the year should indicate your participation
status.
You are an active participant for a year even if you are not yet vested in
your retirement benefit. Also, if you make required contributions or voluntary
employee contributions to a retirement plan, you are an active participant. In
certain plans, you may be an active participant even if you were only with the
employer for part of the year.
You are not considered an active participant if you are covered in a plan only
because of your service as 1) an Armed Forces Reservist for less than 90 days
of active service, or 2) a volunteer firefighter covered for firefighting
service by a government plan. Of course, if you are covered in any other plan,
these exceptions do not apply.
If you are married, (i) filed a separate tax return, and did not live with
your spouse at any time during the year, or (ii) filed a joint return and have
a joint AGI of less than $150,000, your spouse's active participation will not
affect your ability to make deductible contributions. If you are married and
file jointly, your deduction will be phased out between an AGI of $150,000 to
$160,000.
B. ADJUSTED GROSS INCOME (AGI)
If you are an active participant, you must look at your Adjusted Gross Income
for the year (if you and your spouse file a joint tax return, you use your
combined AGI) to determine whether you can make a deductible IRA contribution.
Your tax return will show you how to calculate your AGI for this purpose. If
you are at or below a certain AGI level, called the Threshold Level, you are
treated as if you were not an active participant and can make a deductible
contribution under the same rules as a person who is not an active
participant.
If you are single, the Threshold Level is $30,000. If you are married and file
a joint tax return, the Threshold Level is $50,000. If you are married but
file a separate tax return, the Threshold Level will be $0.
For taxable years beginning in 1999, the Threshold Levels for single
individuals and for married individuals filing jointly will increase as
follows:
<TABLE>
<CAPTION>
Threshold Level
For taxable years beginning in : ---------------
Single Married (filing jointly)
------ -------
<S> <C> <C>
1999 $31,000 $51,000
2000 $32,000 $52,000
2001 $33,000 $53,000
2002 $34,000 $54,000
2003 $40,000 $60,000
2004 $45,000 $65,000
2005 $50,000 $70,000
2006 $50,000 $75,000
2007 and thereafter $50,000 $80,000
</TABLE>
Page 2
<PAGE>
A married individual filing a joint tax return, who is not an active
participant, but whose spouse is, may, in any year, make deductible IRA
contributions equal to the lesser of $2,000 or 100% of the individual's earned
income. The Threshold Level for such individual is $150,000.
If your AGI is less than $10,000 above your Threshold Level, you will still be
able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level
(AGI - Threshold Level) is called your Excess AGI. The Maximum Allowable
Deduction is $2,000. In the case of a married individual filing jointly and
earning less than his or her spouse, the maximum Allowable Deduction is the
lesser of $2,000 or the spouse's income, less any deductible IRA contributions
or contributions to a Roth IRA. You can estimate your Deduction Limit as
follows:
(Your Deduction Limit may be slightly higher if you use this formula rather
than the table provided by the IRS.)
$10,000 - EXCESS AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$10,000
For the taxable year beginning in 2007, the deduction limit for married
individuals filing jointly will be determined as follows:
$10,000 - EXCESS AGI
-------------------- x Maximum Allowable Deduction = Deduction Limit
$20,000
You must round up the result to the next highest $10 level (the next highest
number which ends in zero). For example, if the result is $1,525, you must
round it up to $1,530. If the final result is below $200 but above zero, your
Deduction Limit is $200. Your Deduction Limit cannot, in any event, exceed
100% of your compensation.
EXAMPLE 1: Ms. Smith, a single person, is an active participant and has
an AGI of $31,619. In 1998, she would calculate her deductible IRA
contribution as follows:
Her AGI is $31,619
Her Threshold Level is $30,000
Her Excess AGI is (AGI - Threshold Level) or ($36,619-$30,000) =
$6,619
Her Maximum Allowable Deduction is $2,000
So, her IRA deduction limit is:
$10,000 - $6,619
---------------- x $2,000 = $676 (rounded to $680)
$10,000
EXAMPLE 2: Mr. and Mrs. Young file a joint tax return. Each spouse earns
more than $2,000 and one is an active participant. Their 1999 combined
AGI is $55,255. Neither spouse contributed to a Roth IRA. They may each
contribute to an IRA and calculate their deductible contributions to
each IRA as follows:
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<PAGE>
Their AGI is $55,255
Their Threshold Level is $51,000
Their Excess AGI is (AGI - Threshold Level) or ($55,255 - $51,000)
= $4,255 The Maximum Allowable Deduction for each spouse is $2,000
So, each spouse may compute his or her IRA deduction limit as
follows:
$10,000 - 4,255
---------------- x $2,000 = $1,149 (rounded to $1,150)
$10,000
EXAMPLE 3: If, in Example 2, Mr. Young did not earn any compensation,
each spouse could still contribute to an IRA and calculate their
deductible contribution to each IRA as in Example 2.
EXAMPLE 4: In 1998, Mr. Jones, a married person, files a separate tax
return and is an active participant. He has $1,500 of compensation and
wishes to make a deductible contribution to an IRA.
His AGI is $1,500
His Threshold Level is $0
His Excess AGI is (AGI - Threshold Level) or $1,500-$0) = $1,500
His Maximum Allowable Deduction is $2,000 So, his IRA deduction
limit is:
$10,000 - $1,500
---------------- x $2,000 = $1,700
$10,000
Even though his IRA deduction limit under the formula is $1,700,
Mr. Jones may not deduct an amount in excess of his compensation,
so, his actual deduction is limited to $1,500.
NON-DEDUCTIBLE CONTRIBUTIONS TO IRAS
Even if you are above the Threshold Level and thus may not make a deductible
contribution of up to $2,000 (or up to $4,000 in the case of married
individuals filing a joint return), you may still contribute up to the lesser
of 100% of compensation or $2,000 to an IRA ($4,000 in the case of married
individuals filing a joint return). The amount of your contribution which is
not deductible will be a non-deductible contribution to the IRA. You may also
choose to make a contribution non-deductible even if you could have deducted
part or all of the contribution. Interest or other earnings on your IRA
contribution, whether from deductible or non-deductible contributions, will
not be taxed until taken out of your IRA and distributed to you.
If you make a non-deductible contribution to an IRA, you must report the
amount of the non-deductible contribution to the IRS on Form 8606 as a part of
your tax return for the year.
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<PAGE>
You may make a $2,000 contribution (or up to $4,000 in the case of married
individuals filing a joint return) at any time during the year, if your
compensation for the year will be at least $2,000 (or up to $4,000 in the case
of married individuals filing a joint return), without having to know how much
will be deductible. When you fill out your return, you may then figure out how
much is deductible.
You may withdraw an IRA contribution made for a year any time before April 15
of the following year. If you do so, you must also withdraw the earnings
attributable to that portion and report the earnings as income for the year
for which the contribution was made. If some portion of your contribution is
not deductible, you may decide either to withdraw the non-deductible amount,
or to leave it in the IRA and designate that portion as a non-deductible
contribution on your tax return.
IRA DISTRIBUTIONS
Generally, IRA distributions which are not rolled over (see "Rollover IRA
Rules," below) are included in your gross income in the year they are
received. Non-deductible IRA contributions, however, are made using income
which has already been taxed (that is, they are not deductible contributions).
Thus, the portion of the IRA distributions consisting of non-deductible
contributions will not be taxed again when received by you. If you make any
non-deductible IRA contributions, each distribution from your IRA(s) will
consist of a non-taxable portion (return of deductible contributions, if any,
and account earnings).
Thus, you may not take a distribution which is entirely tax-free. The
following formula is used to determine the non-taxable portion of your
distributions for a taxable year:
Remaining
Non-deductible Contributions
----------------------------
Year-End Total IRA Balances x Total Distributions = Nontaxable Distributions
(for the year) (for the year)
To figure the year-end total IRA balance, you treat all of your IRAs as a
single IRA. This includes all regular IRAs (whether accounts or annuities), as
well as Simplified Employee Pension (SEP) IRAs, and Rollover IRAs. You also
add back the distributions taken during the year.
EXAMPLE: An individual makes the following contributions to his or her IRA(s).
<TABLE>
<CAPTION>
Year Deductible Non-Deductible
<S> <C> <C>
1990 $ 2,000
1991 1,800
1994 1,000 $ 1,000
1996 600 1,400
-------- --------
$ 5,400 $ 2,400
Deductible Contributions: $ 5,400
Non-Deductible Contributions: 2,400
Earnings on IRAs: 1,200
--------
Total Account Balance of IRA(s)
as of 12/31/98: $ 9,000
(before distributions in 1998).
</TABLE>
In 1998, the individual takes a distribution of $3,000. The total account
balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The
non-taxable portion of the distributions for 1998 is figured as follows:
<TABLE>
<S> <C>
Total non-deductible contributions $ 2,400
Total account balance in the IRAs, before distributions $ 9,000 x $3,000 = $800
</TABLE>
Thus, $800 of the $3,000 distribution in 1998 will not be included in the
individual's taxable income. The remaining $2,200 will be taxable for 1998.
ROLLOVER IRA RULES
1. IRA TO IRA
You may withdraw, tax-free, all or part of the assets from an IRA and reinvest
them in one or more IRAs. The reinvestment must be completed within 60 days of
the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts
required to be distributed because the individual has reached age 70 1/2 may
not be rolled over.
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<PAGE>
2. EMPLOYER PLAN DISTRIBUTIONS TO IRA
All taxable distributions (known as "eligible rollover distributions") from
qualified pension, profit-sharing, stock bonus and tax sheltered annuity plans
may be rolled over to an IRA, with the exception of (1) annuities paid over a
life or life expectancy, (2) installments for a period of ten years or more,
and (3) required minimum distributions under section 401(a)(9).
Rollovers may be accomplished in two ways. First, you may elect to have an
eligible rollover distribution paid directly to an IRA (a "direct rollover").
Second, you may receive the distribution directly and then, within 60 days of
receipt, roll the amount over to an IRA. Under the law, however, any amount
that you elect not to have distributed as a direct rollover will be subject to
20 percent income tax withholding, and, if you are younger than age 59 1/2,
may result in a 10% excise tax on any amount of the distribution that is
included in income. Questions regarding distribution options under the Act
should be directed to your Plan Trustee or Plan Administrator, or may be
answered by consulting IRS Regulations ss.1.401(a)(31)-1, ss.1.402(c)-2T and
ss.31.3405(c)-1.
PENALTIES FOR PREMATURE DISTRIBUTIONS
If you receive a distribution from your IRA before you reach age 59 1/2, an
additional tax of 10 percent will be imposed under Code ss.72(t), unless the
distribution (a) occurs because of your death or disability, (b) is for
certain medical care expenses or to an unemployed individual for health
insurance premiums, (c) is received as a part of a series of substantially
equal payments over your life or life expectancy, (d) is received as a part of
a series of substantially equal payments over the lives or life expectancy of
you and your beneficiary, or (e) the distribution is contributed to a rollover
IRA, (f) is used for a qualified first time home purchase for you, your
spouse, children, grandchildren, or ancestor, subject to a $10,000 lifetime
maximum or (g) is for higher education purposes for you, your spouse, children
or grandchildren.
MINIMUM DISTRIBUTIONS
Under the rules set forth in Code ss.408(b)(3) and ss.401(a)(9), you may not
leave the funds in your annuity contract indefinitely. Certain minimum
distributions are required. These required distributions may be taken in one
of two ways: (a) by withdrawing the balance of your annuity contract by a
"required beginning date," usually April 1 of the year following the date at
which you reach age 70 1/2; or (b) by withdrawing periodic distributions of
the balance in your annuity contract by the required beginning date. These
periodic distributions may be taken over (a) your life; (b) the lives of you
and your named beneficiary; (c) a period not extending beyond your life
expectancy; or (d) a period not extending beyond the joint life expectancy of
you and your named beneficiary.
If you do not satisfy the minimum distribution requirements, then, pursuant to
Code ss.4974, you may have to pay a 50% excise tax on the amount not
distributed as required that year.
The foregoing minimum distribution rules are discussed in detail in IRS
Publication 590, "Individual Retirement Arrangements."
REPORTING
You are required to report penalty taxes due on excess contributions, excess
accumulations, premature distributions, and prohibited transactions.
Currently, IRS Form 5329 is used to report such information to the Internal
Revenue Service.
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<PAGE>
PROHIBITED TRANSACTIONS
Neither you nor your beneficiary may engage in a prohibited transaction, as
that term is defined in Code ss.4975.
Borrowing any money from this IRA would, under Code ss.408(e)(3), cause the
annuity contract to cease to be an Individual Retirement Annuity and would
result in the value of the annuity being included in the owner's gross income
in the taxable year in which such loan is made.
Use of this annuity contract as security for a loan from the Company, if such
loan were otherwise permitted, would, under Code ss.408(e)(4), cause the
portion so used to be treated as a taxable distribution.
EXCESS CONTRIBUTIONS
Tax Code ss.4973 imposes a 6 percent excise tax as a penalty for an excess
contribution to an IRA. An excess contribution is the excess of the deductible
and nondeductible amounts contributed by the Owner to an IRA for that year
over the lesser of his or her taxable compensation or $2,000. (Different
limits apply in the case of a spousal IRA arrangement.) If the excess
contribution is not withdrawn by the due date of your tax return (including
extensions) you will be subject to the penalty.
IRS APPROVAL
Your annuity contract and IRA endorsement have been filed for approval by the
Internal Revenue Service as a tax qualified Individual Retirement Annuity.
When received, such approval by the Internal Revenue Service is a
determination only as to the form of the annuity and does not represent a
determination of the merits of such annuity.
This disclosure statement is intended to provide an overview of the applicable
tax laws relating to Individual Retirement Arrangements. It is not intended to
constitute a comprehensive explanation as to the tax consequences of your IRA.
AS WITH ALL SIGNIFICANT TRANSACTIONS SUCH AS THE ESTABLISHMENT OR MAINTENANCE
OF, OR WITHDRAWAL FROM AN IRA, APPROPRIATE TAX AND LEGAL COUNSEL SHOULD BE
CONSULTED. Further information may also be acquired by contacting your IRS
District Office or consulting IRS Publication 590.
FINANCIAL DISCLOSURE
(SELECT RESERVE VARIABLE ANNUITY, FORM NO. 97505)
This Financial Disclosure is applicable to IRAs using a Select Reserve
Variable Annuity (contract form number 97505) purchased from American General
Life Insurance Company on or after March 1, 1998.
Earnings under variable annuities are not guaranteed, and depend on the
performance of the investment option(s) selected. As such, earnings cannot be
projected. Set forth below are the charges associated with such annuities.
CHARGES:
(a) During the Accumulation Phase, a maximum charge of $25 for each
transfer, in excess of 12 free transfers annually, of contract
value between divisions of the Separate Account. During the Payout
Phase (the time during which regular payments are received), this
charge is applicable for each transfer in excess of six free
transfers annually.
(b) To compensate for mortality and expense risks assumed under the
contract, variable divisions only will incur a daily charge at an
annualized rate of 0.62% of the average Separate Account Value of
the contract during both the Accumulation and the Payout Phase.
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<PAGE>
(c) Premium taxes, if applicable, may be charged against Accumulation
Value at time of annuitization or upon the death of the Annuitant.
If a jurisdiction imposes premium taxes at the time purchase
payments are made, the Company may deduct a charge at that time,
or defer the charge until the purchase payments are withdrawn,
whether on account of a full or partial surrender, annuitization,
or death of the Annuitant.
(c) To compensate for administrative expenses, a daily charge will be
incurred at an annualized rate of .04% of the average Separate
Account Value of the contract during the Accumulation and the
Payout Phase.
(e) Each variable division will be charged a fee for asset management
and other expenses deducted directly from the underlying fund
during the Accumulation and Payout Phase. Total fees will range
between 0.57% and 2.31%.
Page 8
<PAGE>
1035 EXCHANGE INSTRUCTIONS
1. Processing Rules
A 1035 exchange is one that qualified under IRC Section 1035 guidelines.
A 1035 exchange is for non-qualified funds only.
The Home Office does not offer tax advice. Applicants and contractowners
should contact their own tax advisors.
To qualify as a 1035 exchange, the following contract types are
required:
* An annuity or life insurance contract in exchange for an annuity
contract.
In addition, the following contract type exchanges are required:
* Individual contract to individual contract;
* Joint contract to joint contract; and
* Two individual contracts on same annuitant(s) with the same
owner(s) to individual or joint contract.
The annuitant and owner on the exchanged contract must be the same on
the new contract.
To qualify as a full 1035 exchange, all existing cash value must be
transferred to the new contract and none of the cash value can be
refunded.
Money from a 1035 exchange cannot be added to an existing annuity
contract - it must fund a new contract.
2. Forms Requirements
* Annuity Application (form number which is approved in the state of
application)
* Replacement form as required by state, if applicable
* Absolute Assignment form (L 8714) for IRC Section 1035(A) Exchange
* External company's contract/policy or lost contract/policy
statement
3. Signature Requirements
The annuitant of the new application (age 15 or older) must sign the
Annuity Application.
The proposed owner of the new contract must sign the Annuity Application
and the Absolute Assignment Form (L 8714).
If the owner is a trust, then the trustee's signature and title are
required on the application and the Absolute Assignment Form (L 8714).
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<PAGE>
QUALIFIED AND NON-QUALIFIED FUNDS
TRANSFER INSTRUCTIONS
1. Processing Rules
A transfer occurs when an existing policy/contract or account is
liquidated and proceeds are forwarded to another company or to the
client.
There are three types of transfers:
* Trustee-to-Trustee (or Custodian) transfer: Proceeds are sent from
one company directly to another company to fund a like plan
(Example: TSA to TSA, IRA to IRA, Non-qualified to Non-qualified).
* Direct Rollover: Proceeds are sent from one company directly to
another company to fund a different type of plan (Example: TSA to
IRA, 401(k) to IRA, etc.).
* Rollover: Proceeds are sent from the original company to the
owner. The owner then forwards the check to the new company within
60 days.
Partial transfers are allowed.
Please consult a tax advisor for any tax consequences.
These types of transfers are not 1035 exchanges and do not qualify under
IRC Section 1035 guidelines.
A transfer may be qualified or non-qualified.
NOTE: The Home Office is responsible for qualified administration of
IRAs/SEPs only. Other than IRAs, administration of qualified plans
is the responsibility of the customer or plan administrator. The
Home Office does not provide a plan prototype.
2. Form Requirements
* Annuity Application (form number which is approved in the state of
application).
* Replacement form as required by state, if applicable.
* Absolute Assignment form (L8714) for IRC Section 1035(a) Exchange
* External company/institution's contract or lost contract/contract
statement.
3. Signature Requirements
The annuitant of the new application (age 15 or older) must sign the
Annuity Application
The proposed owner of the new contract must sign the Annuity Application
and the Absolute Assignment Form (L 8714).
If the owner is a trust, then the trustee's signature and title are on
the application and the Absolute Assignment Fomr (L 8714).
Page 10
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
A Subsidiary of American General Corporation
P.O. Box 1401 Houston, Texas 77251-1401
[American General Logo]
SELECT RESERVE
==============
Variable Annuity
ABSOLUTE ASSIGNMENT
TO EFFECT A SECTION 1035(a) EXCHANGE AND ROLLOVER OF A LIFE INSURANCE OR AN
ANNUITY CONTRACT
-----------------------------------------------------------------------------
TO BE COMPLETED ON THE EXISTING CONTRACT:
Contract No.:________________________ Cash Value:_________________________
Annuitant/Insured:___________________ Insurer:____________________________
Owner:_______________________________ Address_____________________________
of Insurer:_________________________
-----------------------------------------------------------------------------
I hereby assign and transfer to American General Life Insurance Company all
rights, title and interest of every nature and transfer to character in and to
the contract described above (contract) in an exchange intended to qualify
under Section 1035(a) of the Internal Revenue Code. In accordance with Section
1035 and its regulations, the Owner and Annuitant on the contract described
above will be the same as on the contract to be issued.
I understand that if the Company underwrites, approves my application for, and
issues to me a new annuity contract which I accept on the life of the same
annuitant in the contract, then the Company intends to surrender the contract
for its cash value.
I UNDERSTAND THAT AS OF THE DATE OF SURRENDER OF THE CONTRACT BY THE COMPANY,
THE CONTRACT WILL NO LONGER PROVIDE ANY COVERAGE.
I UNDERSTAND THAT UPON RECEIPT OF THE SURRENDER VALUE BY THE COMPANY, THE
PROCEEDS WILL BE APPLIED AS AN INITIAL OR ADDITIONAL PREMIUM FOR THE NEW
ANNUITY CONTRACT. The first premium must be paid no later than when the new
contract is delivered. The contract assigned shall not be considered a premium
until the cash surrender value is actually received by the Company. A contract
will not be in effect until the first premium is paid while all statements and
answers in all parts of my application remain correct.
I understand that by executing this assignment, I irrevocably waive all
rights, claims and demands under the contract.
I represent and agree that the Company is furnished this form and is
participating in this transaction at my specific request and as an
accommodation to me. I represent and agree that the Company has made no
representations concerning my tax treatment under Internal Revenue Code
Section 1035 or otherwise.
The Company assumes no responsibility or liability for the undersigned's tax
treatment under Internal Revenue Code Section 1035 or otherwise.
I represent and warrant that no person, firm or corporation has a legal or
equitable interest in the contract, except the undersigned and that no
proceedings of either a legal or equitable nature have been instituted or are
pending against undersigned.
I UNDERSTAND THAT THE FIRST PREMIUM MUST BE PAID NO LATER THAN THE TIME THE
CONTRACT APPLIED FOR IS DELIVERED AND THAT THE CASH VALUE OF THE ASSIGNED
CONTRACT SHALL NOT BE CONSIDERED PART OF THE PREMIUM UNTIL THE CASH SURRENDER
VALUE IS ACTUALLY RECEIVED BY THE COMPANY. I FURTHER UNDERSTAND THAT AN
ANNUITY CONTRACT WILL NOT COME INTO FORCE AS A RESULT OF THIS ASSIGNMENT.
Signed this______day of___________, 19___ at_________________________________
___________________________________ _____________________________________
WITNESS SIGNATURE OF OWNER (ASSIGNEE
___________________________________ _____________________________________
WITNESS SIGNATURE OF CO-OWNER
(IF APPLICABLE)
-----------------------------------------------------------------------------
HOME OFFICE USE ONLY
Received and duplicate filed at the Home Office of the Company at 2727-A
Allen Parkway, 3-50, Houston, Texas 77019.
By________________________, ___________________________
(TITLE)
L8714 REV 1297
Page 11
<PAGE>
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Page 12
<PAGE>
[American General Logo]
SELECT RESERVE
==============
Variable Annuity
QUALIFIED FUNDS TRANSFER FORM
For use by customers transferring Qualified funds (IRA, 401(k), pension plan,
or other qualified deferred compensation) to American General Life Insurance
Company of New York when funds to be invested are not in a life insurance
contract or policy - THIS FORM IS NOT TO BE USED FOR NON-QUALIFIED 1035
EXCHANGES. Disclosure forms required of the Insurer must be delivered to the
customer.
-----------------------------------------------------------------------------
CURRENT TRUSTEE OR CUSTODIAN
Name:______________________________________________________________
Address:___________________________________________________________
-----------------------------------------------------------------------------
PARTICIPANT
Name:______________________________________________________________
Account Number:____________________________________________________
Sum to be transferred: [ ]Full Account Balance [ ]Other___________
-----------------------------------------------------------------------------
NOTICE TO CURRENT TRUSTEE OR CUSTODIAN
You are directed to convert to cash the assets held for the Participant under
the IRC ss. 408(a) (Individual Retirement Annuity or Account) or other
qualified account indicated above and transfer the funds to American General
Life Insurance Company as described under "Transfer Information."
Signature of Participant:_______________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit (FBO) of______________________________________
Print Name of Participant
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019-2191
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account and deposit
said funds into an IRC ss. 408(b) Individual Retirement Annuity or other
qualified account as directed with American General Life Insurance Company,
subject to the terms and conditions of said annuity or account.
By:_____________________________________________/_________________
Authorized Representative of American General Date
Life Insurance Company
If this is a full account balance transfer, Participants who have reached
their required distribution age, 70 1/2 (or older) must take any required
distribution prior to completing this transaction.
L 6742 REV 394
Page 13
<PAGE>
[American General Logo]
SELECT RESERVE
==============
Variable Annuity
NON-QUALIFIED FUND TRANSFER AUTHORIZATION
For use by customers transferring Non-Qualified funds from a Financial
Institution or Mutual Fund to American General Life Insurance Company.
THIS FORM IS NOT TO BE USED FOR 1035 EXCHANGES
-----------------------------------------------------------------------------
CURRENT FINANCIAL INSTITUTION
Name: ______________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
Phone No.: _________________________________________________________
-----------------------------------------------------------------------------
ACCOUNT OWNER
Name: ______________________________________________________________
Account/Certificate Number(s): 1. __________________________________
2.______________________________________________
3.______________________________________________
-----------------------------------------------------------------------------
NOTICE TO CURRENT FINANCIAL INSTITUTION
I hereby request and direct the following action to be taken in order to
transfer the proceeds of the account/certificate identified above (Complete
number 1, 2, or 3 as appropriate.):
1.[ ] Certificate of Deposit Withdrawal:
[ ] Full [ ] Partial $____________________
Indicate Amount
(Complete a or b.)
a.[ ] On the Maturity date of___/___/___ .
b.[ ] Upon receipt of this request.
2. Fully liquidate Mutual Fund Account (copy of recent
statement attached).
3.[ ] Other type of Account (e.g. savings, checking)
[ ]Full [ ]Partial $____________________
Indicate Amount
Signature of Account Owner:_________________________________________
-----------------------------------------------------------------------------
TRANSFER INFORMATION
Make check payable as follows: American General Life Insurance Company
for the benefit (FBO) of______________________________________
Print Name of Participant
Funds should be sent to:
P.O. Box 1401 OR 2727A Allen Parkway, 3-50
Houston, TX 77251-1401 Houston, TX 77019
-----------------------------------------------------------------------------
ACCEPTANCE
American General Life Insurance Company will accept on behalf of the above
named Participant, the transfer of funds from the above account(s) and
deposit said funds in a flexible premium deferred annuity or other account as
directed with American General Life Insurance Company of New York, subject to
the terms and conditions of said annuity or account.
By:_____________________________________________/_________________
Authorized Representative of American General Date
Life Insurance Company
L8190 REV 694
Page 14
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
CHANGE REQUEST
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 813-5065
SELECT RESERVE
==============
Variable Annuity
-----------------------------------------------------------------------------
1. [X] CONTRACT IDENTIFICATION (COMPLETE SECTION 1 AND 5 FOR ALL
REQUESTS.) INDICATE CHANGE OR REQUEST DESIRED BELOW.
CONTRACT #:______________________ ANNUITANT:______________________
CONTRACT OWNER:____________________________________________________
ADDRESS: __________________________________________________________
__________________________________________________________
[ ] Check here if change of address
S.S. NO. OR TAX I.D. NO.:___/___/___ Phone Number:(___)___________
-----------------------------------------------------------------------------
2. [ ] DOLLAR COST AVERAGING
Dollar-cost average [ ] $______ OR [ ] %______% (whole % only)
Begin Date:__/__/__
Taken from the [ ] Money Market OR [ ] 1-Year Guarantee Period
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Duration: [ ]12 months [ ]24 months [ ]36 months
to be allocated to the following division(s) as indicated. (Use only
dollars OR percentages)
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________
Low Duration VIP (3) _________
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________
OFFITBANK VIF-High Yield (6) _________
OFFITBANK VIF-Total Return (7) _________
OFFITBANK VIF-U. S. Government Securities (8) _________
ROYCE CAPITAL FUND
Royce Premier (9) _________
Royce Total Return (10) _________
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________
Wright Selected Blue Chip (12) _________
OTHER
______________________________________ _________
</TABLE>
-----------------------------------------------------------------------------
3. [ ] AUTOMATIC REBALANCING ($25,000 MINIMUM)
Use whole percentages; Total must equal 100%
[ ]ADD [ ]CHANGE automatic rebalancing of variable investments to the
percentage allocations indicated below:
[ ]Quarterly [ ]Semiannually [ ]Annually (Based on contract anniversary)
[ ]STOP automatic rebalancing
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________
Low Duration VIP (3) _________
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________
OFFITBANK VIF-High Yield (6) _________
OFFITBANK VIF-Total Return (7) _________
OFFITBANK VIF-U. S. Government Securities (8) _________
ROYCE CAPITAL FUND
Royce Premier (9) _________
Royce Total Return (10) _________
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________
Wright Selected Blue Chip (12) _________
OTHER
______________________________________ _________
</TABLE>
NOTE: Automatic rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
4. [ ] TRANSFER OF ACCUMULATED VALUES
(Available by either $ or % allocation)
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
<TABLE>
<S> <C>
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
________ from Div.________ to Div. ________ ________ from Div.________ to Div.________
</TABLE>
NOTE: If a transfer is elected and Automatic Rebalancing is active on your
account, you may want to consider changing the Automatic Rebalancing
allocations (Section 3). Otherwise, the Automatic Rebalancing will
transfer funds in accordance with instructions on file.
-----------------------------------------------------------------------------
5. [ ] AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS.)
CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY: (1) THAT THE NUMBER
SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER AND (2) THAT
I AM NOT SUBJECT TO BACKUP WITHHOLDING UNDER SECTION 3406(a)(1)(C) OF THE
INTERNAL REVENUE CODE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
_________________ _____________________________________
DATE SIGNATURE OF OWNER(S)
-----------------------------------------------------------------------------
L 8878-SR
Page 15
<PAGE>
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Page 16
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 813-5065
SELECT RESERVE
==============
Variable Annuity
SYSTEMATIC WITHDRAWALS REQUEST
-----------------------------------------------------------------------------
1. [X] CONTRACT IDENTIFICATION
CONTRACT #:______________________ ANNUITANT:______________________
CONTRACT OWNER:____________________________________________________
ADDRESS: __________________________________________________________
__________________________________________________________
[ ] Check here if change of address
S.S. NO. OR TAX I.D. NO.:___/___/___ Phone Number:(___)___________
-----------------------------------------------------------------------------
2. SYSTEMATIC WITHDRAWAL ELECTION (Minimum check amount is $100)
(USE EITHER DOLLARS OR WHOLE PERCENTAGES.)
(DOLLARS MUST TOTAL SPECIFIED AMOUNT, OR PERCENTAGES MUST TOTAL 100%.)
WITHDRAWALS PRIOR TO AGE 59 1/2 MAY BE SUBJECT TO AN IRS PENALTY.
Consult your tax advisor for additional information.
HOW OFTEN SHOULD PAYMENTS BE MADE:
[ ]MONTHLY [ ]QUARTERLY [ ]SEMIANNUALLY [ ]ANNUALLY
First check to be processed on ____/____/____. Subsequent checks will be
MM DD YY
processed at the next payout dates. on the SAME DAY of the month elected
as your start date. (Date must be between the 5th and 24th of the month
and at least 30 days after issue date.)
SPECIFIED DOLLAR AMOUNT $_______________ (Not to be used for partial
withdrawal request)
Unless specified below, withdrawals will be taken from the divisions as
they are currently allocated in your contract.
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________%
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________%
Low Duration VIP (3) _________%
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________%
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________%
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________%
OFFITBANK VIF-High Yield (6) _________%
OFFITBANK VIF-Total Return (7) _________%
OFFITBANK VIF-U. S. Government Securities (8) _________%
ROYCE CAPITAL FUND
Royce Premier (9) _________%
Royce Total Return (10) _________%
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________%
Wright Selected Blue Chip (12) _________%
OTHER
______________________________________ _________%
FIXED ACCOUNT
1-Year Guarantee Period _________%
</TABLE>
-----------------------------------------------------------------------------
3. MAILING OF YOUR SYSTEMATIC WITHDRAWEL
[ ] Mail to owner at address in Section 1. [ ] Mail to name/address other
than owner (complete information below:
__________________________________________________________________________
INDIVIDUAL OR BANK NAME
__________________________________________________________________________
ADDRESS
__________________________________________________________________________
CITY/STATE/ZIP
__________________________________________________________________________
IF BANK , PROVIDE ACCOUNT NUMBER TO BE REFERENCED FOR DEPOSIT
-----------------------------------------------------------------------------
4. NOTICE OF WITHHOLDING
The taxable portion of the distribution you receive from your annuity
contract is subject to federal income tax withholding unless you elect not
to have withholding apply. Withholding of state income tax may also be
required by your state of residence. You may elect not to have withholding
apply by checking the appropriate box below. If you elect not to have
withholding apply to your distribution or if you do not have enough income
tax withheld, you may be responsible for payment of estimated tax. You may
incur penalties under the estimated tax rules if your withholding and
estimated tax are not sufficient.
[ ] I do NOT want income tax withheld from each distribution.
[ ] I do want _____% or [ ] 10% income tax withheld from each distribution.
-----------------------------------------------------------------------------
5. AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS)
CERTIFICATION: UNDER PENALTIES OF PERJURY, I CERTIFY: (1) THE NUMBER SHOWN
ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER; AND (2) THAT I
AM NOT SUBJECT TO BACKUP WITHHOLDING UNDER SECTION 3406(a)(1)(C) OF THE
INTERNAL REVENUE CODE.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY
PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
Dated __________________ this ______ day of ___________ 19 ___________
____________________________
OWNER
_______________________________ ____________________________
WITNESS JOINT OWNER (if applicable)
L 8879-SR
Page 17
<PAGE>
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Page 18
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 813-5065
SELECT RESERVE
==============
Variable Annuity
AUTOMATIC ADDITIONAL PURCHASE PAYMENT
Contract #:_______________________________________
Annuitant:___________________________________________________________________
Contract Owner(s):___________________________________________________________
(Name and ___________________________________________________________________
Address:)
___________________________________________________________________
Amount of Investment:______________________________
(Minimum $5,000 per payment)
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
Date of 1st withdrawal:_____/______/______
Name of Bank:_____________________________________________________
Account Number:___________________________________________________
ATTACH A VOIDED CHECK
___________________________________________________________________________
| |
| |
| |
| |
| |
| |
| |
| |
| |
|___________________________________________________________________________|
PLEASE SIGN AND DATE THE AUTHORIZATION BELOW.
I, the undersigned bank account owner, hereby authorize and request
American General Life Insurance Company ("Company") to initiate electronic
or other commercially accepted type debits against the indicated bank
account in the depository institution named above ("Depository") for
purchase payments due on the contract listed above. I hereby agree to
indemnify and hold the Company harmless from any loss, claim, or liability
of any kind by reason or dishonor of any debit.
I agree that this Authorization may be terminated by me or the Company at
any time and for any reason by providing written notice of such
termination to the non-terminating party and may be terminated by the
Company immediately if any debit is not honored by the Depository named
above for any reason.
______________________________________ __________________________
Signature of Bank Account Owner(s) Date
L 8877-SR
Page 19
<PAGE>
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Page 20
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, Texas 77251-1401
(800) 813-5065
SELECT RESERVE
==============
Variable Annuity
CHANGE OF BENEFICIARY
(Before completing this form
please read instructions below and on reverse side.)
_____________________________________________________________________________
| |
Contract No. | Contract Owner | Annuitant
____________________|______________________________|_________________________
METHOD OF PAYMENT: The death proceeds shall be payable in equal shares to
the designated beneficiaries as may be living, unless otherwise provided
below. In the event no beneficiary survives the Annuitant or Owner, and if
this form, or the Contract does not provide otherwise, the proceeds will
be paid to the executors or administrators of the deceased's Estate.
PRIMARY BENEFICIARY:
Full Name Relationship to Annuitant Percentages (if applicable)
--------- ------------------------- ---------------------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a primary beneficiary,
complete the following:
____________________________________________ Dated:_________________________
Name of Trust
=============================================================================
CONTINGENT BENEFICIARY (proceeds payable under this designation only if
none of the designated primary beneficiaries survive the deceased
Annuitant or Owner):
Full Name Relationship to Annuitant Percentages (if applicable)
--------- ------------------------- ---------------------------
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
If a living or non-testamentary trust is designated as a contingent
beneficiary, complete the following:
____________________________________________ Dated:_________________________
Name of Trust
=============================================================================
The undersigned contract owner hereby revokes any previous beneficiary
designation and any optional mode of settlement with respect to any death
benefit proceeds payable at the death of the Annuitant or Owner.
I represent and certify that no insolvency or bankruptcy proceedings are
now pending against me.
Dated at___________________________this________day of_____________, 19_____.
_______________________________________ ___________________________________
WITNESS CONTRACT OWNER
_______________________________________ ___________________________________
WITNESS Additional Signature if Required
=============================================================================
This change of beneficiary and/or method of settlement has been approved
by the Company at its Home Office, and presentation of the Contract for
endorsement has been waived.
AMERICAN GENERAL LIFE INSURANCE COMPANY
DATE OF APPROVAL:_____________ BY:___________________________________________
L 8876-SR
Page 21
<PAGE>
INSTRUCTIONS FOR DESIGNATING BENEFICIARY
1. All signatures must be in INK and should appear exactly as the name is
given in the certificate. A separate election for change of beneficiary
must be completed for each contract.
2. The full name of the new Beneficiary, relationship to the Annuitant,
current mailing address and taxpayer identification number (S.S. No.)
should be given for all Beneficiaries. If Beneficiary is to receive
payment under life income option, give date of birth.
3. If a Beneficiary is a married woman, her full given name should be used.
For example, Mary E. Jones, not Mrs. J.F. Jones. If a Trustee is
designated, notification as to the type of trust created should be
furnished the Company.
4. If two Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivor;" if three or more
Beneficiaries are to share jointly, the last name entered should be
followed by the words "equally, or to the survivors or survivor." If the
interest of one Beneficiary is to be contingent to the interest of
another, after the name of the first Beneficiary the following words
should be placed: "if living; otherwise to."
For your assistance, examples of the wording to be used in some of the
more common designations are set out below. In difficult cases where there
is doubt as to the proper wording, the Company will prepare a special form
for your signature on request.
<TABLE>
<S> <C>
1. One Beneficiary Jane Doe, wife of the Annuitant.
2. Two Primary Beneficiaries Jane Doe, wife of the Annuitant,
and John Doe, son, equally, or to the
survivor.
3. One Primary and Two Contingent Jane Doe, wife of the Annuitant,
Beneficiaries if living; otherwise to John Doe and
Mary Doe, children of the Annuitant,
equally, or to the survivor.
4. One Primary and One Contingent Jane Doe, wife of the Annuitant, if
Beneficiary living; otherwise to John Doe, son.
5. Two Primary and One Contingent John Doe and Mary Doe, parents of the
Beneficiaries Annuitant, equally, or to the
survivor; otherwise, to Jane Doe,
sister of the Annuitant.
6. Wife, Primary; Named and Jane Doe, wife of the Annuitant,
Un-named Children, if living; otherwise to Henry Doe,
Contingent Beneficiaries Barbara Doe, and Paul Doe, children
of the Annuitant, and any other
then living children born of the
marriage of the Annuitant and said
wife, equally, or to the survivors.
7. Wife, Primary; Children Mary Doe, wife of the Annuitant,
and Step-Children if living; otherwise, Henry Doe,
Contingents son of the Annuitant, Mary Doe,
step-daughter of the Annuitant,
and any then living children born
of the marriage of the Annuitant and
said wife, equally, or to the
survivor.
8. Wife, Primary; Unnamed Children Jane Doe, wife of the Annuitant, if
with Second Contingents living; otherwise any then living
children born of the marriage of the
Annuitant and said wife, equally, or
to the survivor; otherwise to Harry
Doe and Mabel Doe, parents of the
Annuitant, equally, or to the
survivor.
9. Business Designations A. The Beacon Oil Company,
Incorporated, a Texas Corporation
Houston, Texas, employer (or
creditor), or its successors or
assigns.
B. John Doe, Business Partner.
C. Harry Doe, Employer (or employee).
10. Trustee - Written Trust The American General Bank, Houston,
Texas, as Trustee, or its successors
in Trust, under Trust Instrument dated
May 31, 1995.
Trustee-Testamentary Trust Trustee as provided in the Last
Will and Testament of the Annuitant,
or successors thereunder.
11. Estate The Executors, Administrators, or
Assigns of the Annuitant.
</TABLE>
L 8876-SR
Page 22
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, TX
SELECT RESERVE
==============
Variable Annuity
To Obtain a Statement of Additional Information, please complete the form
below and mail to:
American General Life Insurance Company
Attn: Annuity Correspondence Unit
P.O. Box 1401
Houston, TX 77251-1401
Please send a Statement of Additional Information for the SELECT RESERVE
Variable Annuity to me at the following address:
___________________________
Name
___________________________
Address
___________________________
City/State Zip Code
Page 23
L 8953-SR
<PAGE>
AMERICAN GENERAL LIFE INSURANCE COMPANY
COMBINATION FIXED AND VARIABLE DEFERRED ANNUITY CONTRACTS
OFFERED BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
ANNUITY ADMINISTRATION DEPARTMENT
P.O. BOX 1401, HOUSTON, TEXAS 77251-1401
1-800-813-5065 713-831-3102 (IN TEXAS)
STATEMENT OF ADDITIONAL INFORMATION
Dated March 2, 1998
This Statement of Additional Information ("Statement") is not a
prospectus. It should be read with the Prospectus for American General Life
Insurance Company, dated March 2, 1998, concerning flexible payment deferred
individual annuity Select ReserveSM Contracts investing in certain Series of
the American General Series Portfolio Company, Hotchkis and Wiley Variable
Trust, LEVCO Series Trust, Navellier Variable Insurance Series Fund, Inc.,
OFFITBANK Variable Insurance Fund, Inc., Royce Capital Fund and the Wright
Managed Blue Chip Series Trust. You can obtain a copy of the Prospectus for
the Contracts, and any supplements thereto, by contacting American General
Life Insurance Company ("AGL") at the address or telephone numbers given
above. You have the option of receiving benefits on a fixed basis through
AGL's Fixed Account or on a variable basis through AGL's Separate Account D
("Separate Account D"). Terms used in this Statement have the same meanings as
are defined in the Prospectus under the heading "Glossary."
<TABLE>
TABLE OF CONTENTS
<S> <C>
General Information...................................................... 2
Regulation and Reserves.................................................. 2
Independent Auditors..................................................... 2
Principal Underwriter.................................................... 3
Annuity Payments......................................................... 3
A. Gender of Annuitant................................................. 3
B. Misstatement of Age or Sex and Other Errors......................... 3
Change of Investment Adviser or Investment
Policy................................................................... 4
Performance Data for the Divisions....................................... 4
Effect of Tax-Deferred Accumulation...................................... 7
Financial Statements..................................................... 8
Index to Financial Statements............................................ 9
</TABLE>
1
<PAGE>
GENERAL INFORMATION
AGL (formerly American General Life Insurance Company of Delaware) is a
successor in interest to a company previously organized as a Delaware
corporation in 1917. Effective December 31, 1991, AGL redomesticated as a
Texas insurer and changed its name to American General Life Insurance Company.
AGL is a wholly-owned subsidiary of AGC Life Insurance Company, a Missouri
corporation ("AG Missouri") engaged primarily in the life insurance business
and annuity business. AG Missouri, in turn, is a wholly-owned subsidiary of
American General Corporation, a Texas holding corporation engaged primarily in
the insurance business.
REGULATION AND RESERVES
AGL is subject to regulation and supervision by the insurance
departments of the states in which it is licensed to do business. This
regulation covers a variety of areas, including benefit reserve requirements,
adequacy of insurance company capital and surplus, various operational
standards, and accounting and financial reporting procedures. AGL's operations
and accounts are subject to periodic examination by insurance regulatory
authorities.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed up to prescribed limits for insurance
contract losses, if covered, incurred by insolvent companies. The amount of
any future assessments of AGL under these laws cannot be reasonably estimated.
Most of these laws do provide, however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
Although the federal government generally has not directly regulated the
business of insurance, federal initiatives often have an impact on the
business in a variety of ways. Federal measures that may adversely affect the
insurance business include employee benefit regulation, tax law changes
affecting the taxation of insurance companies or of insurance products,
changes in the relative desirability of various personal investment vehicles,
and removal of impediments on the entry of banking institutions into the
business of insurance. Also, both the executive and legislative branches of
the federal government periodically have under consideration various insurance
regulatory matters, which could ultimately result in direct federal regulation
of some aspects of the insurance business. It is not possible to predict
whether this will occur or, if so, what the effect on AGL would be.
Pursuant to state insurance laws and regulations, AGL is obligated to
carry on its books, as liabilities, reserves to meet its obligations under
outstanding insurance contracts. These reserves are based on assumptions
about, among other things, future claims experience and investment returns.
Neither the reserve requirements nor the other aspects of state insurance
regulation provide absolute protection to holders of insurance contracts,
including the Contracts, if AGL were to incur claims or expenses at rates
significantly higher than expected, for example, due to acquired immune
deficiency syndrome or other infectious diseases or catastrophes, or
significant unexpected losses on its investments.
INDEPENDENT AUDITORS
The 1996 consolidated financial statements of AGL included in this
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report appearing elsewhere
2
<PAGE>
herein. Such financial statements have been included in this Statement in
reliance upon the report of Ernst & Young LLP given upon the authority of such
firm as experts in accounting and auditing. Ernst & Young LLP is located at
One Houston Center, 1221 McKinney, Suite 2400, Houston, TX 77010-2007.
PRINCIPAL UNDERWRITER
American General Securities Incorporated ("AGSI") is the principal
underwriter with respect to the Contracts. AGSI also serves as principal
underwriter to American General Life Insurance Company of New York Separate
Account E, AGL's Separate Account A and AGL's Separate Account VL-R, which are
unit investment trusts registered under the Investment Company Act of 1940.
AGSI, a Texas corporation, is a wholly owned subsidiary of AGL and a member of
the National Association of Securities Dealers, Inc.
As principal underwriter with respect to Separate Account D, AGSI
received from AGL less than $1,000 of compensation for each of the last three
fiscal years.
The securities offered pursuant to the Contracts are offered on a
continuous basis.
ANNUITY PAYMENTS
A. GENDER OF ANNUITANT
When annuity payments are based on life expectancy, the amount of each
annuity payment ordinarily will be higher if the Annuitant or other measuring
life is a male, as compared with a female under an otherwise identical
Contract. This is because, statistically, females tend to have longer life
expectancies than males.
However, there will be no differences between males and females in any
jurisdiction, including Montana, where such differences are not permitted. We
will also make available Contracts with no such differences in connection with
certain employer-sponsored benefit plans. Employers should be aware that,
under most such plans, Contracts that make distinctions based on gender are
prohibited by law.
B. MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of an Annuitant has been misstated to us, any amount
payable will be that which the purchase payments paid would have purchased at
the correct age and sex. If we made any overpayments because of incorrect
information about age or sex, or any error or miscalculation, we will deduct
the overpayment from the next payment or payments due. We will add any
underpayments to the next payment. The amount of any adjustment will be
credited or charged with interest at the assumed interest rate used in the
Contract's annuity tables.
3
<PAGE>
CHANGE OF INVESTMENT ADVISOR OR INVESTMENT POLICY
Unless otherwise required by law or regulation, neither the investment
advisor or manager to any Series nor any investment policy may be changed
without the consent of AGL. If required, approval of or change of any
investment objective will be filed with the insurance department of each state
where a Contract has been delivered. The Owner (or, after annuity payments
start, the payee) will be notified of any material investment policy change
that has been approved. You will be notified of any investment policy change
prior to its implementation by Separate Account D if your comment or vote is
required for such change.
PERFORMANCE DATA FOR THE DIVISIONS
AVERAGE ANNUAL TOTAL RETURN CALCULATIONS
Each Division may advertise its average annual total return. The average
annual total return for a Division for a specific period is found by first
taking a hypothetical $1,000 investment in the Division's Accumulation Units
on the first day of the period at the maximum offering price, which is the
Accumulation Unit value per unit ("initial investment"), and computing the
ending redeemable value ("redeemable value") of that investment at the end of
the period. The redeemable value reflects the effect of all recurring charges
and fees applicable under the Contract to all Variable Accounts. Such charges
and fees include the Mortality and Expense Risk Charge and the Administrative
Expense Charge. Any premium taxes are not reflected. The redeemable value is
then divided by the initial investment and this quotient is taken to the Nth
root (N represents the number of years in the period) and 1 is subtracted from
the result, which is then expressed as a percentage.
CUMULATIVE TOTAL RETURN CALCULATIONS
Cumulative total return performance is the compound rate of return on a
hypothetical initial investment of $1,000 in each Division's Accumulation
Units on the first day of the period at the maximum offering price, which is
the Accumulation Unit value per unit ("initial investment"). Cumulative total
return figures (and the related "Growth of a $1,000 Investment" figures set
forth below) do not include the effect of any premium taxes. Cumulative total
return quotations reflect changes in Accumulation Unit value and are
calculated by finding the cumulative rates of return of the hypothetical
initial investment over various periods, according to the following formula,
and then expressing that as a percentage:
C = (ERV/P) - 1
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value at the end of the applicable period of a
hypothetical $1,000 investment made at the beginning of the
applicable period.
4
<PAGE>
HYPOTHETICAL PERFORMANCE
The tables below provide hypothetical performance information for
certain of the available Divisions of Separate Account D based on the actual
historical performance of the corresponding Series in which each of these
Divisions invests. This information reflects all actual charges and
deductions, except any premium taxes, of these Series and all Separate Account
charges and deductions, except any premium taxes, with respect to the
Contracts, that hypothetically would have been made had the Separate Account,
with respect to the Contracts, been invested in these Series for all the
periods indicated.
Hypothetical Historical Average Annual Total Returns
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Wright International Blue Chip 16.62% N/A N/A 5.07%
Wright Selected Blue Chip 21.99% N/A N/A 12.61%
Money Market 4.32% 3.37% 4.85%
</TABLE>
Hypothetical Historical Cumulative Total Returns
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Wright International Blue Chip 16.62% N/A N/A 15.94%
Wright Selected Blue Chip 21.99% N/A N/A 42.61%
Money Market 4.32% 18.02% 60.57%
</TABLE>
Hypothetical Historical Growth of a $1,000 Investment in the Divisions
(Through December 31, 1996)
<TABLE>
<CAPTION>
SINCE
SERIES
INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION*
<S> <C> <C> <C> <C>
Wright International Blue Chip $1,166 N/A N/A $1,159
Wright Selected Blue Chip $1,220 N/A N/A $1,426
Money Market $1,043 $1,180 $1,606
<FN>
* The inception dates for each Series listed above funding the Divisions
are:Wright International Blue Chip - January 5, 1994; Wright Selected
Blue Chip - January 5, 1994; and the Money Market - January 16, 1986.
</FN>
</TABLE>
5
<PAGE>
MONEY MARKET DIVISION YIELD AND EFFECTIVE YIELD CALCULATIONS
The Money Market Division's yield is computed in accordance with a
method prescribed by the SEC. Under that method, the current yield quotation
is based on a seven-day period and computed as follows: the net change in the
Accumulation Unit value during the period is divided by the Accumulation Unit
value at the beginning of the period to obtain the base period return; the
base period return is then multiplied by the fraction 365/7 to obtain the
current yield figure, which is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of the Division's Portfolio are not included in the calculation.
The Money Market Division's hypothetical historical yield for the seven day
period ended December 31, 1996 was 3.50%.
The Money Market Division's effective yield is determined by taking the
base period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
365/7-1
return + 1). The Money Market Division's hypothetical historical
effective yield for the seven day period ended December 31, 1996 was 3.56%.
Yield and effective yield do not reflect the deduction of premium taxes
that may be imposed upon the redemption of Accumulation Units.
PERFORMANCE COMPARISONS
The performance of each or all of the available Divisions of Separate
Account D may be compared in advertisements and sales literature to the
performance of other variable annuity contracts issuers in general or to the
performance of particular types of variable annuity contracts investing in
mutual funds, or series of mutual funds, with investment objectives similar to
each of the Divisions of Separate Account D. Lipper Analytical Services, Inc.
("Lipper") and the Variable Annuity Research and Data Service ("VARDSR") are
independent services which monitor and rank the performance of variable
annuity issuers in each of the major categories of investment objectives on an
industry-wide basis. Lipper's rankings include variable life issuers as well
as variable annuity issuers. VARDSR rankings compare only variable annuity
issuers. The performance analyses prepared by Lipper and VARDSR rank such
issuers on the basis of total return, assuming reinvestment of dividends and
distributions, but do not take sales charges, redemption fees or certain
expense deductions at the separate account level into consideration. In
addition, VARDSR prepares risk adjusted rankings, which consider the effects
of market risk on total return performance.
In addition, each Division's performance may be compared in
advertisements and sales literature to the following benchmarks: (1) the
Standard & Poor's 500 Composite Stock Price Index, an unmanaged weighted index
of 500 leading domestic companies that represents approximately 80% of the
market capitalization of the United States equity market; (2) the Dow Jones
Industrial Average, an unmanaged unweighted average of thirty blue chip
industrial corporations listed on the New York Stock Exchange and generally
considered representative of the United States stock market; (3) the Consumer
Price Index, published by the U.S. Bureau of Labor Statistics, a statistical
measure of change, over time, in the prices of goods and services in major
expenditure groups and generally is considered to be a measure of inflation;
(4) the Lehman Brothers Government and Domestic Strategic Income Index, the
Salomon Brothers High Grade Domestic Strategic Income Index, and the Merrill
Lynch Government/Corporate Master Index, unmanaged indices that are generally
considered to represent the performance of intermediate and long term bonds
during various market cycles; and (5) the Morgan Stanley Capital International
Europe Australia Far East Index, an unmanaged index that is considered to be
generally representative of major non-United States stock markets.
6
<PAGE>
EFFECT OF TAX-DEFERRED ACCUMULATION
The Contracts qualify for tax-deferred treatment on earnings. This
tax-deferred treatment increases the amount available for accumulation by
deferring taxes on any earnings until the earnings are withdrawn. The longer
the taxes are deferred, the more the accumulation potential effectively grows
over the term of the Contracts.
The hypothetical tables set out below illustrate this potential. The
tables compare accumulations based on a single initial purchase payment of
$100,000 compounded annually under (1) a Contract, under which earnings are
not taxed until withdrawn in connection with a full surrender, partial
withdrawal, or annuitization, or termination due to insufficient Account Value
("withdrawal of earnings") and (2) an investment under which earnings are
taxed on a current basis ("Taxable Investment"), based on an assumed tax rate
of 28%, and the assumed earning rates specified.
<TABLE>
<CAPTION>
5 YEARS 10 YEARS 20 YEARS
------- -------- --------
<S> <C> <C> <C>
(7.50% earnings rate)
Contract $143,563 $206,103 $424,785
Contract (after Taxes) $131,365 $176,394 $333,845
Taxable Investment $130,078 $169,202 $286,294
(10.00% earnings rate)
Contract $161,051 $259,374 $672,750
Contract (after Taxes) $143,957 $214,749 $512,380
Taxable Investment $141,571 $200,423 $401,694
</TABLE>
The hypothetical tables do not reflect any fees or charges imposed under
a Contract or Taxable Investment. However, the Contracts impose a Mortality
and Expense Risk Charge of 0.62% and an Administrative Expense Charge of
0.04%. A Taxable Investment could incur comparable fees or charges. Fees and
charges would reduce the return from a Contract or Taxable Investment.
Under the Contracts, a withdrawal of earnings is subject to tax, and may
be subject to an additional 10% penalty before age 59 1/2.
These tables are only illustrations of the effect of tax-deferred
accumulations and are not a guarantee of future performance.
7
<PAGE>
FINANCIAL STATEMENTS
Separate Account D has a total of 56 Divisions as of the date of this
Statement. The 13 Divisions which are available under the Contracts that are
the subject of this Statement are not included in the December 31, 1996,
financial statements for Separate Account D, because none were available under
any contracts related to Separate Account D as of December 31, 1996.
Therefore, there are no financial statements for Separate Account D included
in this Statement.
The financial statements of AGL that are included in this Statement
should be considered primarily as bearing on the ability of AGL to meet its
obligations under the Contracts.
8
<PAGE>
<TABLE>
INDEX TO
FINANCIAL STATEMENTS
<CAPTION>
Page No.
--------
<S> <C>
AGL Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors.................... 10
Consolidated Balance Sheets.......................................... 11
Consolidated Income Statements....................................... 13
Consolidated Statements of Shareholders' Equity...................... 14
Consolidated Statements of Cash Flows................................ 15
Notes to Consolidated Financial Statements........................... 16
Combined Financial Statements - Statutory Basis (Unaudited)
Nine Months Ended September 30, 1997 ................................ 48
</TABLE>
The most current audited consolidated financial statements of AGL are
those for the year ended December 31, 1996, which have been prepared in
accordance with generally accepted accounting practices ("GAAP"). The
unaudited combined financial statements of AGL for the nine months ended
September 30, 1997, have been prepared in accordance with accounting practices
prescribed or permitted by state insurance regulatory authorities ("STAT").
AGL prepares financial statements on a GAAP basis annually. It does not
produce interim financial statements on a GAAP basis, only on a STAT basis.
There are significant differences between financial statements prepared on a
GAAP basis and financial statments prepared on a STAT basis. These differences
are described in the notes that are part of the interim nine-month financial
statements.
AGL's audited consolidated financial statements prepared on a GAAP basis
for the year ended December 31, 1997, will become available within several
weeks of the date of this Statement of Additional Information ("Statement").
AGL proposes to amend this Statement at that time to include its audited
year-end 1997 financial statements. A copy of the amended Statement, when
available, may be obtained through your registered representative, or by
contacting us at our address or telephone number set forth in the Prospectus.
AGL represents that there have been no adverse changes in its financial
condition or operations between December 31, 1996, and the date of this
Statement.
9
<PAGE>
ERNST & YOUNG LLP One Houston Center Phone: 713 750 1500
Suite 2400 Fax: 713 750 1501
1221 McKinney Street
Houston, Texas 77010-2007
Report of Independent Auditors
Board of Directors
American General Life Insurance Company
We have audited the accompanying consolidated balance sheets of American
General Life Insurance Company (an indirectly wholly owned subsidiary of
American General Corporation) and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American General
Life Insurance Company and subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
March 20, 1997
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
10
<PAGE>
American General Life Insurance Company
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturity securities, at fair value (amortized cost -
$24,762,134 in 1996 and $23,349,517 in 1995) $ 25,395,381 $ 24,769,751
Equity securities, at fair value (cost - $17,642 in 1996 and
$72,443 in 1995) 20,555 92,318
Mortgage loans on real estate 1,707,843 1,790,110
Investment real estate 145,442 141,927
Policy loans 1,006,137 918,465
Other long-term investments 43,344 23,819
Short-term investments 94,882 65,262
------------------------------------
Total investments 28,413,584 27,801,652
Cash 33,550 43,944
Investment in Parent Company (cost - $8,597 in 1996 and 1995) 28,597 24,399
Indebtedness from affiliates 86,488 90,664
Accrued investment income 392,058 392,832
Accounts receivable 170,457 174,303
Deferred policy acquisition costs 1,042,783 605,501
Property and equipment 35,414 38,275
Other assets 134,289 124,919
Assets held in separate accounts 7,727,189 5,051,112
------------------------------------
Total assets $ 38,064,409 $ 34,347,601
====================================
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 26,558,538 $ 25,276,305
Other policy claims and benefits payable 41,679 43,175
Other policyholders' funds 376,675 445,801
Federal income taxes 402,361 560,538
Indebtedness to affiliates 3,376 3,120
Other liabilities 325,630 284,328
Liabilities related to separate accounts 7,727,189 5,051,112
------------------------------------
Total liabilities 35,435,448 31,664,379
Shareholders' equity:
Common stock, $10 par value, 600,000 shares authorized, issued, and
outstanding 6,000 6,000
Preferred stock, $100 par value, 8,500 shares authorized, issued,
and outstanding 850 850
Additional paid-in capital 933,342 858,075
Net unrealized investment gains 219,151 493,594
Retained earnings 1,469,618 1,324,703
------------------------------------
Total shareholders' equity 2,628,961 2,683,222
------------------------------------
Total liabilities and shareholders' equity $ 38,064,409 $ 34,347,601
====================================
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
American General Life Insurance Company
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
Revenues:
<S> <C> <C> <C>
Premiums and other considerations $ 382,923 $ 342,420 $ 324,521
Net investment income 2,095,072 2,011,088 1,874,323
Net realized investment gains (losses) 28,502 (1,942) (61,268)
Other 41,968 27,172 30,841
------------------------------------------------------
Total revenues 2,548,465 2,378,738 2,168,417
Benefits and expenses:
Benefits 1,689,011 1,641,206 1,514,544
Operating costs and expenses 347,369 309,110 297,498
Interest expense 830 2,180 1,254
------------------------------------------------------
Total benefits and expenses 2,037,210 1,952,496 1,813,296
------------------------------------------------------
Income before income tax expense 511,255 426,242 355,121
Income tax expense 176,660 143,947 128,188
------------------------------------------------------
Net income $ 334,595 $ 282,295 $ 226,933
======================================================
</TABLE>
SEE ACCOMPANYING NOTES.
13
<PAGE>
American General Life Insurance Company
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year $ 6,000 $ 6,000 $ 6,000
Change during year - - -
------------------------------------------------------
Balance at end of year 6,000 6,000 6,000
Preferred stock:
Balance at beginning of year 850 - -
Change during year - 850 -
------------------------------------------------------
Balance at end of year 850 850 -
Additional paid-in capital:
Balance at beginning of year 858,075 850,358 850,236
Capital contribution from Parent 75,000 - -
Other changes during year 267 7,717 122
------------------------------------------------------
Balance at end of year 933,342 858,075 850,358
Net unrealized investment gains (losses):
Balance at beginning of year 493,594 (730,900) 427,471
Change during year (274,443) 1,224,494 (1,158,371)
------------------------------------------------------
Balance at end of year 219,151 493,594 (730,900)
Retained earnings:
Balance at beginning of year 1,324,703 1,249,109 1,261,676
Net income 334,595 282,295 226,933
Dividends paid (189,680) (206,701) (239,500)
------------------------------------------------------
Balance at end of year 1,469,618 1,324,703 1,249,109
------------------------------------------------------
Total shareholders' equity $ 2,628,961 $ 2,683,222 $ 1,374,567
=======================================================
</TABLE>
14
SEE ACCOMPANYING NOTES.
<PAGE>
American General Life Insurance Company
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-----------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 334,595 $ 282,295 $ 226,933
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Change in accounts receivable 3,846 (18,654) (8,942)
Change in future policy benefits and other policy
claims (543,193) (70,383) 120,756
Amortization of policy acquisition costs 102,189 68,295 56,662
Policy acquisition costs deferred (188,001) (203,607) (194,974)
Change in other policyholders' funds (69,126) 63,174 38,379
Provision for deferred income tax expense 12,388 (9,773) 24,043
Depreciation 16,993 18,119 18,412
Amortization (30,758) (35,825) (59,680)
Change in indebtedness to/from affiliates 4,432 7,596 (113,620)
Change in amounts payable to brokers (25,260) 30,964 23,806
Net (gain) loss on sale of investments (28,502) 1,942 61,268
Other, net 32,111 46,863 (61,093)
-----------------------------------------------------
Net cash (used in) provided by operating activities (378,286) 181,006 131,950
INVESTING ACTIVITIES
Purchases of investments and loans made (27,245,453) (14,573,323) (15,723,196)
Sales or maturities of investments and receipts from
repayment of loans 25,889,422 12,528,185 13,939,720
Sales and purchases of property and equipment, net (8,057) (12,114) (5,529)
-----------------------------------------------------
Net cash used in investing activities (1,364,088) (2,057,252) (1,789,005)
FINANCING ACTIVITIES
Policyholder account deposits 3,593,380 3,372,522 3,136,341
Policyholder account withdrawals (1,746,987) (1,258,560) (1,227,046)
Dividends paid (189,680) (206,701) (239,500)
Capital contribution from Parent 75,000 - -
Other 267 67 122
-----------------------------------------------------
Net cash provided by financing activities 1,731,980 1,907,328 1,669,917
-----------------------------------------------------
(Decrease) increase in cash (10,394) 31,082 12,862
Cash at beginning of year 43,944 12,862 -
-----------------------------------------------------
Cash at end of year $ 33,550 $ 43,944 $ 12,862
=====================================================
</TABLE>
Interest paid amounted to approximately $1,080,000, $1,933,000, and $1,207,000
in 1996, 1995, and 1994, respectively.
SEE ACCOMPANYING NOTES.
15
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements
December 31, 1996
NATURE OF OPERATIONS
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary
of American General Corporation (the "Parent Company"). The Company's wholly
owned life insurance subsidiaries are American General Life Insurance Company
of New York ("AGNY") and The Variable Annuity Life Insurance Company
("VALIC").
The Company offers a complete portfolio of the standard forms of universal
life, interest-sensitive whole life, term life, structured settlements, and
fixed and variable annuities throughout the United States. In addition, a
variety of equity products are sold through its broker/dealer, American
General Securities, Inc. The Company serves the estate planning needs of
middle- and upper-income households and the insurance needs of small- to
medium-size businesses. AGNY offers a broad array of traditional and
interest-sensitive insurance, in addition to individual annuity products.
VALIC provides tax-deferred retirement annuities and employer-sponsored
retirement plans to employees of health care, educational, public sector, and
other not-for-profit organizations throughout the United States.
1. ACCOUNTING POLICIES
1.1 PREPARATION OF FINANCIAL STATEMENTS
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") and include the accounts of
the Company and its wholly owned life insurance subsidiaries, AGNY and VALIC.
Transactions with the Parent Company and other subsidiaries of the Parent
Company are not eliminated from the financial statements of the Company. All
other material intercompany transactions have been eliminated in
consolidation.
The preparation of financial statements requires management to make estimates
and assumptions that affect amounts reported in the financial statements and
disclosures of contingent assets and liabilities. Ultimate results could
differ from those estimates.
16
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING
The Company and its wholly owned life insurance subsidiaries are required to
file financial statements with state regulatory authorities. State insurance
laws and regulations prescribe accounting practices for calculating statutory
net income and equity. In addition, state regulators may permit statutory
accounting practices that differ from prescribed practices. The use of such
permitted practices by the Company and its wholly owned life insurance
subsidiaries did not have a material effect on statutory equity at December
31, 1996.
Statutory financial statements differ from GAAP. Significant differences were
as follows (in thousands):
<TABLE>
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
Net income:
Statutory net income (1996 balance is
unaudited) $ 284,070 $ 197,769 $ 281,344
Deferred policy acquisition costs 85,812 135,312 138,312
Deferred income taxes (12,388) 9,773 (24,043)
Adjustments to policy reserves (19,954) (77,591) (76,458)
Goodwill amortization (2,169) (2,195) (2,200)
Net realized gain (loss) on investments 14,140 22,874 (19,654)
Gain (loss) on sale of subsidiary - 661 (41,956)
Other, net (14,916) (4,308) (28,412)
---------------------------------------------------
GAAP net income $ 334,595 $ 282,295 $ 226,933
===================================================
Shareholders' equity:
Statutory capital and surplus (1996 balance is
unaudited) $ 1,441,768 $ 1,298,323 $ 1,283,268
Deferred policy acquisition costs 1,042,783 605,501 1,479,115
Deferred income taxes (410,007) (549,663) (284,832)
Adjustments to policy reserves (297,434) (311,065) (208,913)
Acquisition-related goodwill 55,626 57,795 59,990
Asset valuation reserve ("AVR") 291,205 263,295 223,382
Interest maintenance reserve ("IMR") 63 3,114 (272)
Investment valuation differences 643,289 1,417,775 (1,115,921)
Benefit plans, pretax 6,749 6,023 4,421
Surplus from separate accounts (106,026) (76,645) (51,704)
Other, net (39,055) (31,231) (13,967)
---------------------------------------------------
Total GAAP shareholders' equity $ 2,628,961 $ 2,683,222 $ 1,374,567
===================================================
</TABLE>
17
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.2 STATUTORY ACCOUNTING (CONTINUED)
The more significant differences between GAAP and statutory accounting
principles are that under GAAP: (a) acquisition costs related to acquiring new
business are deferred and amortized (generally in proportion to the present
value of expected gross profits from surrender charges and investment,
mortality, and expense margins), rather than being charged to operations as
incurred; (b) future policy benefits are based on estimates of mortality,
interest, and withdrawals generally representing the Company's experience,
which may differ from those based on statutory mortality and interest
requirements without consideration of withdrawals; (c) deferred federal income
taxes are provided for significant timing differences between income reported
for financial reporting purposes and income reported for federal income tax
purposes; (d) certain assets (principally furniture and equipment, agents'
debit balances, computer software, and certain other receivables) are reported
as assets rather than being charged to retained earnings; (e) acquisitions are
accounted for using the purchase method of accounting rather than being
accounted for as equity investments; and (f) fixed maturity investments are
carried at fair value rather than amortized cost. In addition, statutory
accounting principles require life insurance companies to establish an asset
valuation reserve ("AVR") and an interest maintenance reserve ("IMR"). The AVR
is designed to address the credit-related risk for bonds, preferred stocks,
derivative instruments, and mortgages and market risk for common stocks, real
estate, and other invested assets. The IMR is composed of investment- and
liability-related realized gains and losses that result from interest rate
fluctuations. These realized gains and losses, net of tax, are amortized into
income over the expected remaining life of the asset sold or the liability
released.
1.3 INSURANCE CONTRACTS
The insurance contracts accounted for in these financial statements include
primarily long-duration contracts. Long-duration contracts include traditional
whole life, endowment, guaranteed renewable term life, universal life, limited
payment, and investment contracts. Long-duration contracts generally require
the performance of various functions and services over a period of more than
one year. The contract provisions generally cannot be changed or canceled by
the insurer during the contract period. However, most new contracts written by
the Company allow the insurer to revise certain elements used in determining
premium rates or policy benefits, subject to guarantees stated in the
contracts.
18
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS
FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are currently classified as
available-for-sale and recorded at fair value. After adjusting related balance
sheet accounts as if the unrealized gains (losses) had been realized, the net
adjustment is recorded in net unrealized gains (losses) on securities within
shareholders' equity. If the fair value of a security classified as
available-for-sale declines below its cost and this decline is considered to
be other than temporary, the security is reduced to its fair value, and the
reduction is recorded as a realized loss.
MORTGAGE LOANS
Mortgage loans are reported at amortized cost, net of an allowance for losses.
The allowance for losses covers all non-performing loans, consisting of loans
restructured or delinquent 60 days or more, and loans for which management has
a concern based on its assessment of risk factors, such as potential
nonpayment or nonmonetary default. The allowance is based on a loan-specific
review and a formula that reflects past results and current trends.
Impaired loans, those for which the Company determines it is probable that all
amounts due under the contractual terms will not be collected, are reported at
the lower of amortized cost or fair value of the underlying collateral, less
estimated costs to sell.
POLICY LOANS
Policy loans are reported at unpaid principal balances adjusted periodically
for uncollectible amounts.
INVESTMENT REAL ESTATE
Investment real estate consists of income-producing real estate, foreclosed
real estate, and the American General Center, an office complex in Houston.
The Company classifies all investment real estate, except the American General
Center, as available-for-sale. Real estate available-for-sale is carried at
the lower of cost less accumulated depreciation, if applicable, or fair value
less costs to sell. Changes in estimates of fair value less costs to sell are
recognized as realized gains (losses) through a valuation allowance.
19
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
Real estate held-for-investment is carried at cost less accumulated
depreciation and impairment reserves and write-downs, if applicable.
Impairment losses are recorded whenever circumstances indicate that a property
might be impaired and the estimated undiscounted future cash flows of the
property are less than the carrying amount. In such event, the property is
written down to fair value, determined by market prices, third-party
appraisals, or expected future cash flows discounted at market rates. Any
write-down is recognized as a realized loss, and a new cost basis is
established.
INVESTMENT INCOME
Interest on fixed maturity securities, performing and restructured mortgage
loans, and policy loans is recorded as income when earned and is adjusted for
any amortization of premium or discount. Interest on delinquent mortgage loans
is recorded as income when received. Dividends are recorded as income on
ex-dividend dates.
REALIZED INVESTMENT GAINS (LOSSES)
Realized investment gains (losses) are recognized using the specific
identification method and include declines in fair value of investments below
cost that are considered to be other than temporary.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company's use of derivative financial instruments is limited to interest
rate and currency swap agreements. The difference between amounts paid and
received on swap agreements is recorded on an accrual basis as an adjustment
to investment income over the periods covered by the agreements. The related
amount payable to or receivable from counterparties is included in other
liabilities or other assets.
The fair values of the swap agreements are recognized in the consolidated
balance sheet if they hedge investment securities carried at fair value or
anticipated investment purchases. In this event, changes in the fair value of
a swap agreement are reported in net unrealized gains (losses) on securities
included in shareholders' equity, consistent with the treatment of the related
investment security.
20
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.4 INVESTMENTS (CONTINUED)
For swap agreements hedging anticipated investment security purchases, the net
swap settlement amount or unrealized gain or loss is deferred and included in
the measurement of the anticipated transaction when it occurs.
Any gain or loss from early termination of a swap agreement is deferred and
amortized into income over the remaining term of the related investment. If
the underlying investment is extinguished or sold, any related gain or loss on
swap agreements is recognized in income.
1.5 SEPARATE ACCOUNTS
Separate accounts are assets and liabilities associated with certain
contracts, principally annuities; the investment risk lies solely with the
contract holder rather than the Company. Consequently, the Company's liability
for these accounts equals the value of the account assets. Investment income,
realized investment gains (losses), and policyholder account deposits and
withdrawals related to separate accounts are excluded from the consolidated
statements of income and cash flows. Assets held in separate accounts are
primarily shares in mutual funds, which are carried at fair value based on the
quoted net asset value per share.
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC")
Certain costs of writing an insurance policy, including agents' commissions,
underwriting and marketing expenses, are deferred and reported as DPAC.
DPAC associated with interest-sensitive life insurance contracts, insurance
investment contracts, and participating life insurance contracts, to the
extent recoverable from expected future gross profits, is deferred and
amortized generally in proportion to the present value of expected future
gross profits from surrender charges and investment, mortality, and expense
margins. Expected future gross profits are adjusted to include the impact of
realized and unrealized gains (losses) as if net unrealized investment gains
(losses) had been realized at the balance sheet date. The impact of this
adjustment is included in the net unrealized gains (losses) on securities
within shareholders' equity. DPAC associated with all other insurance
contracts, to the extent recoverable from
21
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.6 DEFERRED POLICY ACQUISITION COSTS ("DPAC") (CONTINUED)
future policy revenues, is amortized over the premium-paying period of the
related contracts using assumptions that are consistent with those used in
computing policy benefit reserves.
The Company reviews the carrying value of DPAC on at least an annual basis. In
determining whether the carrying amount is appropriate, the Company considers
estimated future gross profits or future premiums, as applicable for the type
of contract. In all cases, the Company considers expected mortality, interest
earned and credited rates, persistency, and expenses.
1.7 PREMIUM RECOGNITION
Most receipts for annuities and interest-sensitive life insurance policies are
classified as deposits instead of revenue. Revenues for these contracts
consist of mortality, expense, and surrender charges assessed against the
account balance. Policy charges that compensate the Company for future
services are deferred and recognized in income over the period earned, using
the same assumptions used to amortize DPAC (see Note 1.6).
For limited-payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium received and the net premium is deferred
and recognized in income in a constant relationship to insurance in force. For
all other contracts, premiums are recognized when due. When the revenue is
recorded, an estimate of the cost of the related benefit is recorded in the
future policy benefits account on the consolidated balance sheet. Also, this
cost is recorded in the consolidated statement of income as a benefit in the
current year and in all future years during which the policy is expected to be
renewed.
1.8 OTHER ASSETS
Acquisition-related goodwill, which is included in other assets, is charged to
expense in equal amounts over 40 years. The carrying value of goodwill is
regularly reviewed for indicators of impairment in value.
22
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.9 DEPRECIATION
Provision for depreciation of American General Center, data processing
equipment, and furniture and fixtures is computed on the straight-line method
over the estimated useful lives of the assets.
1.10 POLICY AND CONTRACT CLAIMS RESERVES
Substantially all of the Company's insurance and annuity liabilities relate to
long-duration contracts which generally require performance over a period of
more than one year. The contract provisions normally cannot be changed or
canceled by the Company during the contract period.
For interest-sensitive and investment contracts, reserves equal the sum of the
policy account balance and deferred revenue charges. In establishing reserves
for limited payment and other long-duration contracts, an estimate is made of
the cost of future policy benefits to be paid as a result of present and
future claims due to death, disability, surrender of a policy, and payment of
an endowment. Reserves for traditional insurance products are determined using
the net level premium method. Based on past experience, consideration is given
to expected policyholder deaths, policy lapses, surrenders, and terminations.
Consideration is also given to the possibility that the Company's experience
with policyholders will be worse than expected. Interest assumptions used to
compute reserves ranged from 2.5% to 13.5% at December 31, 1996.
The claim reserves are determined using case-basis evaluation and statistical
analyses and represent estimates of the ultimate net cost of unpaid claims.
These estimates are reviewed; and as adjustments become necessary, such
adjustments are reflected in current operations. Since these reserves are
based on estimates, the ultimate settlement of claims may vary from the
amounts included in the accompanying financial statements. Although it is not
possible to measure the degree of variability inherent in such estimates,
management believes claim reserves are reasonable.
23
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.11 REINSURANCE
The Company limits its exposure to loss on any single insured to $1.5 million
by ceding additional risks through reinsurance contracts with other insurers.
Ceded reinsurance becomes a liability of the reinsurer assuming the risk. The
Company diversifies its risk of exposure to reinsurance loss by using several
reinsurers that have strong claims-paying ability ratings. If a reinsurer
could not meet its obligations, the Company would reassume the liability. The
likelihood of a material reinsurance liability being reassumed by the Company
is considered to be remote.
Benefits paid and future policy benefits related to ceded reinsurance
contracts are recorded as reinsurance receivables. The cost of reinsurance is
recognized over the life of the underlying reinsured policies using
assumptions consistent with those used to account for the underlying policies.
1.12 PARTICIPATING POLICY CONTRACTS
Participating life insurance contracts contain dividend payment provisions
that entitle the policyholder to participate in the earnings of the contracts.
Participating life insurance contracts accounted for 2.47% and 2.48% of life
insurance in force at December 31, 1996 and 1995, respectively. Such business
is accounted for in accordance with SFAS 120.
1.13 INCOME TAXES
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, are included in a
life/nonlife consolidated tax return with the Parent Company and its
noninsurance subsidiaries. The Company participates in a tax-sharing agreement
with other companies included in the consolidated tax return. Under this
agreement, tax payments are made to the Parent Company as if the companies
filed separate tax returns; and companies incurring operating and/or capital
losses are reimbursed for the use of these losses by the consolidated return
group.
24
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
1.13 INCOME TAXES (CONTINUED)
Income taxes are provided for in accordance with SFAS 109. Under this
standard, deferred tax assets and liabilities are calculated using the
differences between the financial reporting basis and the tax basis of assets
and liabilities, using the enacted tax rate. The effect of a tax rate change
is recognized in income in the period of enactment. Under SFAS 109, state
income taxes are included in income tax expense.
1.14 STOCK-BASED COMPENSATION
Certain officers of the Company participate in American General Corporation's
stock and incentive plans which provide for the award of stock options,
restricted stock awards, performance awards, and incentive awards to key
employees. Stock options constitute the majority of such awards. Expense
related to stock options is measured as the excess of the market price of the
stock at the measurement date over the exercise price. The measurement date is
the first date on which both the number of shares that the employee is
entitled to receive and the exercise price are known. Under the stock option
plans no expense is recognized, since the market price equals the exercise
price at the measurement date.
Under an alternative accounting method, compensation expense arising from
stock-based compensation plans would be measured at the estimated fair value
of the stock-based award at the date of grant. Use of this method would not
have a material impact on net income.
25
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS
2.1 INVESTMENT INCOME
<TABLE>
Investment income by type of investment was as follows:
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
Investment income:
<S> <C> <C> <C>
Fixed maturities $1,846,549 $1,759,358 $1,611,355
Equity securities 1,842 6,773 5,860
Mortgage loans on real estate 175,833 185,022 202,399
Investment real estate 22,752 16,397 15,049
Policy loans 58,211 52,939 48,973
Other long-term investments 2,328 1,996 1,389
Short-term investments 9,280 6,234 9,753
Investment income from affiliates 11,502 12,570 13,632
------------------------------------------------------
Gross investment income 2,128,297 2,041,289 1,908,410
Investment expenses 33,225 30,201 34,087
------------------------------------------------------
Net investment income $2,095,072 $2,011,088 $1,874,323
======================================================
</TABLE>
The carrying value of investments that have produced no investment income
during 1996 was less than 1% of total invested assets. The ultimate
disposition of these investments is not expected to have a material effect on
the Company's results of operations and financial position.
26
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.2 NET REALIZED INVESTMENT GAINS (LOSSES)
Realized gains (losses) by type of investment were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Gross gains $ 46,498 $ 38,657 $ 21,780
Gross losses (47,293) (41,022) (116,217)
------------------------------------------------------
Total fixed maturities (795) (2,365) (94,437)
Equity securities 18,304 9,710 14,313
Other investments 10,993 (9,287) 18,856
------------------------------------------------------
Net realized investment gains (losses)
before tax 28,502 (1,942) (61,268)
Income tax expense (benefit) 9,976 547 (13,996)
======================================================
Net realized investment gains (losses)
after tax $ 18,526 $ (2,489) $ (47,272)
======================================================
</TABLE>
27
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES
All fixed maturity and equity securities are classified as available-for-sale
and reported at fair value (see Note 1.4). Amortized cost and fair value at
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
GROSS GROSS UNREALIZED
AMORTIZED COST UNREALIZED LOSS FAIR
GAIN VALUE
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1996 Fixed maturity securities:
Corporate securities:
Investment grade $ 15,639,170 $ 528,602 $ 90,379 $ 16,077,393
Below investment grade 898,187 29,384 5,999 921,572
Mortgage-backed securities* 7,547,616 186,743 54,543 7,679,816
U.S. government obligations 313,759 26,597 1,050 339,306
Foreign governments 313,655 13,255 248 326,662
State and political subdivisions 48,553 1,003 226 49,330
Redeemable preferred stocks 1,194 108 - 1,302
------------------------------------------------------------------------
Total fixed maturity securities $ 24,762,134 $ 785,692 $ 152,445 $ 25,395,381
========================================================================
Equity securities $ 17,642 $ 3,021 $ 108 $ 20,555
========================================================================
Investment in Parent Company $ 8,597 $ 20,000 $ - $ 28,597
========================================================================
</TABLE>
28
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS UNREALIZED
AMORTIZED COST UNREALIZED LOSS FAIR
GAIN VALUE
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1995 Fixed maturity securities:
Corporate securities:
Investment grade $ 13,368,369 $ 929,067 $ 20,649 $ 14,276,787
Below investment grade 939,223 41,325 5,215 975,333
Mortgage-backed securities* 8,459,110 412,700 5,182 8,866,628
U.S. government obligations 245,860 43,771 116 289,515
Foreign governments 294,619 22,854 - 317,473
State and political subdivisions 38,640 1,531 20 40,151
Redeemable preferred stocks 3,696 263 95 3,864
------------------------------------------------------------------------
Total fixed maturity securities $ 23,349,517 $ 1,451,511 $ 31,277 $ 24,769,751
========================================================================
Equity securities $ 72,443 $ 19,915 $ 40 $ 92,318
========================================================================
Investment in Parent Company $ 8,597 $ 15,802 $ - $ 24,399
========================================================================
<FN>
* Primarily includes pass-through securities guaranteed by and mortgage
obligations ("CMOs") collateralized by the U.S. government and government
agencies.
</FN>
</TABLE>
29
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
Net unrealized gains (losses) on securities included in shareholders' equity
at December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Gross unrealized gains $ 808,713 $ 1,487,228
Gross unrealized losses (152,553) (31,317)
DPAC and other fair value adjustments (315,117) (687,773)
Deferred federal income taxes (121,892) (274,544)
====================================
Net unrealized gains on securities $ 219,151 $ 493,594
====================================
</TABLE>
The contractual maturities of fixed maturity securities at December 31, 1996
were as follows:
<TABLE>
<CAPTION>
AMORTIZED MARKET
COST VALUE
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Fixed maturity securities, excluding mortgage-backed securities:
Due in one year or less $ 410,953 $ 414,215
Due after one year through five years 3,523,441 3,649,205
Due after five years through ten years 9,316,775 9,575,258
Due after ten years 3,963,349 4,076,887
Mortgage-backed securities 7,547,616 7,679,816
====================================
Total fixed maturity securities $ 24,762,134 $ 25,395,381
====================================
</TABLE>
Actual maturities may differ from contractual maturities, since borrowers may
have the right to call or prepay obligations. In addition, corporate
requirements and investment strategies may result in the sale of investments
before maturity. Proceeds from sales of fixed maturities were $16.2 billion,
$7.3 billion, and $3.7 billion during 1996, 1995, and 1994, respectively.
30
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE
Diversification of the geographic location and type of property
collateralizing mortgage loans reduces the concentration of credit risk. For
new loans, the Company requires loan-to-value ratios of 75% or less, based on
management's credit assessment of the borrower. The mortgage loan portfolio
was distributed as follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF TOTAL PERCENT
AMOUNT NONPERFORMING
----------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
December 31, 1996 Geographic distribution:
South Atlantic $ 522 30.6% 8.1%
Pacific 407 23.8 8.1
Mid-Atlantic 231 13.5 -
East North Central 168 9.8 -
Mountain 153 9.0 2.8
West South Central 141 8.2 5.3
East South Central 109 6.4 -
West North Central 13 0.8 -
New England 13 0.8 -
Allowance for losses (49) (2.9) -
------------------------------------
Total $1,708 100.0% 5.0%
====================================
Property type:
Office $ 590 34.5% -%
Retail 502 29.4 2.5
Industrial 304 17.8 6.0
Apartments 264 15.5 8.3
Hotel/motel 54 3.2 -
Other 43 2.5 78.8
Allowance for losses (49) (2.9) -
====================================
Total $1,708 100.0% 5.0%
====================================
</TABLE>
31
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
OUTSTANDING PERCENT OF TOTAL PERCENT
AMOUNT NONPERFORMING
----------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
December 31, 1995 Geographic distribution:
South Atlantic $ 551 30.8% 7.8%
Pacific 491 27.4 8.9
Mid-Atlantic 220 12.3 -
East North Central 192 10.6 -
Mountain 81 4.5 5.3
West South Central 189 10.6 11.4
East South Central 112 6.3 -
West North Central 9 0.5 -
New England 9 0.5 -
Allowance for losses (64) (3.5) -
====================================
Total $1,790 100.0% 6.1%
====================================
Property type:
Office $ 591 33.0% 2.1%
Retail 520 29.0 3.2
Industrial 306 17.1 2.2
Apartments 315 17.6 12.4
Hotel/motel 21 1.2 -
Residential 56 3.1 6.9
Other 45 2.5 75.6
Allowance for losses (64) (3.5) -
====================================
Total $1,790 100.0% 6.1%
====================================
</TABLE>
32
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
Impaired mortgage loans on real estate and related interest income were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Impaired loans:
With allowance* $ 60 $ 79
Without allowance - 4
------------------------------------
Total impaired loans $ 60 $ 83
====================================
<FN>
* Represents gross amounts before allowance for mortgage loan losses of $9
million and $22 million, respectively.
</FN>
</TABLE>
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN MILLIONS)
<S> <C> <C> <C>
Average investment $ 72 $ 102 $ 100
Interest income earned $ 6 $ 8 $ 6
Interest income - cash basis $ 6 $ 8 $ 3
</TABLE>
33
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
2. INVESTMENTS (CONTINUED)
2.5 INVESTMENT SUMMARY
Investments of the Company were as follows:
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------
AMOUNT AT
WHICH SHOWN IN
THE BALANCE SHEET
COST VALUE
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government
agencies and authorities $ 313,759 $ 339,306 $ 339,306
States, municipalities, and political
subdivisions 48,553 49,330 49,330
Foreign governments 313,655 326,662 326,662
Public utilities 2,014,461 2,088,615 2,088,615
Mortgage-backed securities 7,547,616 7,679,816 7,679,816
All other corporate bonds 14,522,896 14,910,350 14,910,350
Redeemable preferred stocks 1,194 1,302 1,302
------------------------------------------------------
Total fixed maturities 24,762,134 25,395,381 25,395,381
Equity securities:
Common stocks:
Industrial, miscellaneous, and other 9,976 10,163 10,163
Nonredeemable preferred stocks 7,666 10,392 10,392
------------------------------------------------------
Total equity securities 17,642 20,555 20,555
Mortgage loans on real estate* 1,707,843 XXXXXXXXX 1,707,843
Investment real estate 145,442 XXXXXXXXX 145,442
Policy loans 1,006,137 XXXXXXXXX 1,006,137
Other long-term investments 43,344 XXXXXXXXX 43,344
Short-term investments 94,882 XXXXXXXXX 94,882
======================================================
Total investments $ 27,777,424 $ XXXXXXXXX $ 28,413,584
======================================================
<FN>
* Amount is net of a $49 million allowance for losses.
</FN>
</TABLE>
34
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
3. DEFERRED POLICY ACQUISITION COSTS (DPAC)
The balance of DPAC at December 31 and the components of the change reported
in operating costs and expenses for the years then ended were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1 $ 605,501 $ 1,479,115 $ 481,615
Capitalization 188,001 203,607 194,974
Amortization (102,189) (68,295) (56,662)
======================================================
Balance at December 31 of SFAS 115 $ 1,042,783 ($605,501) $ 1,479,115
======================================================
</TABLE>
4. OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill $ 55,626 $ 57,795
Other 78,663 67,124
------------------------------------
Total other assets $ 134,289 $ 124,919
====================================
</TABLE>
35
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES
5.1 TAX LIABILITIES
Income tax liabilities were as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Current tax (receivable) payable $ (7,646) $ 10,875
Deferred tax liabilities, applicable to:
Net income 288,115 275,119
Net unrealized investment gains 121,892 274,544
------------------------------------
Total deferred tax liabilities 410,007 549,663
------------------------------------
Total current and deferred tax liabilities $ 402,361 $ 560,538
====================================
</TABLE>
Components of deferred tax liabilities and assets at December 31 were as
follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities applicable to:
Deferred policy acquisition costs $ 308,802 $ 163,017
Basis differential of investments 254,402 534,942
Other 130,423 117,436
---------------------------------------------
Total deferred tax liabilities 693,627 815,395
Deferred tax assets applicable to:
Policy reserves (219,677) (227,656)
Other (63,943) (38,076)
---------------------------------------------
Total deferred tax assets before valuation
allowance (283,620) (265,732)
Valuation allowance - -
---------------------------------------------
Total deferred tax assets, net of valuation
allowance (283,620) (265,732)
---------------------------------------------
Net deferred tax liabilities $ 410,007 $ 549,663
=============================================
</TABLE>
36
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.1 TAX LIABILITIES (CONTINUED)
A portion of life insurance income earned prior to 1984 is not taxable unless
it exceeds certain statutory limitations or is distributed as dividends. Such
income, accumulated in policyholders' surplus accounts, totaled $93.6 million
at December 31, 1996. At current corporate rates, the maximum amount of tax on
such income is approximately $32.8 million. Deferred income taxes on these
accumulations are not required because no distributions are expected.
5.2 TAX EXPENSE
Components of income tax expense for the year were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current expense $ 164,272 $ 153,720 $ 104,145
Deferred expense (benefit):
Deferred policy acquisition cost 21,628 38,275 30,234
Policy reserves (27,460) (49,177) (42,302)
Basis differential of investments 4,129 3,710 23,482
Other, net 14,091 (2,581) 12,629
------------------------------------------------------
Total deferred 12,388 (9,773) 24,043
------------------------------------------------------
Income tax expense $ 176,660 $ 143,947 $ 128,188
======================================================
</TABLE>
A reconciliation between the income tax expense computed by applying the
federal income tax rate (35%) to income before taxes and the income tax
expense reported in the financial statement is presented below.
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax at statutory percentage of GAAP pretax
income $ 178,939 $ 149,185 $ 124,292
Tax-exempt investment income (9,347) (10,185) (9,725)
Goodwill 759 768 770
Tax on sale of subsidiary - (661) 10,722
Other 6,309 4,840 2,129
------------------------------------------------------
Income tax expense $ 176,660 $ 143,947 $ 128,188
======================================================
</TABLE>
37
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
5. FEDERAL INCOME TAXES (CONTINUED)
5.3 TAXES PAID
Income taxes paid amounted to approximately $182 million, $90 million, and
$181 million in 1996, 1995, and 1994, respectively.
5.4 TAX RETURN EXAMINATIONS
The Company and its life insurance subsidiaries, together with certain other
life insurance subsidiaries of the Parent Company, file a consolidated federal
income tax return. The Internal Revenue Service ("IRS") has completed
examinations of the consolidated returns through 1988. The IRS is continuing
to dispute the tax treatment of some items for the years 1977 through 1988.
Some of these issues will require litigation to resolve; and any amounts
ultimately settled with the IRS would also include interest. Although the
final outcome is uncertain, the Parent Company believes that the ultimate
liability, including interest, resulting from these issues will not exceed
amounts currently provided for in the consolidated financial statements. The
IRS is currently examining the consolidated tax returns for the years 1989
through 1992.
In April 1992, the IRS issued Notices of Deficiency for the 1977-1981 tax
years of certain insurance subsidiaries. The basis of the dispute was the tax
treatment of modified coinsurance agreements. The Parent Company elected to
pay all related assessments plus associated interest, totaling $59 million. A
claim for refund of tax and interest was disallowed by the IRS in January
1993. On June 30, 1993, a representative suit for refund was filed in the
United States Court of Federal Claims. On February 7, 1996, the court ruled in
favor of the Parent Company on all legal issues related to this contingency,
and a judgement was entered in favor of the Parent Company on July 9, 1996 for
the portion of the contingency related to the representative case. The IRS has
appealed this judgement; however, the Parent Company intends to pursue a full
refund of the amounts paid. Accordingly, no provision has been made in the
consolidated financial statements related to this contingency.
38
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES
Affiliated notes and accounts receivable were as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
-----------------------------------------------------------------------
PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE
-----------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
American General Corporation,
9 3/8% due 2008 $ 4,725 $ 3,239 $ 4,725 $ 3,197
American General Corporation,
8 1/4%, due 2004 19,572 19,572 22,018 22,018
American General Corporation,
Restricted Subordinated Note,
13 1/2%, due 2002 33,550 33,550 35,608 35,608
-----------------------------------------------------------------------
Total notes receivable from affiliates
57,847 56,361 62,351 60,823
Accounts receivable from affiliates
- 30,127 - 29,841
-----------------------------------------------------------------------
Indebtedness from affiliates $ 57,847 $ 86,488 $ 62,351 $ 90,664
=======================================================================
</TABLE>
Various American General companies provide services to the Company,
principally mortgage servicing and investment advisory services. The Company
paid approximately $22,083,000, $21,006,000, and $21,161,000 for such services
in 1996, 1995, and 1994, respectively. Accounts payable for such services at
December 31, 1996 and 1995 were not material. In addition, the Company rents
facilities and provides services to various American General companies. The
Company received approximately $1,255,000, $2,086,000, and $2,486,000 for such
services and rent in 1996, 1995, and 1994, respectively. Accounts receivable
for rent and services at December 31, 1996 and 1995 were not material.
The Company has 8,500 shares of $100 par value cumulative preferred stock
authorized and outstanding with an $80 dividend rate, redeemable at $1,000 per
share after December 31, 2000. The holder of this stock, the Franklin Life
Insurance Company ("Franklin"), an affiliated company, is entitled to one vote
per share, voting together with the holders of common stock.
During 1996, the Company's residential mortgage loan portfolio of $42 million
was sold to American General Finance at carrying value plus accrued interest.
39
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS
7.1 PENSION PLANS
The Company has non-contributory, defined benefit pension plans covering most
employees. Pension benefits are based on the participant's average monthly
compensation and length of credited service offset by an amount that complies
with federal regulations. The Company's funding policy is to contribute
annually no more than the maximum amount deductible for federal income tax
purposes. The Company uses the projected unit credit method for computing
pension expense.
The components of pension expense and underlying assumptions were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 1,826 $ 1,346 $ 1,825
Interest cost on projected benefit obligation 2,660 2,215 2,007
Actual return on plan assets (9,087) (10,178) (523)
Amortization of unrecognized net asset (261) (888) (900)
Amortization of unrecognized prior service cost
197 197 222
Deferral of net asset gain (loss) 4,060 5,724 (3,586)
Amortization of gain 68 38 102
------------------------------------------------------
Total pension income $ (537) $ (1,546) $ (853)
======================================================
Assumptions:
Weighted-average discount rate on benefit
obligation 7.50% 7.25% 8.50%
Rate of increase in compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of return on plan assets
10.00% 10.00% 10.00%
</TABLE>
40
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.1 PENSION PLANS (CONTINUED)
The funded status of the plans and the prepaid pension expenses included in
other assets at December 31 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $ 27,558 $ 24,972
Nonvested 4,000 3,933
Additional minimum liability 205 323
------------------------------------
Accumulated benefit obligation 31,763 29,228
Effect of increase in compensation levels 5,831 5,536
------------------------------------
Projected benefit obligation 37,594 34,764
Plan assets at fair value 65,159 56,598
------------------------------------
Plan assets in excess of projected benefit obligation 27,565 21,834
Unrecognized net gain (15,881) (9,715)
Unrecognized prior service cost 274 473
Unrecognized transition asset - (261)
------------------------------------
Prepaid pension expense $ 11,958 $ 12,331
====================================
</TABLE>
More than 95% of the plan assets were invested in fixed maturity and equity
securities at the plan's most recent balance sheet date.
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and its life insurance subsidiaries, together with certain other
insurance subsidiaries of the Parent Company, have life, medical, supplemental
major medical, and dental plans for certain retired employees and agents. Most
plans are contributory, with retiree contributions adjusted annually to limit
employer contributions to predetermined amounts. The Company has reserved the
right to change or eliminate these benefits at any time.
41
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
The life plans are fully insured. A portion of the retiree medical and dental
plans are funded through a voluntary employees' beneficiary association
("VEBA") established in 1994; the remainder is unfunded and self-insured. All
of the retiree medical and dental plans' assets held in the VEBA were invested
in readily marketable securities at its most recent balance sheet date.
The plans' combined funded status and the accrued postretirement benefit cost
included in other liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $5,199 $ 6,242
Fully eligible active plan participants 251 143
Other active plan participants 2,465 2,580
------------------------------------
Accumulated postretirement benefit obligation 7,915 8,965
Plan assets at fair value 106 203
------------------------------------
Accumulated postretirement benefit obligation in excess
of plan assets at fair value 7,809 8,762
Unrecognized net gain (243) (1,855)
------------------------------------
Accrued postretirement benefit cost $7,566 $ 6,907
====================================
Weighted-average discount rate on postretirement benefit obligation
7.50% 7.25%
</TABLE>
The components of postretirement benefit expense were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost - benefits earned $218 $171 $208
Interest cost on accumulated postretirement benefit
obligation 626 638 527
------------------------------------------------------
Postretirement benefit expense $844 $809 $735
======================================================
</TABLE>
42
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
7. BENEFIT PLANS (CONTINUED)
7.2 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
For measurement purposes, a 9.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed in 1997; the rate was assumed
to decrease gradually to 5.0% in 2005 and remain at that level. A 1% increase
in the assumed annual rate of increase in per capita cost of health care
benefits results in a $337,894,000 increase in accumulated postretirement
benefit obligation and a $58,817,000 increase in postretirement benefit
expense.
8. DERIVATIVE FINANCIAL INSTRUMENTS
8.1 USE OF DERIVATIVE FINANCIAL INSTRUMENTS
The Company is neither a dealer nor a trader in derivative financial
instruments.
Interest rate swaps are occasionally used to effectively convert specific
investment securities from a floating- to a fixed-rate basis, or vice versa,
and to hedge against the risk of rising prices on anticipated investment
security purchases.
Currency swap agreements are infrequently used to effectively convert cash
flows from specific investment securities denominated in foreign currencies
into U.S. dollars at specified exchange rates and to hedge against currency
rate fluctuations on anticipated investment security purchases.
8.2 CREDIT AND MARKET RISK
The Company is exposed to credit risk in the event of nonperformance by
counterparties to swap agreements. The Company limits this exposure by
entering into swap agreements with counterparties having high credit ratings
and regularly monitoring the ratings.
43
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
8. DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
8.2 CREDIT AND MARKET RISK (CONTINUED)
The Company's credit exposure on swaps is limited to the fair value of swap
agreements that are favorable to the Company. The Company does not expect any
counterparty to fail to meet its obligation; however, nonperformance would not
have a material impact on the consolidated financial statements.
The Company's exposure to market risk is mitigated by the offsetting effects
of changes in the value of swap agreements and of the related investment
securities.
Derivative financial instruments related to investment securities did not have
a material effect on net investment income in 1996, 1995, or 1994.
8.3 TERMS OF DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments related to investment securities at
December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Interest rate swap agreements to pay fixed rate:
Notional amount $60 $45
Average receive rate 6.19% 5.82%
Average pay rate 6.42% 6.41%
Interest rate swap agreements to receive fixed rate:
Notional amount $44 $24
Average receive rate 6.84% 7.03%
Average pay rate 6.01% 6.82%
Currency swap agreements (receive U.S. dollars/pay Canadian dollars):
Notional amount (in U.S. dollars) $99 $72
Average exchange rate 1.57 1.62
</TABLE>
Average floating rates may change significantly, thereby affecting future cash
flows. Swap agreements generally have terms of two to ten years.
44
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, requires
disclosure of the fair value of financial instruments. This standard excludes
certain financial instruments and all nonfinancial instruments, including
policyholder liabilities, from its disclosure requirements. Care should be
exercised in drawing conclusions based on fair value, since (1) the fair
values presented do not include the value associated with all of the Company's
assets and liabilities and (2) the reporting of investments at fair value
without a corresponding revaluation of related policyholder liabilities can be
misinterpreted.
Carrying amounts and fair values for those financial instruments covered by
SFAS 107 at December 31, 1996 are presented below:
<TABLE>
<CAPTION>
FAIR CARRYING
VALUE AMOUNT
------------------------------------
(IN MILLIONS)
<S> <C> <C>
Assets:
Fixed maturity and equity securities * $ 25,416 $ 25,416
Mortgage loans on real estate $ 1,716 $ 1,708
Policy loans $ 1,012 $ 1,006
Investment in parent company $ 29 $ 29
Indebtedness from affiliates $ 86 $ 86
Liabilities:
Insurance investment contracts $ 22,025 $ 23,416
<FN>
* Includes derivative financial instruments with negative fair value of
$10.8 million and $3.6 million and positive fair value of $.6 million and
$1.1 million at December 31, 1996 and 1995, respectively.
</FN>
</TABLE>
45
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions were used to estimate the fair values of
financial instruments:
FIXED MATURITY AND EQUITY SECURITIES
Fair values of fixed maturity and equity securities were based on
quoted market prices, where available. For investments not actively
traded, fair values were estimated using values obtained from
independent pricing services or, in the case of some private
placements, by discounting expected future cash flows using a current
market rate applicable to yield, credit quality, and average life of
investments.
MORTGAGE LOANS ON REAL ESTATE
Fair value of mortgage loans was estimated primarily using discounted
cash flows based on contractual maturities and risk-adjusted discount
rates.
POLICY LOANS
Fair value of policy loans was estimated using discounted cash flows
and actuarially determined assumptions incorporating market rates.
INVESTMENT IN PARENT COMPANY
The fair value of the investment in Parent Company is based on quoted
market prices of American General Corporation common stock.
INSURANCE INVESTMENT CONTRACTS
Insurance investment contracts do not subject the Company to
significant risks arising from policyholder mortality or morbidity.
The majority of the Company's annuity products are considered
insurance investment contracts. Fair value of insurance investment
contracts was estimated using cash flows discounted at market
interest rates.
46
<PAGE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
INDEBTEDNESS FROM AFFILIATES
Indebtedness from affiliates is composed of accounts receivable and
notes receivable from affiliates. Due to the short-term nature of
accounts receivable, fair value is assumed to equal carrying value.
Fair value of notes receivable was estimated using discounted cash
flows based on contractual maturities and discount rates that were
based on U.S. Treasury rates for similar maturity ranges.
10. DIVIDENDS PAID
American General Life Insurance Company paid $189 million, $207 million, and
$240 million in dividends on common stock to AGC Life Insurance Company in
1996, 1995 and 1994, respectively. The 1995 dividends included $701 thousand
in the form of furniture and equipment. In addition, in 1996, the Company paid
$680 thousand in dividends on preferred stock to Franklin.
11. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES
The Company and its insurance subsidiaries are restricted by state insurance
laws as to the amounts they may pay as dividends without prior approval from
their respective state insurance departments. At December 31, 1996,
approximately $2.4 billion of consolidated shareholders' equity represents net
assets of the Company which cannot be transferred, in the form of dividends,
loans, or advances to the Parent Company. Approximately $1.7 billion of
consolidated shareholders' equity is similarly restricted as to transfer from
its subsidiaries to the Company.
Generally, the net assets of the Company's subsidiaries available for transfer
to the Parent are limited to the amounts that the subsidiaries' net assets, as
determined in accordance with statutory accounting practices, exceed minimum
statutory capital requirements. However, payments of such amounts as dividends
may be subject to approval by regulatory authorities and are generally limited
to the greater of 10% of policyholders' surplus or the previous year's
statutory net gain from operations.
The Company has various leases, substantially all of which are for office
space and facilities. Rentals under financing leases, contingent rentals, and
future minimum rental commitments and rental expense under operating leases
are not material.
47
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
11. RESTRICTIONS, COMMITMENTS, AND CONTINGENCIES (CONTINUED)
The Company is party to various lawsuits arising in the ordinary course of
business. The Company believes that it has a valid and substantial defense to
each of these actions and is defending them vigorously. Further, it is the
Company's opinion and the opinion of counsel for the Company that the outcome
of these actions will not have a materially adverse effect on the financial
position or results of operations of the Company.
The Company is a defendant in lawsuits filed as purported class actions,
asserting claims related to sales practices of certain life insurance
products. Because these cases are in the early stages of litigation, it is
premature to address their materiality. The claims are being defended
vigorously by the Company.
The increase in the number of insurance companies that are under regulatory
supervision has resulted, and is expected to continue to result, in increased
assessments by state guaranty funds to cover losses to policyholders of
insolvent or rehabilitated insurance companies. Those mandatory assessments
may be partially recovered through a reduction in future premium taxes in
certain states. At December 31, 1996 and 1995, the Company has accrued $16.1
million and $21.3 million, respectively, for guaranty fund assessments, net of
$4.1 million and $4.3 million, respectively, of premium tax deductions. The
Company has recorded receivables of $10.9 million and $7.4 million at December
31, 1996 and 1995, respectively, for expected recoveries against the payment
of future premium taxes. Expenses incurred for guaranty fund assessments were
$6.0 million, $22.4 million, and $8.7 million in 1996, 1995, and 1994,
respectively.
48
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. REINSURANCE
Reinsurance transactions for the years ended December 31, 1996, 1995, and 1994
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CEDED TO OTHER ASSUMED FROM OF AMOUNT
GROSS AMOUNT COMPANIES OTHER COMPANIES NET AMOUNT ASSUMED TO NET
----------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
December 31, 1996
Life insurance in force $ 44,535,841 $ 8,625,465 $ 5,081 $ 35,915,457 .01%
=======================================================================
Premiums:
Life insurance and annuities
$ 104,225 $ 34,451 $ 36 $ 69,810 .05%
Accident and health insurance
1,426 64 - 1,362 .00%
-----------------------------------------------------------------------
Total premiums $ 105,651 $ 34,515 $ 36 $ 71,172 .05%
=======================================================================
December 31, 1995
Life insurance in force $ 44,637,599 $ 7,189,493 $ 5,771 $ 37,453,877 0.02%
=======================================================================
Premiums:
Life insurance and annuities
$ 103,780 $ 26,875 $ 171 $ 77,076 0.22%
Accident and health insurance
1,510 82 - 1,428 0.00%
-----------------------------------------------------------------------
Total premiums $ 105,290 $ 26,957 $ 171 $ 78,504 0.22%
=======================================================================
December 31, 1994
Life insurance in force $ 41,360,465 $ 4,519,564 $ 6,813 $ 36,847,714 0.02%
=======================================================================
Premiums:
Life insurance and annuities
$ 110,089 $ 26,390 $ 147 $ 83,846 0.18%
Accident and health insurance
1,723 146 - 1,577 0.00%
-----------------------------------------------------------------------
Total premiums $ 111,812 $ 26,536 $ 147 $ 85,423 0.17%
=======================================================================
</TABLE>
49
<PAGE>
American General Life Insurance Company
Notes to Consolidated Financial Statements (continued)
12. REINSURANCE (CONTINUED)
Reinsurance recoverable on paid losses was approximately $6,904,000,
$6,190,000 and $3,671,000 at December 31, 1996, 1995, and 1994, respectively.
Reinsurance recoverable on unpaid losses was approximately $4,282,000,
$2,775,000, and $5,371,000 at December 31, 1996, 1995, and 1994, respectively.
13. ACQUISITIONS
Effective December 31, 1995, the Company purchased Franklin United Life
Insurance Company, a subsidiary of Franklin, which is a wholly owned
subsidiary of the Parent Company. This purchase was effected through issuance
of $8.5 million in preferred stock to Franklin. The acquisition was accounted
for using the purchase method of accounting and is not material to the
operations of the Company.
50
<PAGE>
COMBINED FINANCIAL STATEMENTS - STATUTORY BASIS
AMERICAN GENERAL LIFE INSURANCE COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
51
<PAGE>
American General Life Insurance Company
Combined Financial Statements - Statutory Basis (Unaudited)
Nine Months ended September 30, 1997
CONTENTS
<TABLE>
<S> <C>
Balance Sheet - Statutory Basis (Unaudited) ................................. 53
Statement of Income - Statutory Basis (Unaudited) ............................. 55
Statement of Changes in Capital and Surplus - Statutory Basis (Unaudited) ..... 56
Statement of Cash Flows - Statutory Basis (Unaudited) ......................... 57
Notes to Combined Financial Statements (Unaudited) ............................ 59
</TABLE>
52
<PAGE>
American General Life Insurance Company
Combined Balance Sheet -- Statutory Basis (Unaudited)
September 30, 1997
<TABLE>
<CAPTION>
ADMITTED ASSETS September 30, 1997
-------------------
<S> <C>
Cash and investments:
Bonds $26,273,506,860
Preferred stocks 6,183,431
Common stocks 10,846,089
Short-term investments 0
Investment in subsidiaries and affiliates-common 28,925,302
stocks
Mortgage loans on real estate 1,626,899,145
Real estate 181,768,724
Loans to policyholders 1,080,961,476
Other invested assets 45,609,424
-------------------
Total cash and investments 29,254,700,451
Amounts recoverable from reinsurers 5,185,923
Commissions and expense allowances due 1,438,070
Experience rating and other refunds due 1,316,142
EDP equipment 17,991,714
Accrued investment income 446,816,029
Premiums due, deferred, and uncollected 25,897,695
Receivable from affiliates 2,294,838
Other admitted assets 45,600,635
-------------------
Total assets excluding separate accounts 29,801,241,497
Assets held in separate accounts 10,861,178,651
Total admitted assets $40,662,420,148
===================
</TABLE>
SEE ACCOMPANYING NOTES.
53
<PAGE>
American General Life Insurance Company
Combined Balance Sheet -- Statutory Basis (Unaudited)
September 30, 1997
<TABLE>
<CAPTION>
LIABILITIES, CAPITAL, AND SURPLUS September 30, 1997
-------------------
<S> <C>
Liabilities:
Policy and contractual liabilities:
Life and annuity reserves $ 27,145,872,256
Accident and health reserves 6,655,192
Premiums received in advance 911,509
Policy and contract claims 40,493,718
Premium and other deposit liabilities 293,428,178
Policyholder dividends 54,483,157
-------------------
Total policy and contractual liabilities 27,541,844,010
Federal income taxes (2,419,274)
Cash overdraft 16,585,494
Experience rating refunds 36,893,478
Payable to affiliates 4,346,236
Amounts withheld or retained by company as agent
or trustee 5,495,865
Accrued expenses:
General expenses 24,981,060
Commissions 18,132,071
Taxes, licenses, and fees 10,580,596
-------------------
Total accrued expenses 53,693,727
Other liabilities 248,806,372
Transfers to Separate Accounts due or accrued (134,635,910)
Asset valuation reserve 320,388,669
Interest maintenance reserve 4,421,280
-------------------
Total liabilities excluding separate accounts 28,095,419,947
Liabilities related to separate accounts 10,861,178,651
-------------------
Total liabilities 38,956,598,598
Capital and surplus:
Common stock - $10 par value; 600,000 shares
authorized, issued, and outstanding 6,000,000
Preferred stock - $100 par value; 8,500 shares
authorized,
issued, and outstanding 850,000
Additional paid-in capital 577,997,127
Unassigned surplus 1,120,974,423
-------------------
Total capital and surplus 1,705,821,550
Total liabilities, capital, and surplus $40,662,420,148
===================
</TABLE>
SEE ACCOMPANYING NOTES.
54
<PAGE>
American General Life Insurance Company
Combined Statement of Income -- Statutory Basis (Unaudited)
Nine Months ended September 30, 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
-------------------
REVENUES:
<S> <C>
Premiums and annuity considerations $500,888,756
Deposit-type funds 2,603,213,634
Other considerations received 100,948,992
Net investment income 1,638,603,049
Amortization of the interest maintenance reserve (521,997)
Other income 206,930,569
-------------------
Total revenues 5,050,063,003
BENEFITS PAID OR PROVIDED:
Death and matured endowments 114,238,116
Annuity 207,206,249
Surrender benefits 1,294,956,270
Other benefits 65,537,520
Increase in life, annuity, and health reserves 1,007,748,877
Increase in liability for policyholder funds 11,498,459
-------------------
Total benefits paid or provided 2,701,185,491
INSURANCE AND OTHER EXPENSES:
Commissions 154,973,626
General insurance expense 175,073,115
Taxes, licenses, and fees 22,853,773
Net transfers to separate accounts 1,613,990,924
Other benefits and expenses 8,960,322
-------------------
Total insurance and other expenses 1,975,851,760
-------------------
Net gain from operations before dividends to
policyholders, income taxes, and net realized
capital losses 373,025,752
Dividends to policyholders 3,368,547
-------------------
Net gain from operations before income taxes and net
realized capital gains
Federal income taxes 133,125,864
-------------------
Net gain from operations 236,531,341
Net realized capital gains, net of income taxes 6,406,886
-------------------
Net income $242,938,227
===================
</TABLE>
SEE ACCOMPANYING NOTES.
55
<PAGE>
American General Life Insurance Company
Combined Statement of Changes in Capital and Surplus --
Statutory Basis (Unaudited)
Nine Months ended September 30, 1997
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
-------------------
<S> <C>
Balance at December 31, 1996 $1,441,768,173
Net income 242,938,227
Net change in difference between cost and
admitted asset investment amounts (4,680,930)
Increase in nonadmitted assets (6,115,251)
Increase in reserve valuation (906,250)
Increase in asset valuation reserve (29,182,419)
Surplus contributed from Parent 250,000,000
Dividends to common shareholders (188,000,000)
Balance at September 30, 1997 $1,705,821,550
===================
</TABLE>
SEE ACCOMPANYING NOTES.
56
<PAGE>
American General Life Insurance Company
Combined Statement of Cash Flows -- Statutory Basis (Unaudited)
Nine Months ended September 30, 1997
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
-------------------
OPERATING ACTIVITIES
<S> <C>
Premiums and annuity considerations $500,688,771
Deposit-type funds 2,603,213,638
Considerations for supplementary contracts with life
contingencies 42,454,951
Considerations for supplementary contracts without
life contingencies and dividend accumulations 58,484,953
Coupons left to accumulate interest 20,517
Commissions and expense allowances on reinsurance
ceded 94,745,089
Net investment income 1,565,641,843
Other income received 111,377,663
Death benefits (108,685,487)
Matured endowments (2,735,732)
Disability benefits and benefits under accident
and health policies (2,316,240)
Surrender benefits and other fund withdrawals paid (1,300,836,564)
Annuity benefits (208,353,984)
Coupons, guaranteed annual pure endowments, and similar (51,882)
benefits
Interest on policy or contract funds (753,593)
Payments on supplementary contracts with life
contingencies (2,996,787)
Payments on supplementary contracts without life
contingencies and dividend accumulation (58,460,745)
Accumulated coupon payments (272,457)
Commissions on premiums and annuity considerations (152,669,029)
Commissions and expenses allowances on reinsurance
assumed (7,452)
General insurance expenses (172,501,330)
Insurance taxes, licenses and fees, excluding
federal income tax (26,746,887)
Net transfers to separate accounts (1,650,489,810)
Dividends paid to policyholders (3,852,830)
Federal income taxes paid (128,191,331)
Other operating expenses paid (9,572,779)
-------------------
Net Cash from Operations 1,147,132,506
</TABLE>
SEE ACCOMPANYING NOTES.
57
<PAGE>
American General Life Insurance Company
Combined Statement of Cash Flows -- Statutory Basis (Unaudited)
Nine Months ended September 30, 1997
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1997
-------------------
INVESTING ACTIVITIES
<S> <C>
Purchase of investments (16,052,953,940)
Proceeds from investments sold, matured, or repaid 14,768,046,071
Net increase in policy loans and premium notes (74,985,961)
Net tax on capital gains (1,881,772)
-------------------
Net cash used in investing activities (1,361,775,602)
FINANCING AND MISCELLANEOUS ACTIVITIES
Increase in borrowed money 24,434,000
Capital contribution 250,000,000
Dividends paid to stockholder
Other, net
(188,000,000)
46,019,429
-------------------
Net cash from financing and miscellaneous
activities 132,453,429
Net decrease in short-term investments and cash
overdraft (82,189,667)
Short-term investments and cash at beginning of
period 65,604,173
Short-term investments and cash overdraft at end
of period $(16,585,494)
===================
</TABLE>
SEE ACCOMPANYING NOTES.
58
<PAGE>
American General Life Insurance Company
Notes to Combined Financial Statements -- Statutory Basis (Unaudited)
September 30, 1997
BACKGROUND
American General Life Insurance Company (the "Company") is a wholly owned
subsidiary of AGC Life Insurance Company, which is a wholly owned subsidiary
of American General Corporation (the "Parent Company"). The Company's wholly
owned life insurance subsidiaries are American General Life Insurance Company
of New York ("AGNY") and the Variable Annuity Life Insurance Company
("VALIC").
1. BASIS OF PRESENTATION
The accompanying combined financial statements of the Company have been
prepared in conformity with accounting practices prescribed or permitted
by the National Association of Insurance Commissioners ("NAIC") and the
Texas Department of Insurance. Such practices vary from generally
accepted accounting principles ("GAAP"). The preparation of financial
statements required management to make estimates and assumptions that
affect (1) the reported amounts of assets and liabilities, (2)
disclosures of contingent assets and liabilities, and (3) the reported
amounts of revenues and expenses during the reporting periods. Such
estimates and assumptions could change in the future as more information
becomes known, which could impact the amounts reported herein.
The costs of both acquiring and renewing business are expensed when
incurred. Under GAAP, acquisition costs related to interest-sensitive
life insurance contracts, insurance investment contracts, and
participating life insurance contracts, to the extent recoverable from
future gross profits, are deferred and amortized, generally in
proportion to the present value of expected future gross profit margins.
For all other insurance contracts, to the extent recoverable from future
policy revenues, deferred policy acquisition costs are amortized over
the premium-paying period of the related contracts using assumptions
that are consistent with those used in computing policy benefit
reserves.
Certain assets designated as "nonadmitted" assets--principally
receivables, furniture and equipment, computer software, and agents'
debit balances--are excluded from the accompanying balance sheet and are
charged directly to unassigned surplus.
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions, rather than on estimated expected
experience or actual account balances as is required under GAAP. In
addition, statutory reserves may be reduced by an expense allowance,
which partially offsets the effect of not deferring policy acquisition
expenses.
A liability for reinsurance balances has been provided for unsecured
policy reserves, unearned premiums, and unpaid losses ceded to
reinsurers unauthorized by license to assume such business. Changes to
these amounts are credited or charged directly to unassigned surplus.
Under GAAP, an allowance for amounts deemed uncollectible would be
established through a charge to earnings.
59
<PAGE>
American General Life Insurance Company
Notes to Combined Financial Statements -- Statutory Basis (Unaudited)
September 30, 1997
Policy and contractual liabilities ceded to reinsurers have been
reported as reductions of the related reserves, rather than as assets as
is required under GAAP.
Deferred income taxes are not provided for differences between income
reported for financial statement purposes and for income tax purposes or
for unrealized gains or losses on investments.
Investments in bonds and preferred stocks are generally reported at
amortized cost. However, if bonds are designated category "6" and
preferred stocks are designated categories "4-6" by the NAIC, these
investments are reported at the lesser of amortized cost or market
value. For GAAP, such fixed-maturity investments are designated at
purchase as held-to-maturity, trading, or available-for-sale.
Held-to-maturity fixed investments are reported at amortized cost, and
the remaining fixed-maturity investments are reported at fair value,
with unrealized holding gains and losses reported in operations for
those designated as trading and as a separate component of shareholders'
equity for those designated as available-for-sale. Statutory market
values of certain investments in bonds and stocks, as discussed above,
are based on values specified by the Securities Valuation Office ("SVO")
of the NAIC. Investments in real estate are reported net of related
obligations rather than on a gross basis. Real estate owned and occupied
by the Company is included in investments rather than reported as an
operating asset, and investment income and operating expenses include
rent for the Company's occupancy of those properties. Changes between
cost and admitted investment amounts are credited or charged directly to
unassigned surplus rather than to a separate surplus account.
Realized gains and losses are reported, after net gain from operations,
net of tax and transfers to the interest maintenance reserve. Under
GAAP, pretax realized gains and losses are reported as a component of
total revenues with related taxes combined with taxes from operations.
As prescribed by the NAIC, the Asset Valuation Reserve ("AVR") is
computed in accordance with a prescribed formula and represents a
provision for possible fluctuations in the value of bonds, equity
securities, mortgage loans, real estate, and other invested assets.
Changes to the AVR are charged or credited directly to unassigned
surplus.
As also prescribed by the NAIC, the Company reports an Interest
Maintenance Reserve ("IMR") that represents the net accumulated
unamortized realized capital gains and losses attributable to changes in
the general level of interest rates on sales of fixed income
investments, principally bonds and mortgage loans. Such gains or losses
are amortized into income on a straight-line basis over the remaining
period to maturity based on groupings of individual securities sold in
five-year bands.
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
Revenues for universal life policies consist of the total premiums
received and benefits represent the death benefits and surrender values
paid and the change in policy reserves. Under GAAP, premiums received in
excess of policy charges are not recognized as premium revenue and
benefits represent the excess of benefits paid over the policy account
value and interest credited to the account values.
60
<PAGE>
American General Life Insurance Company
Notes to Combined Financial Statements -- Statutory Basis (Unaudited)
September 30, 1997
2. YEAR 2000 CONTINGENCY
Management has been engaged in a program to render its computer systems
(hardware and mainframe and personal applications software) Year 2000
compliant. The Company will incur internal staff costs as well as
third-party vendor and other expenses to prepare the systems for Year
2000. The cost of testing and conversion of systems applications has not
had, and is not expected to have, a material adverse effect on the
Company. However, risks and uncertainties exist in most significant
systems development projects. If conversion of the Company's systems is
not completed on a timely basis, due to nonperformance by third-party
vendors or other unforeseen circumstances, the Year 2000 problem could
have a material adverse impact on the operations of the Company.
3. LITIGATION
The Company and its subsidiaries are defendants in purported lawsuits,
asserting claims related to pricing and sales practices. These claims
are being defended vigorously by the Company. Given the uncertain nature
of litigation and the early stages of this litigation, the outcome of
these actions cannot be predicted at this time. Company management
nevertheless believes that the ultimate outcome of all such pending
litigation should not have a material adverse effect on the Company's
combined capital and surplus; however, it is possible that settlements
or adverse determinations is one or more of these actions or other
future proceedings could have a material adverse effect on the Company's
results of operations for a given period. No provision has been made in
the financial statements related to this pending litigation because the
amount of loss, if any, from these actions cannot be reasonably
estimated at this time.
61
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
PART A: None
PART B:
(1) Consolidated Financial Statements of American General
Life Insurance Company:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of December 31,
1996 and 1995
Consolidated Income Statements for the years
ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Combined Financial Statements - Statutory Basis
(Unaudited) Nine Months Ended September 30, 1997
PART C: None
<TABLE>
(b) Exhibits
<S> <C>
1(a) American General Life Insurance Company of
Delaware Board of Directors resolution
authorizing the establishment of Separate
Account D. (1)
(b) Resolution of the Board of Directors of
American General Life Insurance Company of
Delaware authorizing, among other things, the
redomestication of that company in Texas and
the renaming of that company as American
General Life Insurance Company. (2)
(c) Resolution of the Board of Directors of
American General Life Insurance Company of
Delaware providing, INTER ALIA, for Registered
Separate Accounts' Standards of Conduct. (3)
2 None
3 (a) Distribution Agreement, dated October 3, 1991,
between American General Securities
Incorporated and American General Life
Insurance Company. (2)
C-1
<PAGE>
(b)(i) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
American General Series Portfolio Company and
the Variable Annuity Life Insurance Company.
(ii) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
Hotchkis and Wiley Variable Trust and Hotchkis
and Wiley.
(iii) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
LEVCO Series Trust and John A. Levin & Co.,
Inc.
(iv) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
Navellier Variable Insurance Series Fund, Inc.
and Navellier & Associates, Inc.
(v) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated, the
OFFITBANK Variable Insurance Fund, Inc.,
OFFITBANK and OFFIT Funds Distributor, Inc.
(vi) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
Royce Capital Fund and Royce & Associates,
Inc..
(vii) Form of fund Participation Agreement among
American General Life Insurance Company,
American General Securities Incorporated,
Wright Managed Blue Chip Series Trust and
Wright Investors Service, Inc.
(c) Form of Agreement between American General
Life Insurance Company and Dealer regarding
exchange and allocation transaction requests.
(4)
4 (a) Specimen form of Combination Fixed and
Variable Deferred Annuity Select Reserve(sm)
Contract. (Form No. 97505) (11)
(b) Form of Qualified Contract Endorsement. (2)
(c)(i) Specimen form of Individual Retirement Annuity
Disclosure Statement and additional
specialized forms available under Contract
Form No. 97505. (5)
(ii) Specimen form of Individual Retirement Annuity
Endorsement. (6)
(iii) Specimen form of IRA Instruction Form. (4)
5 (a) Specimen form of Application for Contract Form
No. 97505. (11)
(b)(i) Specimen form of Separate Account D Election
of Annuity Payment Option/Change Form. (4)
(ii) Specimen form of Absolute Assignment to Effect
Section 1035(a) Exchange and Rollover of a
Life Insurance Policy or Annuity Contract. (4)
C-2
<PAGE>
(c)(i) Form of Transaction Request Form. (4)
(ii) Specimen form of Select ReserveSM Service
Request, including telephone transfer
authorization.
(iii) Specimen form of confirmation of initial
purchase payment under Contract Form No.
97505.
6 (a) Amended and Restated Articles of Incorporation
of American General Life Insurance Company,
effective December 31, 1991. (2)
(b) Bylaws of American General Life Insurance
Company, adopted January 22, 1992. (4)
7 None
8 (a) Form of Agreement by and between the Variable
Annuity Life Insurance Company and American
General Life Insurance Company
(b) Form of Agreement by and between Hotchkis and
Wiley and American General Life Insurance
Company.
(c) Form of Agreement by and between John A. Levin
and Co., Inc. and American General Life
Insurance Company.
(d) Form of Agreement by and between Navellier &
Associates, Inc. and American General Life
Insurance Company.
(e) Form of Agreement by and between OFFITBANK and
American General Life Insurance Company.
(f) Form of Agreement by and between Royce &
Associates, Inc. and American General Life
Insurance Company.
(g) Form of Agreement by and between Wright
Investors' Service Inc. and American General
Life Insurance Company.
9 Opinion and consent of Counsel.
10 Consent of Independent Auditors.
11 None
12 None
C-3
<PAGE>
13(a) Computations of hypothetical historical
average annual total returns for each Division
available under Contract Form No. 97505 for
the one, five and ten year periods ended
December 31, 1996, and since inception.
(b) Computations of hypothetical historical
cumulative total returns for each Division
available under Contract Form No. 97505 for
the one, five and ten year periods ended
December 31, 1996, and since inception.
(c) Computations of hypothetical historical seven
day yield and effective yield for the Money
Market Division available under Contract Form
No. 97505 for the seven day period ended
December 31, 1996.
14 Financial Data Schedule. (See Exhibit 27
below.)
15(a) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by
Peter V. Tuters in his capacity as director
and, where applicable, officer of American
General Life Insurance Company. (7)
(b) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by
Jon Newton in his capacity as director and,
where applicable, officer of American General
Life Insurance Company. (8)
(c) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by
the following persons in their capacities as
directors and, where applicable, officers of
American General Life Insurance Company:
Messrs. Martin and Herbert. (9)
(d) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by
the following persons in their capacities as
directors and, where applicable, officers of
American General Life Insurance Company:
Messrs. Fravel and LaGrasse. (10)
(e) Power of Attorney with respect to Registration
Statements and Amendments thereto signed by
the following persons in their capacities as
directors and, where applicable, officers of
American General Life Insurance Company:
Messrs. D'Agostino, Imhoff and Polkinghorn.
27 (Inapplicable, because, notwithstanding Item
24.(b) as to Exhibits, the Commission staff
has advised that no such Schedule is
required.)
C-4
<PAGE>
<FN>
(1) Incorporated herein by reference to the initial filing of Registrant's
Form N-4 Registration Statement (File No. 2-49805) on December 6, 1973.
(2) Incorporated herein by reference to the initial filing of Registrant's
Form N-4 Registration Statement (File No. 33-43390, filed on October 16,
1991.
(3) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement (File No. 33-43390), filed on
December 31, 1991.
(4) Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registrant's Registration Statement (File No. 33-43390), filed on April
30,1992.
(5) Included in Part A of this Amendment.
(6) Previously filed in Post-Effective Amendment No. 4 to Registrant's Form
N-4 Registration Statement (File No. 33-43390), filed on April 28, 1995.
(7) Previously filed in Post-Effective Amendment No. 3 to Registrant's Form
N-4 Registration Statement (File No. 33-43390), filed on March 2, 1994.
(8) Previously filed in Post-Effective Amendment No. 7 to Registrant's Form
N-4 Registration Statement (File No. 33-43390), filed on April 30, 1996.
(9) Previously filed in Post-Effective Amendment No. 9 to Registrant's Form
N-4 Registration Statement (File No.33-43390), filed on August 16, 1996.
(10) Previously filed in Post-Effective Amendment No. 12 to Registrant's Form
N-4 Registration Statement (File No. 33-43390), filed on April 30, 1997.
(11) Previously filed in the initial filing of Registrant's Form N-4
Registration Statement (File No.333-40637) on November 20, 1997.
</FN>
</TABLE>
C-5
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The directors, executive officers, and, to the extent
responsible for variable annuity operations, other officers of
the depositor are listed below.
<TABLE>
<CAPTION>
Positions And Offices
Name And Principal With The
Business Address Depositor
------------------ ---------------------
<S> <C>
Robert M. Devlin Chairman
2929 Allen Parkway
Houston, TX 77019
Jon P. Newton Vice Chairman
2929 Allen Parkway
Houston, TX 77019
James S. D'Agostino Director
2929 Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director, President & Chief
2727-A Allen Parkway Executive Officer
Houston, TX 77019
David A. Fravel Director & Senior Vice President,
2727-A Allen Parkway Insurance Services
Houston, TX. 77019
Robert F. Herbert, Jr. Director, Senior Vice President
2727-A Allen Parkway Chief Financial Officer, Treasurer & Controller
Houston, TX 77019
Royce G. Imoff, II Director, Senior Vice President &
2727-A Allen Parkway Chief Marketing Officer
Houston, TX 77019
John V. LaGrasse Director, Senior Vice President &
2727-A Allen Parkway Chief Systems Officer
Houston, TX 77019
Philip K. Polkinghorn Director & Senior Vice President
2727-A Allen Parkway
Houston, TX 77019
Peter V. Tuters Director, Vice President & Chief
2929 Allen Parkway Investment Officer
Houston, TX 77019
F. Paul Kovach, Jr. Senior Vice President, Broker Dealers and
2727-A Allen Parkway Financial Institution Marketing Group
Houston, TX 77019
C-6
<PAGE>
Simon J. Leech, ACS Senior Vice President, Houston Service Center
2727-A Allen Parkway
Houston, TX 77019
Wayne A. Barnard Vice President & Chief Actuary
2727-A Allen Parkway
Houston, TX 77019
Dennis H. Roberts Vice President
2727-A Allen Parkway
Houston, TX 77019
Timothy W. Still Vice President
2727-A Allen Parkway
Houston, TX 77019
Steven A. Glover Assistant Secretary
2727-A Allen Parkway
Houston, TX 77019
Joyce R. Bilski Administrative Officer
2727-A Allen Parkway
Houston, TX 77019
Farideh Farrokhi Assistant Controller
2727-A Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
C-7
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
SUBSIDIARIES OF AMERICAN GENERAL CORPORATION1,2
The following is a list of American General Corporation's
subsidiaries as of December 31, 1997. All subsidiaries listed are
corporations, unless otherwise indicated. Subsidiaries of
subsidiaries are indicated by indentations and unless otherwise
indicated, all subsidiaries are wholly owned. Inactive subsidiaries
are denoted by an asterisk (*).
<TABLE>
<CAPTION>
Jurisdiction of
Name Incorporatiion
------ ----------------
<S> <C>
AGC Life Insurance Company(5).................................................. Missouri
American General Life and Accident Insurance Company(6) ...................... Tennessee
American General Exchange, Inc. ............................................. Tennessee
Independent Fire Insurance Company........................................... Florida
American General Property Insurance Company of Florida..................... Florida
Old Faithful General Agency, Inc........................................... Texas
Independent Life Insurance Company........................................... Georgia
American General Life Insurance Company(7) ................................... Texas
(REGISTRANT IS A SEPARATE ACCOUNT OF AMERICAN GENERAL LIFE
INSURANCE COMPANY, DEPOSITOR)
American General Annuity Service Corporation ................................ Texas
American General Life Insurance Company of New York ......................... New York
The Winchester Agency Ltd. ................................................. New York
The Variable Annuity Life Insurance Company ................................. Texas
The Variable Annuity Marketing Company ..................................... Texas
VALIC Investment Services Company .......................................... Texas
VALIC Retirement Services Company .......................................... Texas
VALIC Trust Company ........................................................ Texas
Astro Acquisition Corp........................................................ Delaware
The Franklin Life Insurance Company .......................................... Illinois
The American Franklin Life Insurance Company ................................ Illinois
Franklin Financial Services Corporation ..................................... Delaware
HBC Development Corporation .................................................. Virginia
Allen Property Company ........................................................ Delaware
Florida Westchase Corporation................................................. Delaware
Hunter's Creek Communications Corporation .................................... Florida
Westchase Development Corporation............................................. Delaware
American General Capital Services, Inc. ....................................... Delaware
American General Corporation(*) ............................................... Delaware
American General Delaware Management Corporation1 ............................. Delaware
American General Finance, Inc. ............................................... Indiana
AGF Investment Corp. ........................................................ Indiana
American General Auto Finance, Inc. . ....................................... Delaware
American General Finance Corporation(8) ..................................... Indiana
American General Finance Group, Inc. ....................................... Delaware
American General Financial Services, Inc.(9) .............................. Delaware
The National Life and Accident Insurance Company ......................... Texas
C-8
<PAGE>
Merit Life Insurance Co. ................................................... Indiana
Yosemite Insurance Company ................................................. California
American General Finance, Inc................................................ Alabama
American General Financial Center ........................................... Utah
American General Financial Center, Inc.(*) .................................. Indiana
American General Financial Center, Incorporated(*) .......................... Indiana
American General Financial Center Thrift Company(*) ......................... California
Thrift, Incorporated(*) ..................................................... Indiana
American General Independent Producer Division Co............................. Delaware
American General Investment Advisory Services, Inc.(*) ...................... Texas
American General Investment Holding Corporation(10)........................... Delaware
American General Investment Management Corporation(10)........................ Delaware
American General Realty Advisors, Inc. ....................................... Delaware
American General Realty Investment Corporation ............................... Texas
American General Mortgage Company............................................ Delaware
GDI Holding, Inc.(*)(11) ................................................... California
Ontario Vineyard Corporation ................................................ Delaware
Pebble Creek Country Club Corporation ....................................... Florida
Pebble Creek Service Corporation ............................................ Florida
SR/HP/CM Corporation ........................................................ Texas
American General Property Insurance Company .................................. Tennessee
Bayou Property Company........................................................ Delaware
AGLL Corporation(12)......................................................... Delaware
American General Land Holding Company ....................................... Delaware
AG Land Associates, LLC(12)................................................. California
Hunter's Creek Realty, Inc.(*) ............................................. Florida
Summit Realty Company, Inc. ................................................ So. Carolina
Florida GL Corporation ....................................................... Delaware
GPC Property Company ......................................................... Delaware
Cinco Ranch East Development, Inc. .......................................... Delaware
Cinco Ranch West Development, Inc. .......................................... Delaware
Hickory Downs Development, Inc. ............................................. Delaware
Lake Houston Development, Inc. .............................................. Delaware
South Padre Development, Inc. ............................................... Delaware
Green Hills Corporation ...................................................... Delaware
Knickerbocker Corporation .................................................... Texas
American Athletic Club, Inc. ................................................ Texas
Pavilions Corporation......................................................... Delaware
USLIFE Corporation............................................................ New York
All American Life Insurance Company.......................................... Illinois
1149 Investment Corp......................................................... Delaware
American General Life Insurance Company of Pennsylvania...................... Pennsylvania
New D Corporation(*)......................................................... Iowa
The Old Line Life Insurance Company of America............................... Wisconsin
The United States Life Insurance Company in the City of New York............. New York
USLIFE Advisers, Inc......................................................... New York
USLIFE Agency Services, Inc.................................................. Illinois
USLIFE Credit Life Insurance Company......................................... Illinois
USLIFE Credit Life Insurance Company of Arizona............................ Arizona
USLIFE Indemnity Company................................................... Nebraska
C-9
<PAGE>
USLIFE Financial Corporation of Delaware(*).................................. Delaware
Midwest Holding Corporation................................................. Delaware
I.C. Cal*.................................................................. Nebraska
Midwest Property Management Co............................................. Nebraska
USLIFE Financial Institution Marketing Group, Inc............................ California
USLIFE Insurance Services Corporation........................................ Texas
USLIFE Realty Corporation.................................................... Texas
405 Leasehold Operating Corporation......................................... New York
405 Properties Corporation(*)............................................... New York
USLIFE Real Estate Services Corporation..................................... Texas
USLIFE Realty Corporation of Florida........................................ Florida
USLIFE Systems Corporation................................................... Delaware
American General Finance Foundation, Inc. is not included on
this list. It is a non-profit corporation.
NOTES
<FN>
(1) The following limited liability companies were formed in the State of
Delaware on March 28, 1995. The limited liability interests of each are
jointly owned by American General Corporation ("AGC") and American
General Delaware Management Corporation ("AGDMC") and the business and
affairs of each are managed by AGDMC:
American General Capital, L.L.C.
American General Delaware, L.L.C.
(2) On November 26, 1996, American General Institutional Capital A ("AG Cap
Trust A"), a Delaware business trust, was created. On March 10, 1997,
American General Institutional Capital B ("AG Cap Trust B"), also a
Delaware business trust, was created. Both AG Cap Trust A's and AG Cap
Trust B's business and affairs are conducted through their trustees:
Bankers Trust Company and Bankers Trust (Delaware). Capital securities
of each are held by non-affiliated third party investors and common
securities of AG Cap Trust A and AG Cap Trust B are held by AGC.
(3) On December 23, 1994, AGC Life Insurance Company ("AGCL") became the
owner of approximately 40% of the shares of common stock of Western
National Corporation ("WNC") (the percentage of ownership by the
American General insurance holding company system will increase to
approximately 46% upon conversion of WNC's Series A Convertible
Preferred Stock which AGCL also owns). WNC, a Delaware corporation, owns
the following companies:
WNL Holding Corporation
Western National Life Insurance Company (TX)
WesternSave (401K Plan)
Independent Advantage Financial & Insurance Services, Inc.
WNL Investment Advisory Services, Inc.
Conseco Annuity Guarantee Corp.
WNL Brokerage Services, Inc.
WNL Insurance Services, Inc.
C-10
<PAGE>
However, AGCL (1) holds the direct interest in WNC and the indirect
interests in WNC's subsidiaries for investment purposes; (2) does not
direct the operations of WNC or WNL; (3) has no representatives on the
Board of Directors of WNC; and (4) is restricted, pursuant to a
Shareholder's Agreement between WNC and AGCL, in its right to vote its
shares against the slate of directors proposed by WNC's Board of
Directors. Accordingly, although WNC and its subsidiaries technically
are members of the American General insurance holding company system
under insurance holding company laws, AGCL does not direct and control
WNC or its subsidiaries.
(4) American General Life and Accident Insurance Company ("AGLA") owns
approximately 20% of Mosher, Inc. ("Mosher") on a fully diluted basis.
AGLA owns approximately 11% of Whirlpool Financial Corp. ("Whirlpool")
on a fully diluted basis. The total investment of AGLA in Whirlpool
represents approximately 3% of the voting power of the capital stock of
Whirlpool, but approximately 11% of the Whirlpool stock which has voting
rights. The interests in Mosher and Whirlpool (each of which are
corporations that are not associated with AGC) are held for investment
purposes only.
(5) AGL owns 100% of the common stock of American General Securities
Incorporated ("AGSI"), a full-service NASD broker-dealer. AGSI, in turn,
owns 100% of the stock of the following insurance agencies:
American General Insurance Agency, Inc. (Missouri)
American General Insurance Agency of Hawaii, Inc. (Hawaii)
American General Insurance Agency of Massachusetts, Inc. (Massachusetts)
In addition, the following agencies are indirectly related to AGSI, but
not owned or controlled by AGSI:
American General Insurance Agency of Ohio, Inc. (Ohio)
American General Insurance Agency of Texas, Inc. (Texas)
American General Insurance Agency of Oklahoma, Inc. (Oklahoma)
Insurance Masters Agency, Inc. (Texas)
AGSI and the foregoing agencies are not affiliates or subsidiaries of
AGL under applicable holding company laws, but they are part of the AGC
group of companies under other laws.
(6) American General Finance Corporation is the parent of an additional 48
wholly owned subsidiaries incorporated in 30 states and Puerto Rico for
the purpose of conducting its consumer finance operations, INCLUDING
those noted in footnote 7 below.
(7) American General Financial Services, Inc. is the parent of an additional
7 wholly owned subsidiaries incorporated in 4 states and Puerto Rico for
the purpose of conducting its consumer finance operations.
(8) American General Realty Investment Corporation owns only a 75% interest
in GDI Holding, Inc.
C-11
<PAGE>
(9) AG Land Associates, LLC is jointly owned by American General Land
Holding Company ("AGLH") and AGLL Corporation ("AGLL"). AGLH holds a
98.75% managing interest and AGLL owns a 1.25% managing interest.
</FN>
</TABLE>
All of the subsidiaries of AGL are included in its consolidated
financial statements, which are filed in Part B of this Registration
Statement.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 3, 1998, there were no owners of Contracts of the class
presently offered by this Registration Statement.
ITEM 28. INDEMNIFICATION
Article VII, section 1, of the Company's By-Laws provides, in part, that
the Company shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Company) by reason of the fact that
such person is or was serving at the request of the Company, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with such proceeding if such person
acted in good faith and in a manner such person reasonably believed to
be in the best interest of the Company and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such
person was unlawful.
Article VII, section 1 (in part), section 2, and section 3, provide that
the Company shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the Company to procure a judgment
in its favor by reason of the fact that such person is or was acting in
behalf of the Company, against expenses actually and reasonably incurred
by such person in connection with the defense or settlement of such
action if such person acted in good faith, in a manner such person
believed to be in the best interests of the Company, and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances. No indemnification shall
be made under section 1: (a) in respect of any claim, issue, or matter
as to which such person shall have been adjudged to be liable to the
Company, unless and only to the extent that the court in which such
action was brought shall determine upon application that, in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall determine;
(b) of amounts paid in settling or otherwise disposing of a threatened
or pending action with or without court approval; or (c) of expense
incurred in defending a threatened or pending action which is settled or
otherwise disposed of without court approval.
Article VII, section 3, provides that, with certain exceptions, any
indemnification under Article VII shall be made by the Company only if
authorized in the specific case, upon a determination that
indemnification of the person is proper in the circumstances because the
person has met the applicable standard of conduct set forth in section 1
of Article VII by (a) a majority vote of a quorum consisting of
directors who are not parties to such proceeding; (b) approval of the
shareholders, with the shares owned by the person to be indemnified not
being entitled to vote thereon; or (c) the court in which such
proceeding is or was pending upon application made by the Company or the
indemnified person or the attorney or other persons rendering services
in connection with the defense, whether or not
C-12
<PAGE>
such application by the attorney or indemnified person is opposed by the
Company. Article VII, section 7, provides that for purposes of Article
VII, those persons subject to indemnification include any person who is
or was a director, officer, or employee of the Company, or is or was
serving at the request of the Company as a director, officer, or
employee of another foreign or domestic corporation which was a
predecessor corporation of the Company or of another enterprise at the
request of such predecessor corporation.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Registrant's principal underwriter, American General Securities
Incorporated, also acts as principal underwriter for American
General Life Insurance Company of New York Separate Account E and
American General Life Insurance Company Separate Accounts A and
VL-R.
(b) The directors and principal officers of the principal underwriter
are:
<TABLE>
<CAPTION>
Position and Offices
with Underwriter,
Name and Principal American General
Business Address Securities Incorporated
------------------ -----------------------
<S> <C>
F. Paul Kovach, Jr. Director & President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Rodney O. Martin, Jr. Director
American General Life
2727-A Allen Parkway
Houston, TX 77019
Robert F. Herbert Associate Tax Officer
American General Life
2727-A Allen Parkway
Houston, Texas 77019
C-13
<PAGE>
John V. LaGrasse Vice President
American General Life
2727-A Allen Parkway
Houston, TX 77019
Fred G. Fram Vice President
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Steven A. Glover Assistant Secretary
American General Life
2727-A Allen Parkway
Houston, TX 77019
Carole D. Hlozek Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
J. Andrew Kalbaugh Administrative Officer
American General Securities
Incorporated
2727 Allen Parkway
Houston, TX 77019
Kenneth D. Nunley Associate Tax Officer
2727-A Allen Parkway
Houston, TX 77019
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF RECORDS
All records referenced under Section 31(a) of the 1940 Act, and Rules
31a-1 through 31a-3 thereunder, are maintained and in the custody of
American General Life Insurance Company at its principal executive
office located at 2727-A Allen Parkway, Houston, TX 77019.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
The Registrant undertakes: A) to file a post-effective amendment to this
Registration Statement as frequently as is necessary to ensure that the
audited financial statements in the Registration Statement are never
more than 16 months old for so long as payments under the Contracts may
be accepted; B) to include either (1) as part of any application to
C-14
<PAGE>
purchase a Contract offered by a prospectus, a space that an applicant
can check to request a Statement of Additional Information, or (2) a
toll-free number or a post card or similar written communication affixed
to or included in the applicable prospectus that the applicant can
remove to send for a Statement of Additional Information; C) to deliver
any Statement of Additional Information and any financial statements
required to be made available under this form promptly upon written or
oral request.
REPRESENTATION REGARDING THE REASONABLENESS OF AGGREGATE FEES AND CHARGES
DEDUCTED UNDER THE CONTRACTS PURSUANT TO SECTION 26)(E)(2)(A) OF THE
INVESTMENT COMPANY ACT OF 1940
AGL represents that the fees and charges deducted under the Contracts that are
identified as Contract Form No. 97505 and comprehended by this Registration
Statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by AGL
under the Contracts. AGL bases its representation on its assessment of all of
the facts and circumstances, including such relevant factors, as: the nature
and extent of such services, expenses and risks; the need for AGL to earn a
profit; the degree to which the Contracts include innovative features; and the
regulatory standards for exemptive relief under the Investment Company Act of
1940 used prior to October 1996, including the range of industry practice.
This representation applies to all Policies sold pursuant to this Registration
Statement, including those sold on the terms specifically described in the
Prospectus contained herein, or any variations therein, based on supplements,
endorsements, or riders to any Policies or prospectus, or otherwise.
C-15
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, American General Life Insurance Company Separate
Account D, has duly caused this Amendment to the Registration Statement to be
signed on its behalf, in the City of Houston and State of Texas on this 10th
day of February , 1998.
AMERICAN GENERAL LIFE INSURANCE
COMPANY SEPARATE ACCOUNT D
(Registrant)
BY: AMERICAN GENERAL LIFE
INSURANCE COMPANY
(On behalf of the Registrant and itself)
BY: /s/ROBERT F. HERBERT JR.
------------------------
Robert F. Herbert, Jr.
Senior Vice President
ATTEST: /s/STEVEN A. GLOVER
-------------------
Steven A. Glover
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
----------- -------
<S> <C>
RODNEY O. MARTIN, JR.* Principal Executive Officer
--------------------------
(Rodney O. Martin, Jr.)
ROBERT F. HERBERT, JR.* Principal Financial and Accounting Officer
--------------------------
(Robert F. Herbert, Jr.)
</TABLE>
<TABLE>
Directors
---------
<S> <C>
JOHN V. LaGRASSE*
-------------------------- --------------------------
(Robert M. Devlin) (John V. LaGrasse)
JAMES S. D'AGOSTINO, JR.* RODNEY O. MARTIN, JR.*
-------------------------- --------------------------
(James S. D'Agostino, Jr.) (Rodney O. Martin, Jr.)
DAVID A. FRAVEL* JON P. NEWTON*
-------------------------- --------------------------
(David A. Fravel) (Jon P. Newton)
ROBERT F. HERBERT, JR.* PHILIP K. POLKINGHORN*
-------------------------- --------------------------
(Robert F. Herbert, Jr.) (Philip K. Polkinghorn)
ROYCE G. IMHOFF, II* PETER V. TUTERS*
-------------------------- --------------------------
(Royce G. Imhoff, II) (Peter V. Tuters)
/s/STEVEN A. GLOVER
--------------------------
*By Steven A. Glover, Attorney-in-Fact February 10, 1998
</TABLE>
<PAGE>
<TABLE>
EXHIBIT INDEX
<S> <C>
3(b)(i) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, American General Series Portfolio Company and the
Variable Annuity Life Insurance Company.
(ii) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, Hotchkis and Wiley Variable Trust and Hotchkis
and Wiley.
(iii) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, LEVCO Series Trust and John A. Levin & Co., Inc.
(iv) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, Navellier Variable Insurance Series Fund, Inc.
and Navellier & Associates, Inc.
(v) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, the OFFITBANK Variable Insurance Fund, Inc.,
OFFITBANK and OFFIT Funds Distributor, Inc.
(vi) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, Royce Capital Fund and Royce & Associates, Inc..
(vii) Form of fund Participation Agreement among American General
Life Insurance Company, American General Securities
Incorporated, Wright Managed Blue Chip Series Trust and Wright
Investors Service, Inc.
5(c)(ii) Specimen form of Select ReserveSM Service Request, including
telephone transfer authorization.
(iii) Specimen form of confirmation of initial purchase payment under
Contract Form No. 97505.
8(a) Form of Agreement by and between the Variable Annuity Life
Insurance Company and American General Life Insurance Company
(b) Form of Agreement by and between Hotchkis and Wiley and
American General Life Insurance Company.
(c) Form of Agreement by and between John A. Levin and Co., Inc.
and American General Life Insurance Company.
(d) Form of Agreement by and between Navellier & Associates, Inc.
and American General Life Insurance Company.
(e) Form of Agreement by and between OFFITBANK and American General
Life Insurance Company.
(f) Form of Agreement by and between Royce & Associates, Inc. and
American General Life Insurance Company.
(g) Form of Agreement by and between Wright Investors' Service Inc.
and American General Life Insurance Company.
9 Opinion and consent of Counsel.
10 Consent of Independent Auditors.
13(a) Computations of hypothetical historical average annual total
returns for each Division available under Contract Form No.
97505 for the one, five and ten year periods ended December 31,
1996, and since inception.
(b) Computations of hypothetical historical cumulative total returns
for each Division
<PAGE>
available under Contract Form No. 97505 for the one, five and
ten year periods ended December 31, 1996, and since inception.
(c) Computations of hypothetical historical seven day yield and
effective yield for the Money Market Division available under
Contract Form No. 97505 for the seven day period ended December
31, 1996.
15(e) Power of Attorney with respect to Registration Statements and
Amendments thereto signed by the following persons in their
capacities as directors and, where applicable, officers of
American General Life Insurance Company: Messrs. D'Agostino,
Imhoff and Polkinghorn.
</TABLE>
EXHIBIT 3(b)(i)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
DATED AS OF
___________, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 2
ARTICLE II. Representations and Warranties................ 4
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting................. 6
ARTICLE IV. Sales Material and Information................ 10
ARTICLE V. [Reserved].................................... 11
ARTICLE VI. Diversification............................... 11
ARTICLE VII. Potential Conflicts........................... 12
ARTICLE VIII. Applicable Law................................ 13
ARTICLE IX. Termination................................... 13
ARTICLE X. Notices....................................... 16
ARTICLE XI. Miscellaneous................................. 17
SCHEDULE A Portfolios of American General Series
Portfolio Company Available for Purchase
by American General Life Insurance Company.... 19
SCHEDULE B Separate Accounts and Contracts............... 20
SCHEDULE C Proxy Voting Procedures....................... 21
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of _________,
1998 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"), AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), a Texas
corporation, AMERICAN GENERAL SERIES PORTFOLIO COMPANY (hereinafter the
"Fund"), a Maryland corporation, and THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY (the "Adviser"), a Texas corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (hereinafter the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended
(hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, The Variable Annuity Marketing Company, (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and
serves as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
1
<PAGE>
WHEREAS, the Variable Insurance Products issued by the Accounts are
variable annuity contracts or are variable life insurance policies relying on
certain exemptions from the 1930 Act pursuant to Rule 6e-3(T), and not Rule
6e-2, thereunder.
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund, and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order as soon as
reasonably practical (normally by 10:00 a.m. Eastern time) on the next
following Business Day. Notwithstanding the foregoing, the Company shall use
its best efforts to provide the Fund with notice of such orders by 10:15 a.m.
Eastern time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates the net asset value pursuant to the rules of the SEC, as set
forth in the Fund's Prospectus and Statement of Additional Information.
Notwithstanding the foregoing, the Board of Directors of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio,
if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith
and in light of their fiduciary duties under federal and any applicable state
laws, necessary in the best interests of the shareholders of such Portfolio.
2
<PAGE>
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
3
<PAGE>
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Fund shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the Fund's policy on
determining materiality. The correction of any such errors shall be made at
the Company level and shall be made pursuant to the Fund's policy on
determining materiality. Any material error in the calculation or reporting of
net asset value per share, dividend or capital gain information shall be
reported promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
4
<PAGE>
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Maryland and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
[or the appropriate Adviser] will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and
that the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
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2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS;
VOTING
3.1(a) The Fund or its designee, at its option shall provide the Company
with as many printed copies of the Fund's current prospectus, including the
profile prospectus, (the "Fund Prospectus") as the Company may reasonably
request or in lieu of providing printed copies of the Fund Prospectus, the
Fund shall provide camera-ready film or computer diskettes containing the Fund
Prospectus and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the Fund Prospectus is
materially amended during the year) to have the prospectus for the Contracts
(the "Contract Prospectus") and the Fund Prospectus printed together in one
document or separately. The Company may elect to print the Fund Prospectus in
combination with other fund companies' prospectuses. For purposes hereof, any
combined prospectus including the Fund Prospectus along with the Contract
Prospectus or prospectus of other fund companies shall be referred to as a
"Combined Prospectus." For purposes hereof, the term "Fund Portion of the
Combined Prospectus" shall refer to the percentage of the number of Fund
Prospectus pages in the Combined Prospectus in relation to the total number of
pages of the Combined Prospectus.
3.1(b) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's current statement of additional information (the
"Fund SAI") as the Company may reasonably request or in lieu of providing
printed copies of the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is materially amended during the year) to have the
statement of additional information for the Contracts (the "Contract SAI") and
the Fund SAI printed together or separately. The Company may also elect to
print the Fund SAI in combination with other fund companies' statements of
additional information. For purposes hereof, any combined statement of
additional information including the Fund SAI along with the Contract SAI or
statement of additional information of other fund companies shall be referred
to as a "Combined SAI." For purposes hereof, the term "Fund Portion of the
Combined SAI" shall refer to the percentage of the number of Fund SAI pages in
the Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund, at its option, shall provide the Company with as many
printed copies of the Fund's annual report and semi-annual report
(collectively, the "Fund Reports") as the Company may reasonably request or in
lieu of providing printed copies of the Fund Reports, the Fund shall provide
camera-ready film or computer diskettes containing the Fund's Reports, and
such other assistance
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as is reasonably necessary in order for the Company once each year to have the
annual report and semi-annual report for the Contracts (collectively, the
"Contract Reports") and the Fund Reports printed together or separately. The
Company may also elect to print the Fund Reports in combination with other
fund companies' annual reports and semi-annual reports. For purposes hereof,
any combined annual reports and semi-annual reports including the Fund Reports
along with the Contract Reports or annual reports and semi-annual reports of
other fund companies shall be referred to as "Combined Reports." For purposes
hereof, the term "Fund Portion of the Combined Reports" shall refer to the
percentage of the number of Fund Reports pages in the Combined Reports in
relation to the total number or pages of the Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to
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<PAGE>
provide the Fund SAI or Fund Reports to the Company in the format in which the
Fund is accustomed to formatting statements of additional information and
annual and semi-annual reports. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5)
percent what the Fund would have paid to print such documents. The Fund shall
pay one half the cost of distributing Fund SAIs, Fund Reports and Fund proxy
statements and proxy-related material to such existing Participants. The Fund
shall pay the cost of distributing the Fund Portion of the Combined SAIs and
the Fund Portion of the Combined Reports to existing Participants. The Fund
shall not pay any costs of distributing Fund SAIs, Combined SAIs, Fund
Reports, Combined Reports or proxy statements or proxy-related material to
prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to AGSI if and in amounts
agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to
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<PAGE>
its prospective Participants as sales literature. In the event the Company
elects to prepare a Combined SAI or Combined Reports, AGSI shall pay one half
of the cost of printing the Combined SAI or Combined Reports, respectively,
made available by the Company to its prospective Participants as sales
literature. In such event, AGSI shall bear the cost of typesetting to provide
the Fund SAI and Fund Reports to the Company in the format in which the Fund
is accustomed to formatting statements of additional information and annual
and semi-annual reports. Notwithstanding the foregoing, in no event shall AGSI
pay for any such costs that exceed by more than five (5) percent what AGSI
would have paid to print such documents. AGSI shall pay one half the cost of
distributing Fund SAIs, Combined SAIs, Fund Reports, Combined Reports, and
Fund proxy material to such prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions received from
Participants; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such Portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or
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<PAGE>
comply with Section 16(c) of the 1940 Act (although the Fund is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b). Further, the Fund will act in accordance
with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
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4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company
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if it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested directors), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance policy owners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.6. The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
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<PAGE>
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
8.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE IX. TERMINATION
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI
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<PAGE>
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Adviser will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to
apply on the 60th day since giving of such notice, then such
60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
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<PAGE>
after written notice of such breach is delivered to the Fund
or the Company, as the case may be; or
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4.
9.2. Notwithstanding any termination of this Agreement, the Fund shall
at the option of the Company, continue to make available additional shares of
the Fund pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts") unless such further sale of
Fund shares is proscribed by law, regulation or applicable regulatory body, or
unless the Fund determines that liquidation of the Fund following termination
of this Agreement is in the best interests of the Fund and its shareholders.
Specifically, without limitation, the owners of the Existing Contracts shall
be permitted to direct reallocation of investments in the Fund, redemption of
investments in the Fund and/or investment in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.2 shall not apply to any terminations under Article VII
and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement.
9.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Adviser 90 days prior written notice of its intention to do so.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
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IF TO THE FUND:
American General Series Portfolio Company
2929 Allen Parkway, L4-01
Houston, TX 77019
Attention: Nori L. Gabert
IF TO ADVISER:
The Variable Annuity Life Insurance Company
P. O. Box 3206
Houston, TX 77253-3206
Attention: Cynthia A. Toles
IF TO THE COMPANY:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
IF TO AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XI. MISCELLANEOUS
11.1. 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.
11.2. 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
16
<PAGE>
other confidential information until such time as it may come into the public
domain without the express written consent of the affected party.
11.3. 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.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
11.6. 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.
11.7. 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.
11.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
11.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) The Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) The Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each semi-annual period:
(c) Any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
17
<PAGE>
(d) Any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and each of
its Accounts named in Schedule B hereto, as amended from time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: _____________________________________________
Name: Thomas L. West, Jr.
Title: President and CEO
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
By: _____________________________________________
Name: Cynthia A. Toles
Title: General Counsel and Secretary
18
<PAGE>
SCHEDULE A
<TABLE>
PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY UNDER THIS AGREEMENT
<CAPTION>
Fund Name Separate Account
--------- ----------------
<S> <C>
Capital Conservation Fund A
Government Securities Fund A
International Equities Fund D and VL-R
MidCap Index Fund A, D and VL-R
Money Market Fund A, D and VL-R
Social Awareness Fund D
Stock Index Fund A, D and VL-R
Timed Opportunity Fund A
</TABLE>
19
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Registration Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C> <C>
American General Life Insurance Company Registration Nos.: Name of Contract:
Separate Account A 33-44744 Group and Individual Variable
Established: August 14, 1967 811-1491 Annuity
33-44745 Individual Variable Annuity
811-1491
American General Life Insurance Company
Separate Account D 333-40637 Select Reserve (SM) Flexible Payment
Established: November 19, 1973 811-02441 Variable and Fixed
Individual Deferred Annuity
33-43390 VAriety Plus (SM) Variable Annuity
811-2441
American General Life Insurance Company
Separate Account VL-R
Established: May 6, 1997 333-42567 Platinum Investor I and Platinum
811-08561 Investor II
</TABLE>
20
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. Assuming that the Fund has called an annual meeting, then in that event
the Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one
21
<PAGE>
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Company). Contents of envelope sent to
Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The proxy notice and statement as provided by the Fund 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 should be sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the
22
<PAGE>
Fund receives the tabulations stated in terms of a percentage and the
number of SHARES.) The Fund must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
23
EXHIBIT 3(b)(ii)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
HOTCHKIS AND WILEY VARIABLE TRUST
AND
HOTCHKIS AND WILEY
DATED AS OF
_________________, 199_
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II. Representations and Warranties................ 6
ARTICLE III. Prospectuses, Reports to Shareholders......... 8
and Proxy Statements, Voting
ARTICLE IV. Sales Material and Information................ 12
ARTICLE V. [Reserved].................................... 13
ARTICLE VI. Diversification............................... 13
ARTICLE VII. Potential Conflicts........................... 13
ARTICLE VIII. Indemnification............................... 15
ARTICLE IX. Applicable Law................................ 18
ARTICLE X. Termination................................... 18
ARTICLE XI. Notices....................................... 21
ARTICLE XII. Foreign Tax Credits........................... 21
ARTICLE XIII. Miscellaneous................................. 21
SCHEDULE A Portfolios of Hotchkis and Wiley Variable..... 25
Trust Available for Purchase by American
General Life Insurance Company
SCHEDULE B Separate Accounts and Contracts............... 26
SCHEDULE C Proxy Voting Procedures....................... 27
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of _________,
1997 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), a Texas
corporation; HOTCHKIS AND WILEY VARIABLE TRUST (hereinafter the "Fund"), a
Massachusetts business trust; and HOTCHKIS AND WILEY (the "Adviser"), a
division of The Merrill Lynch Capital Management Group of Merrill Lynch Asset
Management, L.P.
WHEREAS, the Fund desires to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated August 13, 1997, (Rel. No. 1C-22786), granting Participating
Insurance Companies and Variable Insurance Product separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of
the Investment Company Act of 1940, as amended (hereinafter the "1940 Act"),
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by Variable Insurance
Product separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
3
<PAGE>
WHEREAS, the Adviser acts as investment adviser to the Portfolios of the
Fund; and
WHEREAS, Merrill Lynch Funds Distributor, Inc. (the "Underwriter") is
registered as a broker/dealer under the Securities Exchange Act of 1934, as
amended (hereinafter the "1934 Act"), is a member in good standing of the
National Association of Securities Dealers, Inc. (hereinafter "NASD") and
serves as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Fund intends to sell such shares to the relevant Account at
net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee by 4:00 p.m. Eastern
time on a Business Day shall constitute receipt by the Fund; provided that the
Fund receives notice of such order as soon as reasonably practical (normally
by 10:00 a.m. Eastern time) on the next following Business Day.
Notwithstanding the foregoing, the Company shall use its best efforts to
provide the Fund with notice of such orders by 10:15 a.m. Eastern time on the
next following Business Day. "Business Day" shall mean any day on which the
New York Stock Exchange is open for trading and on which the Fund calculates
the net asset value of the Portfolios' shares pursuant to the rules of the
Securities and Exchange Commission ("SEC"), as set forth in the Fund's
Prospectus and Statement of Additional Information. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio, to any person, or
suspend or terminate the
4
<PAGE>
offering of shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee by 4:00
p.m. Eastern time on a Business Day shall constitute receipt by the Fund;
provided that the Fund receives notice of such request for redemption on the
next following Business Day in accordance with the timing rules described in
Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days' written notice of its intention to make available in the future, as
a funding vehicle under the Variable Insurance Products, any other investment
company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
5
<PAGE>
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines, if any. The correction of any such errors shall be made at the
Company level and shall be made pursuant to the SEC's recommended guidelines.
Any material error in the calculation or reporting of net asset value per
share, dividend or capital gain information shall be reported promptly upon
discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
6
<PAGE>
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its Contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the Commonwealth of Massachusetts and
sold in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.3 The Fund and the Adviser will make every effort to qualify each
Portfolio as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) thereafter will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
the Fund or the Adviser will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.6. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that the Fund does and will comply in all material respects
with the applicable provisions of the 1940 Act.
2.7. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.8. The Company represents and warrants that all of its trustees,
officers, employees and other individuals/entities dealing with the money
and/or securities of the Fund are covered by a blanket fidelity bond or
similar coverage, in an amount equal to the greater of $5 million or any
7
<PAGE>
amount required by applicable federal or state law or regulation. The
aforesaid includes coverage for larceny and embezzlement is issued by a
reputable bonding company. The Company agrees to make all reasonable efforts
to see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Adviser in the event that such
coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS,
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request for
distribution to Contract owners whose Contracts are funded by Portfolio
shares. If requested by the Company, in lieu of providing printed copies of
the Fund Prospectus, the Fund shall provide camera-ready film or computer
diskettes containing the Fund Prospectus and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the Fund Prospectus is amended during the year) to have the
prospectus for the Contracts (the "Contract Prospectus") and the Fund
Prospectus printed together in one document or separately. The Company may
elect to print the Fund Prospectus in combination with other fund companies'
prospectuses. For purposes hereof, any combined prospectus including the Fund
Prospectus along with the Contract Prospectus or prospectus of other fund
companies shall be referred to as a "Combined Prospectus." For purposes
hereof, the term "Fund Portion of the Combined Prospectus" shall refer to the
percentage of the number of Fund Prospectus pages in the Combined Prospectus
in relation to the total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request for distribution to any owner of a Contract
funded by Portfolio shares. If requested by the Company in lieu of providing
printed copies of the Fund SAI, the Fund shall provide camera-ready film or
computer diskettes containing the Fund SAI, and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request for distribution to Contract
owners whose Contracts are funded by Portfolio shares. If requested by the
Company in lieu of providing printed copies of the Fund Reports, the Fund
shall provide camera-ready film or computer diskettes containing the Fund's
Reports, and such other assistance as is reasonably necessary in order for the
Company once each year to have the annual report and semi-annual report for
the Contracts (collectively, the "Contract Reports") and the Fund Reports
printed together or separately. The Company may also elect to print the Fund
Reports in
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combination with other fund companies' annual reports and semi-annual reports.
For purposes hereof, any combined annual reports and semi-annual reports
including the Fund Reports along with the Contract Reports or annual reports
and semi-annual reports of other fund companies shall be referred to as
"Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined Reports" shall refer to the percentage of the number of Fund Reports
pages in the Combined Reports in relation to the total number or pages of the
Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses to be made
available by the Company to such existing Participants in order to update
disclosure as required by the 1933 Act and/or the 1940 Act. With respect to
existing Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus to be made available
by the Company to its existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. In such event, the Fund shall
bear the cost of typesetting to provide the Fund Prospectus to the Company in
the format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
to be made available by the Company to its existing Participants. With respect
to existing Participants, in the event the Company elects to prepare a
Combined SAI or Combined Reports, the Fund shall pay the cost of setting in
type and printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, to be made available by the Company to its existing
Participants. In such event, the Fund shall bear the cost of typesetting to
provide the Fund SAI or Fund Reports to the Company in the format in which the
Fund is accustomed to formatting statements of additional information and
annual and semi-annual reports. Notwithstanding the foregoing, in no event
shall the Fund pay for any such costs that exceed by more than five (5)
percent what the Fund would have paid to print such documents. The Fund shall
pay
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one half the cost of distributing Fund SAIs, Fund Reports and Fund proxy
statements and proxy-related material to such existing Participants. The Fund
shall pay the cost of distributing the Fund Portion of the Combined SAIs and
the Fund Portion of the Combined Reports to existing Participants. The Fund
shall not pay any costs of distributing Fund SAIs, Combined SAIs, Fund
Reports, Combined Reports or proxy statements or proxy-related material to
prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
expenses, then the Underwriter may make payments to the Company or to AGSI if
and in amounts agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to
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formatting statements of additional information and annual and semi-annual
reports. Notwithstanding the foregoing, in no event shall AGSI pay for any
such costs that exceed by more than five (5) percent what AGSI would have paid
to print such documents. AGSI shall pay one half the cost of distributing Fund
SAIs, Combined SAIs, Fund Reports, Combined Reports, and Fund proxy material
to such prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders. Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of Trustees and with whatever rules the SEC may promulgate
with respect thereto.
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ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund or the Adviser in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or the Fund
Prospectus, as such registration statement or Fund Prospectus may be amended
or supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the
Fund or its designee, except with the written permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the written
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,
within five (5) Business Days of the filing of such document with the SEC or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract within five (5) Business Days of 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: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios, that it will use its
best efforts at all times to comply with Section 817(h) of the Code and
Treasury Regulation 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulations. In the event a Portfolio
ceases to so qualify, the Adviser will take all reasonable steps (a) to notify
the Company and (b) to adequately diversify the Portfolio so as to achieve
compliance within the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
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7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance policy owners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested Trustees of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested Trustees of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
7.7 The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data
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shall be submitted more frequently if deemed appropriate by the Board. All
reports received by the Board of potential or existing conflicts, and all
Board action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board and officers and agents and the Adviser and
each director and officer of the Adviser, and each person, if any, who
controls the Fund or the Adviser within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company or AGSI) or expenses (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by
the Company or AGSI, or persons under its control and other than
statements or representations authorized by the Fund or the Adviser) or
unlawful conduct of the Company or AGSI or persons under its control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon and in
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conformity with information furnished to the Fund by or on behalf of the
Company or AGSI;
(iv) arise as a result of any failure by the Company or AGSI to provide
the services and furnish the materials required under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company or AGSI, as limited by and in accordance
with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such Party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio, to indemnify
and hold harmless the Company and each of its directors and officers and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Adviser) or expenses (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,
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willful misconduct of the Adviser or any director, officer, employee or agent
thereof, are related to the operation of the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Adviser or the
Fund or the Underwriter by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not supplied
by the Adviser or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Adviser or persons under its control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading,
if such statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials required under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund or the Adviser; including without limitation any failure by
the Fund or the Adviser to comply with the conditions of Article VI
hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information
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of the nature of the claim shall have been served upon such Indemnified Party
(or after such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Adviser of any such claim
shall not relieve the Adviser from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate,
at its own expense, in the defense thereof. The Adviser also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Adviser to such Party of the Adviser's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Adviser
will not be liable to such Party under this Agreement for any legal or other
expenses subsequently incurred by such Party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.2(d). The Company and AGSI agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may
grant (including, but not limited to, the Shared Funding Exemptive Order) and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
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(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Adviser will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to
apply on the 60th day since giving of such notice, then such
60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
19
<PAGE>
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be; or
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the appropriate Adviser 90 days prior written notice of its intention to do
so.
20
<PAGE>
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Hotchkis and Wiley Variable Trust
800 West Sixth Street, Fifth Floor
Los Angeles, CA 90017
Attention:
If to Adviser:
Hotchkis and Wiley
800 West Sixth Street, Fifth Floor
Los Angeles, CA 90017
Attention:
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
21
<PAGE>
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each semi-annual period:
22
<PAGE>
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
HOTCHKIS AND WILEY VARIABLE TRUST
By: _____________________________________________
Name:
Title:
HOTCHKIS AND WILEY
By: _____________________________________________
Name:
Title:
24
<PAGE>
SCHEDULE A
PORTFOLIOS OF HOTCHKIS AND WILEY VARIABLE TRUST
AVAILABLE FOR PURCHASE BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
UNDER THIS AGREEMENT
Equity Income VIP Portfolio
Low Duration VIP Portfolio
25
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Flexible Payment Variable and Fixed
Individual Deferred Annuity
</TABLE>
26
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
27
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The
28
<PAGE>
mutilated or illegible Card is disregarded and considered to be NOT
RECEIVED for purposes of vote tabulation. Any Cards that have been
"kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
29
EXHIBIT 3(b)(iii)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
LEVCO SERIES TRUST
AND
JOHN A. LEVIN & CO., INC.
DATED AS OF
_________________, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II. Representations and Warranties................ 6
ARTICLE III. Prospectuses, Reports to Shareholders......... 8
and Proxy Statements, Voting
ARTICLE IV. Sales Material and Information................ 12
ARTICLE V. [Reserved].................................... 13
ARTICLE VI. Diversification............................... 13
ARTICLE VII. Potential Conflicts........................... 13
ARTICLE VIII. Indemnification............................... 15
ARTICLE IX. Applicable Law................................ 18
ARTICLE X. Termination................................... 19
ARTICLE XI. Notices....................................... 21
ARTICLE XII. Foreign Tax Credits........................... 22
ARTICLE XIII. Miscellaneous................................. 22
SCHEDULE A Portfolios of LEVCO Equity Value Fund......... 25
Available for Purchase by American General
Life Insurance Company
SCHEDULE B Separate Accounts and Contracts............... 26
SCHEDULE C Proxy Voting Procedures....................... 27
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of _________,
1998 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); AMERICAN GENERAL SECURITIES INCORPORATED ("AGSI"), a Texas
corporation; LEVCO Series Trust (hereinafter the "Fund"), a Delaware business
trust; and John A. Levin & Co., Inc., a Delaware corporation (the "Adviser").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated October 8, 1997 (File No. 812-10614), granting Participating
Insurance Companies and Variable Insurance Product separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of
the Investment Company Act of 1940, as amended (hereinafter the "1940 Act"),
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by Variable Annuity
Product separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser manages the Portfolios of the Fund; and
WHEREAS, LEVCO Securities, Inc. (the "Underwriter") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD") and
3
<PAGE>
serves as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that (a) such orders are received by the Company in good
order prior to the time the net asset value of the Fund is priced in
accordance with its prospectus and (b) the Fund receives notice of such order
as soon as reasonably practical (normally by 10:00 a.m. Eastern Time) on the
next following Business Day. Notwithstanding the foregoing, the Company shall
use its best efforts to provide the Fund with notice of such orders by 10:15
a.m. Eastern Time on the next following Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which the Fund calculates the net asset value pursuant to the rules of the
SEC, as set forth in the Fund's Prospectus and Statement of Additional
Information. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to permit the Fund to sell shares of any
Portfolio to any person, or suspend or terminate the offering of shares of any
Portfolio, if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such
Portfolio.
4
<PAGE>
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public. The Company agrees that shares of the Fund will be used only
for the purpose of funding the Accounts and Contracts listed on Schedule B, as
amended from time to time.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that (a) such orders are received by
the Company in good order prior to the time the net asset value of the Fund is
priced in accordance with its prospectus and (b) the Fund receives notice of
such request for redemption on the next following Business Day in accordance
with the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4. Notwithstanding the foregoing,
the payment of redemption proceeds may be delayed, but not for a greater
period than is permitted by the 1940 Act or by rules or order of the SEC
thereunder.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its reasonable best efforts to furnish
same day notice by 7:00 p.m. Eastern time (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to
receive all such dividends and capital gain distributions as are payable on
5
<PAGE>
the Portfolio shares in additional shares of that Portfolio. The Company
reserves the right to revoke this election and to receive all such dividends
and capital gain distributions in cash on 30 days' written notice to the Fund.
The Fund shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its reasonable best efforts to make such net
asset value per share available by 7:00 p.m. Eastern time. In the event that
the Fund is unable to meet the 7:00 p.m. time stated immediately above, then
the Fund shall provide the Company with additional time to notify the Fund of
purchase or redemption orders pursuant to Sections 1.1 and 1.4, respectively,
above. Such additional time shall be equal to the additional time that the
Fund takes to make the net asset values available to the Company; provided,
however, that notification must be made by 10:15 a.m. Eastern time on the
Business Day such order is to be executed regardless of when the net asset
value is made available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level and shall be made pursuant to the SEC's recommended
guidelines. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be reported
promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations; 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 isssurance or sale thereof as a
segregated asset account under the Texas Insurance Law and the regulations
thereunder and has registered or, prior to any issuance or sale of the
Contracts, will register and will maintain the registration of each Account as
a unit investment trust in accordance with and to the extent required by the
provisions of the 1940 Act and the regulations thereunder to serve as a
segregated investment account for the Contracts. The Company shall amend its
registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Delaware and sold
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in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
or the appropriate Adviser will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund represents that the Fund is lawfully organized and
validly existing under the laws of the State of Delaware and that the Fund
does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment adviser, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The
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Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS;
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies of the Fund
Prospectus, the Fund shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
Fund Prospectus is amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus printed together
in one document or separately. The Company may elect to print the Fund
Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the
number of Fund Prospectus pages in the Combined Prospectus in relation to the
total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports
in combination with other fund companies' annual reports and semi-annual
reports. For purposes hereof, any combined annual reports and semi-annual
reports including the Fund Reports along with the Contract Reports or annual
reports and semi-annual reports of other fund companies shall be referred to
as "Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined
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Reports" shall refer to the percentage of the number of Fund Reports pages in
the Combined Reports in relation to the total number or pages of the Combined
Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to provide the Fund
SAI or Fund Reports to the Company in the format in which the Fund is
accustomed to formatting statements of additional information and annual and
semi-annual reports. Notwithstanding the foregoing, in no event shall the Fund
pay for any such costs that exceed by more than five (5) percent what the Fund
would have paid to print such documents. The Fund shall pay one half the cost
of distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund Portion of the Combined SAIs and the Fund
Portion of the Combined Reports to existing Participants. The Fund shall not
pay any costs of setting type, printing and distributing Fund SAIs, Combined
SAIs, Fund Reports, Combined Reports or proxy statements or proxy-related
material to
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<PAGE>
prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to AGSI if and in amounts
agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event shall AGSI pay for any such costs that exceed by
more than five (5) percent
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<PAGE>
what AGSI would have paid to print such documents. AGSI shall pay one half the
cost of distributing Fund SAIs, Combined SAIs, Fund Reports, Combined Reports,
and Fund proxy material to such prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
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ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
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<PAGE>
telephone or tape recording, videotape display, signs or billboards, motion
pictures, or other public media), sales literature (I.E., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents
or employees, and registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
6.2. The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors,
officers, employees and agents and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually, "Indemnified Party," for purposes of
this Section 6.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Adviser)
or litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements, result from the negligence, bad faith, or
willful misconduct of the Adviser or any director, officer, employee or agent
thereof, and are related to the operation of the Adviser or the Fund and arise
out of or result from any material breach of any representation and/or
warranty made by the Adviser in this Agreement or arise out of or result from
any other material breach of this Agreement by the Adviser, including without
limitation any failure by the Adviser to comply with the conditions of
Articles II, IV and VI hereof.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners
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<PAGE>
and variable life insurance contract owners; or (f) a decision by a
Participating Insurance Company to disregard the voting instructions of
Contract owners. The Board shall promptly inform the Company if it determines
that an irreconcilable material conflict exists and the implications
thereof.
7.2. The Company will promptly report any potential or existing
material irreconcilable conflicts of which it is aware to the Board. The
Company will assist the Board in carrying out its responsibilities under the
Shared Funding Exemptive Order, by providing the Board with all information
reasonably necessary for the Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform the
Board whenever contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested directors), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance policy owners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
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7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
7.7 The Company shall at least annually submit to the Board of the
Fund such reports, materials or data as the Board may reasonably request so
that the Board may fully carry out the obligations imposed upon them by the
provisions hereof, and said reports, materials and data shall be submitted
more frequently if deemed appropriate by the Board. All reports received by
the Board of potential or existing conflicts, and all Board action with regard
to determining the existence of a conflict, notifying Participating Insurance
Companies of a conflict, and determining whether any proposed action
adequately remedies a conflict, shall be properly recorded in the minutes of
the Board or other appropriate records, and such minutes or other records
shall be made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board, officer, employee and agent of the Fund and
the Adviser and each director, officer, employee and agent of the Adviser, and
each person, if any, who controls the Fund or the Adviser within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually, "Indemnified Party," for purposes of this Section 8.1) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company or AGSI) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements:
(i) arise out of or are based upon any untrue 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 written 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
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<PAGE>
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in or
accurately derived from the registration statement,
prospectus or sales literature generated and approved by the
Fund) or wrongful conduct of the Company or AGSI or persons
under its control, with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of
the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company or AGSI;
(iv) arise as a result of any failure by the Company or AGSI to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Company or AGSI, as
limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such Party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
16
<PAGE>
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE FUND
8.2(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors, officers, employees and agents and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Adviser) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements, result from the
negligence, bad faith, willful misconduct of the Fund or any director,
officer, employee or agent thereof, are related to the operation of the Fund
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with written information furnished to the Adviser
or the Fund or the Underwriter by or on behalf of the
Company for use in the registration statement or prospectus
for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for
the Contracts not supplied by the Fund or persons under its
control and other than statements or representations
authorized by the Company) or unlawful conduct of persons
under its control, with respect to the sale or distribution
of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund; or
17
<PAGE>
(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; or
(v) 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; including without
limitation any failure by the Fund to comply with the
conditions of Article VI hereof.
8.2(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 may arise from
such Indemnified Party's willful misfeasance, bad faith, or negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). The 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.
8.2(d). The Company and AGSI agree promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
18
<PAGE>
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Advisor will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to
apply on the 60th
19
<PAGE>
day since giving of such notice, then such 60th day shall be
the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be; or
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund subject to all to the terms and
conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed
20
<PAGE>
by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Adviser) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases
where permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that was
otherwise available under the Contracts without first giving the Fund or the
appropriate Adviser 90 days prior written notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Levco Series Trust
One Rockefeller Plaza - 25th Floor
New York, NY 10020
Attention: Norris Nissim
If to Adviser:
John A. Levin & Co., Inc.
One Rockefeller - 25th Floor
New York, NY 10020
Attention: Glenn A. Aigen
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
21
<PAGE>
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement or as required by law, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information until such time as it may come into the public domain without the
express written consent of the affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
22
<PAGE>
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
LEVCO SERIES TRUST
By: _____________________________________________
Name: Norris Nissim
Title: Secretary
JOHN A. LEVIN & CO., INC.
By: _____________________________________________
Name: Glenn A. Aigen
Title: Vice President
24
<PAGE>
SCHEDULE A
PORTFOLIOS OF LEVCO SERIES TRUST
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY UNDER THIS AGREEMENT
LEVCO Equity Value Fund
25
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Flexible Payment Variable and Fixed
Individual Deferred Annuity
</TABLE>
26
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
27
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The
28
<PAGE>
mutilated or illegible Card is disregarded and considered to be NOT
RECEIVED for purposes of vote tabulation. Any Cards that have been
"kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
29
EXHIBIT 3(b)(iv)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
AND
NAVELLIER & ASSOCIATES, INC.
DATED AS OF
_________, 1998
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II. Representations and Warranties................ 6
ARTICLE III. Prospectuses, Reports to Shareholders......... 8
and Proxy Statements, Voting
ARTICLE IV. Sales Material and Information................ 12
ARTICLE V. [Reserved].................................... 13
ARTICLE VI. Potential Conflicts........................... 13
ARTICLE VII. Indemnification............................... 15
ARTICLE VIII. Applicable Law................................ 18
ARTICLE IX. Termination................................... 19
ARTICLE X. Notices....................................... 21
ARTICLE XI. Foreign Tax Credits........................... 22
ARTICLE XII. Miscellaneous................................. 22
SCHEDULE A Portfolios of Navellier Variable
Insurance Series Fund, Inc. Available
for Purchase by American General Life
Insurance Company Under this Agreement........ 25
SCHEDULE B Separate Accounts and Contracts............... 26
SCHEDULE C Proxy Voting Procedures....................... 27
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of
_________, 1998 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY
(hereinafter the "Company"), a Texas insurance company, on its own behalf and
on behalf of each separate account of the Company set forth on Schedule B
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), AMERICAN GENERAL SECURITIES INCORPORATED
("AGSI"), a Texas corporation, NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
(hereinafter the "Fund"), a Maryland corporation, and NAVELLIER & ASSOCIATES,
INC. (the "Adviser") ____________________, a __________________ corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund intends to apply for an order from the Securities and
Exchange Commission, granting Participating Insurance Companies and Variable
Insurance Product separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended (hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-
3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by Variable Annuity Product separate accounts of both
affiliated and unaffiliated life insurance companies and Qualified Plans
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
3
<PAGE>
WHEREAS, Navellier Securities Corp. (the "Underwriter") is registered as
a broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD") and serves as
principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
AGSI, the Fund, and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order by 10:15
a.m. Eastern time on the next following Business Day. Notwithstanding the
foregoing, the Company shall use its best efforts to provide the Fund with
notice of such orders by 10:00 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates the net asset
value pursuant to the rules of the SEC, as set forth in the Fund's Prospectus
and Statement of Additional Information. Notwithstanding the foregoing, the
Board of Directors of the Fund (hereinafter the "Board") may refuse to permit
the Fund to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio, if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the best
interests of the shareholders of such Portfolio.
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1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans all in accordance with the requirements of Section
817(h)(4) of the Internal Revenue Code of 1986, as amended ( the "Code") and
Treasury Regulation 1.817-5. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
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1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level and shall be made pursuant to the SEC's recommended
guidelines. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be reported
promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
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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 and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Maryland and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Code and
that the Fund and the Adviser (with respect to those Portfolios for which such
Adviser acts as investment adviser) will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that the Fund or the appropriate Adviser will notify the Company immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and
that the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment Adviser, and other individuals/entities
dealing with the money and/or securities of the
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Fund are covered by a blanket fidelity bond or similar coverage, in an amount
equal to the greater of $5 million or any amount required by applicable
federal or state law or regulation. The aforesaid includes coverage for
larceny and embezzlement is issued by a reputable bonding company. The Company
agrees to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the Fund
and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS;
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies of the Fund
Prospectus, the Fund shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
Fund Prospectus is amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus printed together
in one document or separately. The Company may elect to print the Fund
Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the
number of Fund Prospectus pages in the Combined Prospectus in relation to the
total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports
in combination with other fund companies' annual reports and semi-annual
reports. For purposes
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hereof, any combined annual reports and semi-annual reports including the Fund
Reports along with the Contract Reports or annual reports and semi-annual
reports of other fund companies shall be referred to as "Combined Reports."
For purposes hereof, the term "Fund Portion of the Combined Reports" shall
refer to the percentage of the number of Fund Reports pages in the Combined
Reports in relation to the total number or pages of the Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to provide the Fund
SAI or Fund Reports to the Company in the format in which the Fund is
accustomed to formatting statements of additional information and annual and
semi-annual reports. Notwithstanding the foregoing, in no event shall the Fund
pay for any such costs that exceed by more than five (5) percent what the Fund
would have paid to print such documents. The Fund shall pay one half the cost
of distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund
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Portion of the Combined SAIs and the Fund Portion of the Combined Reports to
existing Participants. The Fund shall not pay any costs of distributing Fund
SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy statements or
proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to AGSI if and in amounts
agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event shall AGSI pay for any such costs that exceed by
more than five (5) percent
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what AGSI would have paid to print such documents. AGSI shall pay one half the
cost of distributing Fund SAIs, Combined SAIs, Fund Reports, Combined Reports,
and Fund proxy material to such prospective Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3 The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
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ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material
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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. DIVERSIFICATION
5.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 1.817-5.
ARTICLE VI. POTENTIAL CONFLICTS
6.1. The parties acknowledge that the Fund intends to file an
application with the SEC to request an order granting relief from various
provisions of the 1940 Act and the rules thereunder to the extent necessary to
permit the Fund shares to be sold to and held by variable contract separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans. It is anticipated that the Exemptive Order, when and if
issued, shall require the Fund and each Participating Insurance Company to
comply with conditions and undertakings substantially as provided in this
Article VI. If the Exemptive Order imposes conditions materially different
from those provided for in this Article VI, the conditions and undertakings
imposed by the Exemptive Order shall govern this Agreement and the parties
hereto agree to amend this Agreement consistent with the Exemptive Order.
6.2. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; (f) a decision by a Participating Insurance Company
to disregard the voting instructions of Contract owners or (g) if applicable,
a decision by a Qualified Plan to disregard the voting instructions of plan
participants. The Board shall promptly inform the Company if it determines
that an irreconcilable material conflict exists and the implications thereof.
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6.3. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded. These responsibilities of
the Company shall be carried out with a view only to the interests of the
Contract owners.
6.4. If a majority of the Board or majority of its disinterested
Members, determines that a material irreconcilable conflict exists affecting
Company, Company, at its expense and to the extent reasonably practicable (as
determined by a majority of the Board's disinterested Members), will take any
steps necessary to remedy or eliminate the irreconcilable material conflict,
including: (a) withdrawing the assets allocable to some or all of the Separate
Accounts from the Fund or any portfolio thereof and reinvesting those assets
in a different investment medium, which may include another Portfolio of the
Fund, or another investment company; (b) submitting the question as to 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. variable annuity or variable life insurance 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 (c) establishing a new registered management investment
company (or series thereof) or managed separate account. If a material
irreconcilable conflict arises because of Company's decision to disregard
Contract owner voting instructions and that decision represents a minority
position or would preclude a majority vote, Company may be required, at the
election of the Fund, to withdraw the Separate Account's investment in the
Fund and no charge or penalty will be imposed as a result of such withdrawal.
The responsibility to take such remedial action shall be carried out with a
view only to the interests of the Contract owners.
6.5. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
6.6. For purposes of Sections 6.4 and 6.5 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 6.4 or 6.5 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.
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<PAGE>
6.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
6.8 The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VII. INDEMNIFICATION
7.1. INDEMNIFICATION BY THE COMPANY AND AGSI
7.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board and officers, and the Adviser and each
director and officer of the Adviser, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 7.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company or AGSI) 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 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
15
<PAGE>
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by
the Company or AGSI, or persons under its control and other than
statements or representations authorized by the Fund or the Adviser) or
wrongful conduct of the Company or AGSI or persons under its control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company or AGSI; or
(iv) arise as a result of any failure by the Company or AGSI to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company or AGSI, as limited by and in accordance
with the provisions of Sections 7.1(b) and 7.1(c) hereof.
7.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
7.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such Party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
16
<PAGE>
7.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
7.2. INDEMNIFICATION BY THE ADVISER
7.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements, result from the gross negligence, bad faith, willful
misconduct of the Adviser or any director, officer, employee or agent thereof,
or are related to the operation of the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Adviser or the
Fund or the Underwriter by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not supplied
by the Adviser or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Adviser or persons under its control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading,
if such statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this Agreement; or
17
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund or the Adviser; including without limitation any failure by
the Fund or the Adviser to comply with the conditions of Article V
hereof.
7.2(b).The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
7.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Adviser to such Party of
the Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be liable to such Party under this Agreement for any
legal or other expenses subsequently incurred by such Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.2(d). The Company and AGSI agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
ARTICLE VIII. APPLICABLE LAW
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
8.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. TERMINATION
18
<PAGE>
9.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon 180 days advance
written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts.
Reasonable advance notice of election to terminate shall be
furnished by the Company, said termination to be effective ten
(10) days after receipt of notice unless the Fund makes available
a sufficient number of shares to reasonably meet the requirements
of the Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
medium of the Contracts issued or to be issued by the Company. The
terminating party shall give prompt notice to the other parties of
its decision to terminate; or
(d) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company or AGSI reasonably believes that the
Fund may fail to so qualify; or
(e) termination by the Company or AGSI by written notice to the Fund
and the Adviser with respect to any Portfolio in the event that
such Portfolio fails to meet the diversification requirements
specified in Article V hereof; or
(f) termination by either the Fund or the Adviser by written notice to
the Company if the Adviser or the Fund shall determine, in its
sole judgment exercised in good faith, that the Company, AGSI
and/or their affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of
material adverse publicity, provided that the Fund or the Adviser
will give the Company sixty (60) days' advance written notice of
such determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions taken by
the Company or AGSI and any other changes in circumstances since
the giving of such notice, the determination of the Fund or the
Adviser shall continue to apply on the 60th day since giving of
such notice, then such 60th day shall be the effective date of
termination; or
(g) termination by the Company or AGSI by written notice to the Fund
and the Adviser, if the Company or AGSI shall determine, in its
sole judgment exercised in good faith, that either the Fund or the
Adviser (with respect to the appropriate Portfolio) has suffered a
material adverse change in its business, operations, financial
condition or
19
<PAGE>
prospects since the date of this Agreement or is the subject of
material adverse publicity; provided that the Company will give
the Fund or the Adviser sixty (60) days' advance written notice of
such determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions taken by
the Company and any other changes in circumstances since the
giving of such notice, the determination of the Company or AGSI
shall continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to the
Company, if the Company gives the Fund and the Adviser the written
notice specified in Section 2.4 hereof and at the time such notice
was given there was no notice of termination outstanding under any
other provision of this Agreement; provided, however any
termination under this Section 9.1(h) shall be effective sixty
(60) days after the notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of any
representation in Article II or any material provision of this
Agreement, which breach has not been cured to the satisfaction of
the terminating party within ten (10) days after written notice of
such breach is delivered to the Fund or the Company, as the case
may be; or
(j) termination by the Fund or the Adviser by written notice to the
Company in the event an Account or Contract is not registered or
sold in accordance with applicable federal or state law or
regulation, or the Company fails to provide pass-through voting
privileges as specified in Section 3.4.
9.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The Company agrees however: (i) to immediately
terminate the availability of shares of the Fund to Contracts other than
Existing Contracts and (ii) as soon as reasonably practicable to request and
diligently pursue approval from the SEC to replace shares of the Fund with
other investments for Contracts and, if and when granted such approval,
thereafter to so replace the shares of the Fund as soon as reasonably
practicable. Furthermore, the parties agree that this Section 9.2 shall not
apply to any terminations under Article VI and the effect of such Article VI
terminations shall be governed by Article VI of this Agreement.
9.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter
20
<PAGE>
referred to as a "Legally Required Redemption") or (iii) as permitted by an
order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon request, the
Company will promptly furnish to the Fund the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Fund and the
Adviser) to the effect that any redemption pursuant to clause (ii) above is a
Legally Required Redemption. Furthermore, except in cases where permitted
under the terms of the Contracts, the Company shall not prevent Contract
Owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving the Fund or the appropriate Adviser
90 days prior written notice of its intention to do so.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Navellier Variable Insurance Series Fund, Inc.
One East Liberty, Third Floor
Reno, Nevada, 89501
Attention: Dennis A. Holtorf
If to Adviser:
Navellier & Associates, Inc.
One East Liberty, Third Floor
Reno, Nevada 89501
Attention: ______________________________
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XI. FOREIGN TAX CREDITS
21
<PAGE>
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE 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 this
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.
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 Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
12.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports upon request from the
Fund:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under generally
accepted accounting principles ("GAAP"),
22
<PAGE>
if any), as soon as practical and in any event within 90 days
after the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event within 45
days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or report of the
Company sent to stockholders and/or policyholders, as soon as
practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state insurance
regulator, as soon as practical after the filing thereof;
(e) any other public report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
12.10. It is agreed by the parties hereto that Article VII and Sections
12.1, 12.6 and 12.7 shall survive any termination of this Agreement.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
By: _____________________________________________
Name: ______________________________________
Title: ______________________________________
NAVELLIER & ASSOCIATES, INC.
By: _____________________________________________
Name: ______________________________________
Title: ______________________________________
24
<PAGE>
SCHEDULE A
PORTFOLIOS OF
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY UNDER THIS AGREEMENT
1. Navellier Growth Portfolio
25
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Select Reserve (sm) Flexible Payment Variable and
Fixed Deferred Annuity
</TABLE>
26
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
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<PAGE>
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
28
<PAGE>
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
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.
29
EXHIBIT 3(b)(v)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK
AND
OFFIT FUNDS DISTRIBUTOR, INC.
DATED AS OF
___________, 199
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II. Representations and Warranties................ 6
ARTICLE III. Prospectuses, Reports to Shareholders......... 8
and Proxy Statements, Voting
ARTICLE IV. Sales Material and Information................ 12
ARTICLE V [Reserved].................................... 13
ARTICLE VI. Diversification............................... 13
ARTICLE VII. Potential Conflicts........................... 13
ARTICLE VIII. Indemnification............................... 15
ARTICLE IX. Applicable Law................................ 20
ARTICLE X. Termination................................... 20
ARTICLE XI. Notices....................................... 22
ARTICLE XII. Foreign Tax Credits........................... 23
ARTICLE XIII. Miscellaneous................................. 23
SCHEDULE A Portfolios of The OFFITBANK Variable
Insurance Fund, Inc. Available for
Purchase by American General Life
Insurance Company............................. 27
SCHEDULE B Separate Accounts and Contracts............... 28
SCHEDULE C Proxy Voting Procedures....................... 29
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of _________,
1997 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY (hereinafter the
"Company"), a Texas insurance company, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule B hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); AMERICAN GENERAL SECURITIES INCORPORATED (hereinafter "AGSI"), a
Texas corporation; THE OFFITBANK VARIABLE INSURANCE FUND, INC. (hereinafter
the "Fund"), a Maryland corporation; OFFITBANK (hereinafter the "Adviser") a
New York chartered trust company; and OFFIT FUNDS DISTRIBUTOR, INC.
(hereinafter "OFDI"), a Delaware Corporation .
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated February 15, 1995, (File No. 812-9306), granting
Participating Insurance Companies and Variable Insurance Product separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended (hereinafter the "1940
Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by Variable
Insurance Product separate accounts of both affiliated and unaffiliated life
insurance companies and Qualified Plans (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
3
<PAGE>
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, OFDI is registered as a broker/dealer under the Securities
Exchange Act of 1934, as amended (hereinafter the "1934 Act"), is a member in
good standing of the National Association of Securities Dealers, Inc.
(hereinafter "NASD") and serves as principal underwriter of the shares of the
Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and OFDI is authorized to sell such shares to each such Account at
net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund, the Adviser and OFDI agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order as soon as
reasonably practical (normally by 10:00 a.m. Eastern time) on the next
following Business Day. Notwithstanding the foregoing, the Company shall use
its best efforts to provide the Fund with notice of such orders by 10:15 a.m.
Eastern time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates the net asset value pursuant to the rules of the SEC, as set
forth in the Fund's Prospectus and Statement of Additional Information.
Notwithstanding the foregoing, the Board of Directors of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the
4
<PAGE>
offering of shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
5
<PAGE>
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level and shall be made pursuant to the SEC's recommended
guidelines. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be reported
promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
6
<PAGE>
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Maryland and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
or the appropriate Adviser will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to
finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the State of Maryland and
that the Fund does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the
7
<PAGE>
laws and regulations of its state of domicile and any applicable state and
federal securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment Adviser, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and OFDI in the
event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS,
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies of the Fund
Prospectus, the Fund shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
Fund Prospectus is amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus printed together
in one document or separately. The Company may elect to print the Fund
Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the
number of Fund Prospectus pages in the Combined Prospectus in relation to the
total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such
8
<PAGE>
other assistance as is reasonably necessary in order for the Company once each
year to have the annual report and semi-annual report for the Contracts
(collectively, the "Contract Reports") and the Fund Reports printed together
or separately. The Company may also elect to print the Fund Reports in
combination with other fund companies' annual reports and semi-annual reports.
For purposes hereof, any combined annual reports and semi-annual reports
including the Fund Reports along with the Contract Reports or annual reports
and semi-annual reports of other fund companies shall be referred to as
"Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined Reports" shall refer to the percentage of the number of Fund Reports
pages in the Combined Reports in relation to the total number or pages of the
Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to provide the Fund
SAI or Fund Reports to the Company in the format in which the Fund is
accustomed to formatting statements of additional information and annual and
semi-annual reports.
9
<PAGE>
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall pay one half the cost of distributing
Fund SAIs, Fund Reports and Fund proxy statements and proxy-related material
to such existing Participants. The Fund shall pay the cost of distributing the
Fund Portion of the Combined SAIs and the Fund Portion of the Combined Reports
to existing Participants. The Fund shall not pay any costs of distributing
Fund SAIs, Combined SAIs, Fund Reports, Combined Reports or proxy statements
or proxy-related material to prospective Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then OFDI may
make payments to the Company or toAGSI if and in amounts agreed to by OFDI in
writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective
10
<PAGE>
Participants as sales literature. In such event, AGSI shall bear the cost of
typesetting to provide the Fund SAI and Fund Reports to the Company in the
format in which the Fund is accustomed to formatting statements of additional
information and annual and semi-annual reports. Notwithstanding the foregoing,
in no event shall AGSI pay for any such costs that exceed by more than five
(5) percent what AGSI would have paid to print such documents. AGSI shall pay
one half the cost of distributing Fund SAIs, Combined SAIs, Fund Reports,
Combined Reports, and Fund proxy material to such prospective Participants as
sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the
11
<PAGE>
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract 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: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
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7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested directors), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance policy owners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
7.7 The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data
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shall be submitted more frequently if deemed appropriate by the Board. All
reports received by the Board of potential or existing conflicts, and all
Board action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board and officers, the Adviser and OFDI and each
director and officer of the Adviser and OFDI, and each person, if any, who
controls the Fund, Adviser or OFDI within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" and individually,
"Indemnified Party," for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement
with the written consent of the Company or AGSI) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute 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 or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by
the Company or AGSI, or persons under its control and other than
statements or representations authorized by the Fund or the Adviser) or
unlawful conduct of the Company or AGSI or persons under its control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon and in
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conformity with information furnished to the Fund by or on behalf of the
Company or AGSI;
(iv) arise as a result of any failure by the Company or AGSI to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company or AGSI, as limited by and in accordance
with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such Party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements, result from the
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gross negligence, bad faith, willful misconduct of the Adviser or any
director, officer, employee or agent thereof, are related to the operation of
the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Adviser or the
Fund or OFDI by or on behalf of the Company for use in the registration
statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not supplied
by the Adviser or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Adviser or persons under its control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading,
if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund or the Adviser; including without limitation any failure by
the Fund or the Adviser to comply with the conditions of Article VI
hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser
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in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but failure to
notify the Adviser of any such claim shall not relieve the Adviser from any
liability which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the Adviser
will be entitled to participate, at its own expense, in the defense thereof.
The Adviser also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Adviser
to such Party of the Adviser's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such Party under this
Agreement for any legal or other expenses subsequently incurred by such Party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company and AGSI agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
8.3. INDEMNIFICATION BY OFDI
8.3(a). OFDI 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" and individually, "Indemnified Party," for purposes of
this Section 8.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of OFDI) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements, result from the gross negligence, bad
faith, willful misconduct of OFDI or any director, officer, employee or agent
thereof, are related to the operation of OFDI or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Fund or OFDI by
or on behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not supplied
by OFDI or persons under its control and other than statements or
18
<PAGE>
representations authorized by the Company) or unlawful conduct of OFDI
or persons under its control, with respect to the sale or distribution
of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading,
if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
OFDI; or
(iv) arise as a result of any failure by OFDI 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 OFDI in this Agreement or arise
out of or result from any other material breach of this Agreement by the
Adviser.
8.3(b). OFDI shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.3(c). OFDI 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 OFDI 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 OFDI of any such claim shall not
relieve OFDI 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, OFDI will be entitled to participate, at its own expense,
in the defense thereof. OFDI also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action. After
notice from OFDI to such Party of OFDI's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and OFDI will not be liable to such Party
under this Agreement for any legal or other expenses subsequently incurred by
such Party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company and AGSI agree promptly to notify OFDI of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
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ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
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(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Adviser will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to
apply on the 60th day since giving of such notice, then such
60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be;
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4;
or
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(k) termination by OFDI by written notice delivered to the other
parties in the event OFDI is terminated as distributor to
the Fund.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the appropriate Adviser 90 days prior written notice of its intention to do
so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
The OFFITBANK Variable Insurance Fund, Inc.
___________________________________________
___________________________________________
Attention: ________________________________
22
<PAGE>
If to Adviser:
OFFITBANK
520 Madison Avenue
New York, NY 10022-4213
Attention: Stephen B. Wells
If to OFDI:
OFFIT Funds Distributor, Inc.
3435 Stelzer Road
Columbus, OH 43219
Attention: George O. Martinez
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and
23
<PAGE>
other confidential information until such time as it may come into the public
domain without the express written consent of the affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
24
<PAGE>
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
25
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
By: _____________________________________________
Name:
Title:
OFFITBANK
By: _____________________________________________
Name:
Title:
OFFIT FUNDS DISTRIBUTOR, INC.
By: _____________________________________________
Name: George O. Martinez
Title: Senior Vice President
26
<PAGE>
SCHEDULE A
PORTFOLIOS OF
THE OFFITBANK VARIABLE INSURANCE FUND, INC.
AVAILABLE FOR PURCHASE BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
UNDER THIS AGREEMENT
OFFITBANK VIF-Emerging Markets Fund
OFFITBANK VIF-High Yield Fund
OFFITBANK VIF-Total Return Fund
OFFITBANK VIF-U.S. Government Securities
27
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Flexible Payment Variable and Fixed
Individual Deferred Annuity
</TABLE>
28
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
29
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The
30
<PAGE>
mutilated or illegible Card is disregarded and considered to be NOT
RECEIVED for purposes of vote tabulation. Any Cards that have been
"kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
31
EXHIBIT 3(b)(vi)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY,
AMERICAN GENERAL SECURITIES INCORPORATED,
ROYCE CAPITAL FUND
AND
ROYCE & ASSOCIATES, INC.
DATED AS OF
___________, 199_
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II Representations and Warranties................ 7
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting.................. 8
ARTICLE IV. Sales Material and Information ............... 12
ARTICLE V [Reserved].................................... 14
ARTICLE VI. Diversification............................... 14
ARTICLE VII. Potential Conflicts........................... 14
ARTICLE VIII. Indemnification............................... 16
ARTICLE IX. Applicable Law................................ 19
ARTICLE X. Termination................................... 20
ARTICLE XI. Notices....................................... 22
ARTICLE XII. Foreign Tax Credits........................... 23
ARTICLE XIII. Miscellaneous................................. 23
SCHEDULE A Portfolios of Royce Capital Fund.............. 26
Available for Purchase by American
General Life Insurance Company
SCHEDULE B Separate Accounts and Contracts............... 27
SCHEDULE C Proxy Voting Procedures....................... 28
</TABLE>
2
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of
_________, 1997 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY
(hereinafter the "Company"), a Texas insurance company, on its own behalf and
on behalf of each separate account of the Company set forth on Schedule B
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), AMERICAN GENERAL SECURITIES INCORPORATED
("AGSI"), a Texas corporation, ROYCE CAPITAL FUND (hereinafter the "Fund"), a
Delaware business trust, and ROYCE & ASSOCIATES, INC., a New York corporation
(the "Adviser").
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated July 24, 1996 (File No. 812-9988), granting Participating
Insurance Companies and Variable Insurance Product separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of
the Investment Company Act of 1940, as amended (hereinafter the "1940 Act"),
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by Variable Annuity
Product separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
3
<PAGE>
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, _____________ (the "Underwriter") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD") and serves as
principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee of orders prior to the
close of regular trading on the New York Stock Exchange (generally 4:00 p.m.
Eastern time) shall constitute receipt by the Fund; provided that the Fund
receives notice of such order as soon as is reasonably practical (normally by
10:00 a.m. Eastern time) on the next following Business Day. Notwithstanding
the foregoing, the Company shall use its best efforts to provide the Fund with
notice of such orders by 10:15 a.m. Eastern time on the next following
Business Day. "Business Day" shall mean any day on which the
4
<PAGE>
New York Stock Exchange is open for trading and on which the Fund calculates
the net asset value pursuant to the rules of the SEC, as set forth in the
Fund's Prospectus and Statement of Additional Information. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser sixty
(60) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall use
its best efforts to pay the redemption proceeds in federal funds transmitted
by wire on the next Business Day, in any event redemption proceeds shall be
wired to the Company within three Business Days or such longer period
permitted by the 1940 Act, after an order to redeem a Portfolio's shares is
made in accordance with the provision of Section 1.4 hereof. Notwithstanding
the foregoing, if the payment of redemption proceeds on the next Business
5
<PAGE>
Day would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, it 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 the Portfolio shall notify in writing the person designated by the Company
as the recipient for such notice of such delay promptly.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
per share payable on the Fund's shares available to the Company as soon as
reasonably practical after the dividends or capital gains are declared
(normally by 6:30 p.m. Eastern time) and shall use its best efforts to furnish
same day notice by 7:00 p.m. Eastern time (by wire or telephone, followed by
written confirmation) to the Company of any dividends or capital gain
distributions per share payable on the Fund's shares. The Company hereby
elects to receive all such dividends and capital gain distributions as are
payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
dividends and capital gain distributions in cash. The Fund shall notify the
Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company, on behalf of the
Accounts, shall be entitled to an adjustment with respect to the Fund shares
purchased or redeemed to reflect the correct net asset value per share. The
determination of the materiality of any net asset value pricing error shall be
based on the SEC's recommended guidelines regarding such errors. The
correction of any such errors shall be made at the Company level and shall be
made pursuant to the SEC's recommended guidelines. Any material error in the
calculation or reporting of net asset value per share, dividend or capital
gain information shall be reported promptly upon discovery to the Company.
6
<PAGE>
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
serve as a segregated investment account for the Contracts. The Company shall
amend its registration statement for its contracts under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the State of Delaware and sold in
compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that the Fund is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the Fund and the
Adviser (with respect to those Portfolios for which such Adviser acts as
investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
or the appropriate Adviser will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of directors, a
7
<PAGE>
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various
states.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of Delaware and that the Fund
does and will comply in all material respects with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its obligations for
the Fund and the Company in compliance in all material respects with the laws
and regulations of its state of domicile and any applicable state and federal
securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment Adviser, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS;
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies of the Fund
Prospectus, the Fund shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
Fund Prospectus is amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus printed together
in one document or separately. The Company may elect to print the Fund
Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the
number of Fund Prospectus pages in the Combined Prospectus in relation to the
total number of pages of the Combined Prospectus.
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3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the Fund shall
provide camera-ready film or computer diskettes containing the Fund's Reports,
and such other assistance as is reasonably necessary in order for the Company
once each year to have the annual report and semi-annual report for the
Contracts (collectively, the "Contract Reports") and the Fund Reports printed
together or separately. The Company may also elect to print the Fund Reports
in combination with other fund companies' annual reports and semi-annual
reports. For purposes hereof, any combined annual reports and semi-annual
reports including the Fund Reports along with the Contract Reports or annual
reports and semi-annual reports of other fund companies shall be referred to
as "Combined Reports." For purposes hereof, the term "Fund Portion of the
Combined Reports" shall refer to the percentage of the number of Fund Reports
pages in the Combined Reports in relation to the total number or pages of the
Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in
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order to update disclosure as required by the 1933 Act and/or the 1940 Act.
With respect to existing Participants, in the event the Company elects to
prepare a Combined Prospectus, the Fund shall pay the cost of setting in type,
printing and distributing the Fund Portion of the Combined Prospectus made
available by the Company to its existing Participants in order to update
disclosure as required by the 1933 Act and/or the 1940 Act. In such event, the
Fund shall bear the cost of typesetting to provide the Fund Prospectus to the
Company in the format in which the Fund is accustomed to formatting
prospectus. Notwithstanding the foregoing, in no event shall the Fund pay for
any such costs that exceed by more than five (5) percent what the Fund would
have paid to print such documents. The Fund shall not pay any costs of
typesetting, printing and distributing the Fund Prospectus (or Combined
Prospectus, if applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to existing Participants, the Fund shall pay the cost of
setting in type and printing Fund SAIs, Fund Reports and Fund proxy material
made available by the Company to its existing Participants. With respect to
existing Participants, in the event the Company elects to prepare a Combined
SAI or Combined Reports, the Fund shall pay the cost of setting in type and
printing the Fund Portion of the Combined SAI or Combined Reports,
respectively, made available by the Company to its existing Participants. In
such event, the Fund shall bear the cost of typesetting to provide the Fund
SAI or Fund Reports to the Company in the format in which the Fund is
accustomed to formatting statements of additional information and annual and
semi-annual reports. Notwithstanding the foregoing, in no event shall the Fund
pay for any such costs that exceed by more than five (5) percent what the Fund
would have paid to print such documents. The Fund shall pay one half the cost
of distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund Portion of the Combined SAIs and the Fund
Portion of the Combined Reports to existing Participants. The Fund shall not
pay any costs of distributing Fund SAIs, Combined SAIs, Fund Reports, Combined
Reports or proxy statements or proxy-related material to prospective
Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to AGSI if and in amounts
agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state
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laws prior to their sale. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event shall AGSI pay for any such costs that exceed by
more than five (5) percent what AGSI would have paid to print such documents.
AGSI shall pay one half the cost of distributing Fund SAIs, Combined SAIs,
Fund Reports, Combined Reports, and Fund proxy material to such prospective
Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material
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furnished by the Fund to Participants to whom voting privileges are required
to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received, so long
as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for
variable contract owners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its
own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy
and voting instruction solicitations, as set forth in
Schedule C attached hereto and incorporated herein by
reference. Participating Insurance Companies shall be
responsible for ensuring that each of their separate
accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided
to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
Securities and Exchange Commission's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with
whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
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4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an Account or Contract contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: 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.
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ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested directors, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested 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
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<PAGE>
and, as appropriate, segregating the assets of any appropriate group (I.E.,
annuity contract owners, life insurance policy owners, or variable Contract
owners of one or more Participating Insurance Companies) that votes in favor
of such segregation, or offering to the affected Contract owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account. No charge or penalty will be
imposed as a result of such withdrawal. The Company agrees that it bears the
responsibility to take remedial action in the event of a Board determination
of an irreconcilable material conflict and the cost of such remedial action,
and these responsibilities will be carried out with a view only to the
interests of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
7.7 The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the
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SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board and officers, and the Adviser and each
director and officer of the Adviser, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company or AGSI) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute 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 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 any statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Company or AGSI,
or persons under its control and other than statements or
representations authorized by the Fund or the Adviser) or
unlawful conduct of the Company or AGSI or persons under its
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature of
the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on
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behalf of the Company or AGSI; or
(iv) arise as a result of any failure by the Company or AGSI to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Company or AGSI, as
limited by and in accordance with the provisions of Sections
8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against the Indemnified Parties,
the Company or AGSI shall be entitled to participate, at its own expense, in
the defense of such action. The Company or AGSI also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from the Company or AGSI to such Party of the
Company's or AGSI's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses under this Agreement for any legal or
other expenses subsequently incurred by such Party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2 INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written
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consent of the Adviser) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements, result from the gross
negligence, bad faith, willful misconduct of the Adviser or any director,
officer, employee or agent thereof, are related to the operation of the
Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Adviser or the
Fund or the Underwriter by or on behalf of the Company for
use in the registration statement or prospectus for the Fund
or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Portfolio shares; or
(ii) arise out of or as a result of any statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Contracts not supplied by the Adviser or
persons under its control and other than statements or
representations authorized by the Company) or unlawful
conduct of the Adviser or persons under its control, with
respect to the sale or distribution of the Contracts or
Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or
alleged untrue statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund or the Adviser;
including without limitation any failure by the Fund or the
Adviser to comply with the conditions of Article VI hereof.
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8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser will be entitled to
participate, at its own expense, in the defense thereof. The Adviser also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Adviser to such Party of
the Adviser's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be liable to such Party under this Agreement for any
legal or other expenses subsequently incurred by such Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company and AGSI agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
8.2(e). It is understood that these indemnities shall have no effect on
any other agreement or arrangement between the Fund and/or its series and the
Adviser.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant (including, but not limited to, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
19
<PAGE>
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes available a sufficient
number of shares to reasonably meet the requirements of the
Account within said ten (10) day period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Adviser will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any
20
<PAGE>
other changes in circumstances since the giving of such
notice, the determination of the Fund or the Adviser shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th day since giving of such
notice, then such 60th day shall be the effective date of
termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be; or
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests
21
<PAGE>
of the Fund and its shareholders. Specifically, without limitation, the owners
of the Existing Contracts shall be permitted to direct reallocation of
investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the appropriate Adviser 90 days prior written notice of its intention to do
so.
10.4. Notwithstanding any termination of this Agreement pursuant to
Article X hereof, all rights and obligations arising under Article VIII of
this Agreement shall survive.
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:
Royce Capital Fund
1414 Avenue of the Americas
New York, New York 10019
Attention: John D. Diederich
If to Adviser:
Royce & Associates, Inc,.
1414 Avenue of the Americas
New York, New York 10019
Attention: Howard J. Kashner, Esq.
22
<PAGE>
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
23
<PAGE>
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 45 days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof;
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
24
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative
hereto as of the date specified
above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
ROYCE CAPITAL FUND
By: _____________________________________________
Name:
Title:
ROYCE & ASSOCIATES, INC.
By: _____________________________________________
Name:
Title:
25
<PAGE>
SCHEDULE A
PORTFOLIOS OF ROYCE CAPITAL FUND
AVAILABLE FOR
PURCHASE BY AMERICAN GENERAL LIFE
INSURANCE COMPANY UNDER THIS AGREEMENT
Royce Premier Portfolio
Royce Total Return Portfolio
26
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Flexible Payment Variable
and Fixed Individual
Deferred Annuity
</TABLE>
27
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to
28
<PAGE>
Company for insertion into envelopes (envelopes and return envelopes are
provided and paid for by the Company). Contents of envelope sent to
Customers by the Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
5. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
6. 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.
7. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
8 Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
9. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
29
<PAGE>
10. 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.
11. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
12. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
13. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
14. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
15. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
30
EXHIBIT 3(b)(vii)
PARTICIPATION AGREEMENT
AMONG
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
WRIGHT MANAGED BLUE CHIP SERIES TRUST
AND
WRIGHT INVESTORS SERVICE, INC.
DATED AS OF
_________________, 199_
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I. Fund Shares................................... 4
ARTICLE II Representations and Warranties................ 6
ARTICLE III. Prospectuses, Reports to Shareholders
and Proxy Statements, Voting.................. 8
ARTICLE IV. Sales Material and Information................ 12
ARTICLE V [Reserved].................................... 13
ARTICLE VI. Diversification............................... 13
ARTICLE VII. Potential Conflicts........................... 13
ARTICLE VIII. Indemnification............................... 15
ARTICLE IX. Applicable Law................................ 19
ARTICLE X. Termination................................... 19
ARTICLE XI. Notices....................................... 21
ARTICLE XII. Foreign Tax Credits........................... 21
ARTICLE XIII. Miscellaneous................................. 22
SCHEDULE A Portfolios of Wright Managed Blue Chip........ 25
Series Trust Available for Purchase by
American General Life Insurance Company
SCHEDULE B Separate Accounts and Contracts............... 26
SCHEDULE C Proxy Voting Procedures....................... 27
</TABLE>
<PAGE>
THIS AGREEMENT, made and entered into as of the __ day of
_________, 1997 by and among AMERICAN GENERAL LIFE INSURANCE COMPANY
(hereinafter the "Company"), a Texas insurance company, on its own behalf and
on behalf of each separate account of the Company set forth on Schedule B
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"); AMERICAN GENERAL SECURITIES INCORPORATED
("AGSI"), a Texas corporation; WRIGHT MANAGED BLUE CHIP SERIES TRUST
(hereinafter the "Fund"), a Massaaachusetts business trust; and WRIGHT
INVESTORS SERVICE, INC. (the "Adviser"), a _____________________ corporation..
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation
and/or pay-out provisions (hereinafter referred to individually and/or
collectively as "Variable Insurance Products") and (ii) the investment vehicle
for certain qualified pension and retirement plans (hereinafter "Qualified
Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Insurance Products are required to
enter into a participation agreement with the Fund and the Adviser (the
"Participating Insurance Companies"); and
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets, any one or more of which may be made available for Variable
Insurance Products of Participating Insurance Companies; and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule A (each such series hereinafter referred to as a "Portfolio"), as may
be amended from time to time by mutual agreement of the parties hereto, under
this Agreement to the Accounts of the Company; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, dated _______________ (File No. _________), granting Participating
Insurance Companies and Variable Insurance Product separate accounts
exemptions from the provisions of Sections 9(a), 13(a), 15(a), and 15(b) of
the Investment Company Act of 1940, as amended (hereinafter the "1940 Act"),
and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary
to permit shares of the Fund to be sold to and held by Variable Insurance
Product separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws; and
3
<PAGE>
WHEREAS, the Adviser manages certain Portfolios of the Fund; and
WHEREAS, WRIGHT INVESTORS SERVICES DISTRIBUTORS, INC. (the
"Underwriter") is registered as a broker/dealer under the Securities Exchange
Act of 1934, as amended (hereinafter the "1934 Act"), is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD") and serves as principal underwriter of the shares of the Fund; and
WHEREAS, the Company has registered or will register certain Variable
Insurance Products under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, on the date shown for such Account on Schedule B
hereto, to set aside and invest assets attributable to the aforesaid Variable
Insurance Product; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Variable Insurance
Products and the Underwriter is authorized to sell such shares to each such
Account at net asset value; and
WHEREAS, AGSI serves as both the distributor and the principal
underwriter of the Variable Insurance Products that are set forth on Schedule
B;
NOW, THEREFORE, in consideration of their mutual promises, the Company, AGSI,
the Fund and the Adviser agree as follows:
ARTICLE I. FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Portfolios set forth on Schedule A and shall execute orders
placed for each Account on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of such order. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of such
orders from each Account and receipt by such designee shall constitute receipt
by the Fund; provided that the Fund receives notice of such order as soon as
reasonably practical (normally by 10:00 a.m. Eastern time) on the next
following Business Day. Notwithstanding the foregoing, the Company shall use
its best efforts to provide the Fund with notice of such orders by 10:15 a.m.
Eastern time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates the net asset value pursuant to the rules of the SEC, as set
forth in the Fund's Prospectus and Statement of Additional Information.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the
4
<PAGE>
offering of shares of any Portfolio, if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of such Portfolio.
1.2. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their Variable Insurance Products and to
certain Qualified Plans. No shares of any Portfolio will be sold to the
general public.
1.3. The Fund will not make its shares available for purchase by any
insurance company or separate account unless an agreement containing
provisions substantially the same as Sections 2.4, 2.9, 3.4 and Article VII of
this Agreement is in effect to govern such sales.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
by the Fund or its designee of the request for redemption. For purposes of
this Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day in accordance with
the timing rules described in Section 1.1.
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus. The Accounts of the
Company, under which amounts may be invested in the Fund, are listed on
Schedule B attached hereto and incorporated herein by reference, as such
Schedule B may be amended from time to time by mutual written agreement of all
of the parties hereto. The Company will give the Fund and the Adviser ninety
(90) days written notice of its intention to make available in the future, as
a funding vehicle under the Contracts, any other investment company.
1.6. The Company will place separate orders to purchase or redeem
shares of each Portfolio. Each order shall describe the net amount of shares
and dollar amount of each Portfolio to be purchased or redeemed. In the event
of net purchases, the Company shall pay for Portfolio shares on the next
Business Day after an order to purchase Portfolio shares is made in accordance
with the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. In the event of net redemptions, the Portfolio shall pay
the redemption proceeds in federal funds transmitted by wire on the next
Business Day after an order to redeem a Portfolio's shares is made in
accordance with the provision of Section 1.4 hereof. Notwithstanding the
foregoing, if the payment of redemption proceeds on the next Business Day
would require the Portfolio to dispose of securities or otherwise incur
substantial additional costs, and if the Portfolio has determined to settle
redemption transactions for all shareholders on a delayed basis, proceeds
shall be wired to the Company within seven (7) days and the Portfolio shall
notify in writing the person designated by the Company as the recipient for
such notice of such delay by 3:00 p.m. Eastern time on the same Business Day
that the Company transmits the redemption order to the Portfolio.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates
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will not be issued to the Company or any Account. Shares ordered from the Fund
will be recorded in an appropriate title for each Account or the appropriate
subaccount of each Account.
1.8. The Fund shall make the dividends or capital gain distributions
payable on the Fund's shares available to the Company as soon as reasonably
practical after the dividends or capital gains are calculated (normally by
6:30 p.m. Eastern time) and shall use its best efforts to furnish same day
notice by 7:00 p.m. Eastern time (by wire or telephone, followed by written
confirmation) to the Company of any dividends or capital gain distributions
payable on the Fund's shares. The Company hereby elects to receive all such
dividends and capital gain distributions as are payable on the Portfolio
shares in additional shares of that Portfolio. The Company reserves the right
to revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time. In the event that the Fund is
unable to meet the 7:00 p.m. time stated immediately above, then the Fund
shall provide the Company with additional time to notify the Fund of purchase
or redemption orders pursuant to Sections 1.1 and 1.4, respectively, above.
Such additional time shall be equal to the additional time that the Fund takes
to make the net asset values available to the Company; provided, however, that
notification must be made by 10:15 a.m. Eastern time on the Business Day such
order is to be executed regardless of when the net asset value is made
available.
1.10. If the Fund provides materially incorrect share net asset value
information through no fault of the Company, the Company shall be entitled to
an adjustment with respect to the Fund shares purchased or redeemed to reflect
the correct net asset value per share. The determination of the materiality of
any net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. The correction of any such errors shall be
made at the Company level and shall be made pursuant to the SEC's recommended
guidelines. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gain information shall be reported
promptly upon discovery to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the interests of the
Accounts (the "Contracts") are or will be registered and will maintain the
registration under the 1933 Act and the regulations thereunder to the extent
required by the 1933 Act; that the Contracts will be issued in compliance in
all material respects with all applicable federal and state laws and
regulations. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account under the Texas Insurance Law
and the regulations thereunder and has registered or, prior to any issuance or
sale of the Contracts, will register and will maintain the registration of
each Account as a unit investment trust in accordance with and to the extent
required by the provisions of the 1940 Act and the regulations thereunder to
serve as a segregated investment account for the Contracts. The Company shall
amend its
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registration statement for its contracts under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of
its Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and the regulations
thereunder to the extent required by the 1933 Act, duly authorized for
issuance in accordance with the laws of the Commonwealth of Massachusetts and
sold in compliance with all applicable federal and state securities laws and
regulations and that the Fund is and shall remain registered under the 1940
Act and the regulations thereunder to the extent required by the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Fund.
2.3 The Fund and the Adviser represent that each Portfolio of the Fund
is currently qualified as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and that the Fund
and the Adviser (with respect to those Portfolios for which such Adviser acts
as investment adviser) will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Fund
or the appropriate Adviser will notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or
that a Portfolio might not so qualify in the future.
2.4. The Company represents that each Account is and will continue to
be a "segregated account" under applicable provisions of the Code and that
each Contract is and will be treated as a "variable contract" under applicable
provisions of the Code and that it will make every effort to maintain such
treatments and that it will notify the Fund immediately upon having a
reasonable basis for believing that the Account or Contract has ceased to be
so treated or that they might not be so treated in the future.
2.5. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have a board of 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.
2.7. The Fund and the Adviser represent that the Fund is lawfully
organized and validly existing under the laws of the Commonwealth of
Massachusetts and that the Fund does and will comply in all material respects
with the 1940 Act.
2.8. The Adviser and AGSI each represents and warrants that it is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that it will perform its respective
obligations for the Fund and the Company in compliance in all material
respects
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with the laws and regulations of its state of domicile and any applicable
state and federal securities laws and regulations.
2.9. The Company represents and warrants that all of its trustees,
officers, employees, investment Adviser, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage, in an amount equal to the greater of $5
million or any amount required by applicable federal or state law or
regulation. The aforesaid includes coverage for larceny and embezzlement is
issued by a reputable bonding company. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS,
VOTING
3.1(a) The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus, including the profile
prospectus, (the "Fund Prospectus") as the Company may reasonably request. If
requested by the Company, in lieu of providing printed copies of the Fund
Prospectus, the Fund shall provide camera-ready film or computer diskettes
containing the Fund Prospectus and such other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
Fund Prospectus is amended during the year) to have the prospectus for the
Contracts (the "Contract Prospectus") and the Fund Prospectus printed together
in one document or separately. The Company may elect to print the Fund
Prospectus in combination with other fund companies' prospectuses. For
purposes hereof, any combined prospectus including the Fund Prospectus along
with the Contract Prospectus or prospectus of other fund companies shall be
referred to as a "Combined Prospectus." For purposes hereof, the term "Fund
Portion of the Combined Prospectus" shall refer to the percentage of the
number of Fund Prospectus pages in the Combined Prospectus in relation to the
total number of pages of the Combined Prospectus.
3.1(b) The Fund shall provide the Company with as many printed copies of
the Fund's current statement of additional information (the "Fund SAI") as the
Company may reasonably request. If requested by the Company in lieu of
providing printed copies of the Fund SAI, the Fund shall provide camera-ready
film or computer diskettes containing the Fund SAI, and such other assistance
as is reasonably necessary in order for the Company once each year (or more
frequently if the Fund SAI is amended during the year) to have the statement
of additional information for the Contracts (the "Contract SAI") and the Fund
SAI printed together or separately. The Company may also elect to print the
Fund SAI in combination with other fund companies' statements of additional
information. For purposes hereof, any combined statement of additional
information including the Fund SAI along with the Contract SAI or statement of
additional information of other fund companies shall be referred to as a
"Combined SAI." For purposes hereof, the term "Fund Portion of the Combined
SAI" shall refer to the percentage of the number of Fund SAI pages in the
Combined SAI in relation to the total number of pages of the Combined SAI.
3.1(c) The Fund shall provide the Company with as many printed copies of
the Fund's annual report and semi-annual report (collectively, the "Fund
Reports") as the Company may reasonably request. If requested by the Company
in lieu of providing printed copies of the Fund Reports, the
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Fund shall provide camera-ready film or computer diskettes containing the
Fund's Reports, and such other assistance as is reasonably necessary in order
for the Company once each year to have the annual report and semi-annual
report for the Contracts (collectively, the "Contract Reports") and the Fund
Reports printed together or separately. The Company may also elect to print
the Fund Reports in combination with other fund companies' annual reports and
semi-annual reports. For purposes hereof, any combined annual reports and
semi-annual reports including the Fund Reports along with the Contract Reports
or annual reports and semi-annual reports of other fund companies shall be
referred to as "Combined Reports." For purposes hereof, the term "Fund Portion
of the Combined Reports" shall refer to the percentage of the number of Fund
Reports pages in the Combined Reports in relation to the total number or pages
of the Combined Reports.
3.2 EXPENSES
3.2(a) EXPENSES BORNE BY COMPANY. Except as otherwise provided in this
Section 3.2., all expenses of preparing, setting in type and printing and
distributing (i) Contract Prospectuses, Fund Prospectuses, and Combined
Prospectuses; (ii) Fund SAIs, Contract SAIs, and Combined SAIs; (iii) Fund
Reports, Contract Reports, and Combined Reports, and (iv) Contract proxy
material that the Company may require in sufficient quantity to be sent to
Contract owners, annuitants, or participants under Contracts (collectively,
the "Participants"), shall be the expense of the Company.
3.2(b) EXPENSES BORNE BY FUND
FUND PROSPECTUSES
With respect to existing Participants, the Fund shall pay the cost of
setting in type, printing and distributing Fund Prospectuses made available by
the Company to such existing Participants in order to update disclosure as
required by the 1933 Act and/or the 1940 Act. With respect to existing
Participants, in the event the Company elects to prepare a Combined
Prospectus, the Fund shall pay the cost of setting in type, printing and
distributing the Fund Portion of the Combined Prospectus made available by the
Company to its existing Participants in order to update disclosure as required
by the 1933 Act and/or the 1940 Act. In such event, the Fund shall bear the
cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectus.
Notwithstanding the foregoing, in no event shall the Fund pay for any such
costs that exceed by more than five (5) percent what the Fund would have paid
to print such documents. The Fund shall not pay any costs of typesetting,
printing and distributing the Fund Prospectus (or Combined Prospectus, if
applicable) to prospective Participants.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL
With respect to Participants existing as of the date hereof, the Fund
shall pay the cost of setting in type and printing Fund SAIs, Fund Reports and
Fund proxy material made available by the Company to its existing
Participants. With respect to existing Participants, in the event the Company
elects to prepare a Combined SAI or Combined Reports, the Fund shall pay the
cost of setting in type and printing the Fund Portion of the Combined SAI or
Combined Reports, respectively, made available by the Company to its existing
Participants. In such event, the Fund shall bear the cost of typesetting to
provide the Fund SAI or Fund Reports to the Company in the format in which the
Fund
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is accustomed to formatting statements of additional information and annual
and semi-annual reports. Notwithstanding the foregoing, in no event shall the
Fund pay for any such costs that exceed by more than five (5) percent what the
Fund would have paid to print such documents. The Fund shall pay one half the
cost of distributing Fund SAIs, Fund Reports and Fund proxy statements and
proxy-related material to such existing Participants. The Fund shall pay the
cost of distributing the Fund Portion of the Combined SAIs and the Fund
Portion of the Combined Reports to existing Participants. The Fund shall not
pay any costs of distributing Fund SAIs, Combined SAIs, Fund Reports, Combined
Reports or proxy statements or proxy-related material to prospective
Participants.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of typesetting, printing or
distributing any of the foregoing documents other than those actually
distributed to existing Participants.
The Fund shall pay no fee or other compensation to the Company under
this Agreement, except that if the Fund or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to AGSI if and in amounts
agreed to by the Underwriter in writing.
All expenses, including expenses to be borne by the Fund pursuant to
Section 3.2 hereof, incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal
law and, if and to the extent deemed available by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses
for the cost of registration and qualification of the Fund's shares.
3.2(c) EXPENSES BORNE BY AGSI.
FUND PROSPECTUSES
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type, printing and distributing Fund Prospectuses made
available by the Company as sales literature to such prospective Participants.
With respect to prospective Participants, in the event the Company elects to
prepare a Combined Prospectus, AGSI shall pay one half of the cost of printing
and distributing the Combined Prospectus made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund Prospectus to the Company in the
format in which the Fund is accustomed to formatting prospectuses.
Notwithstanding the foregoing, in no event shall AGSI pay for any such costs
that exceed by more than five (5) percent what AGSI would have paid to print
such documents.
FUND SAIS, FUND REPORTS AND PROXY MATERIAL.
With respect to prospective Participants, AGSI shall pay one half of the
cost of setting in type and printing Fund SAIs, Fund Reports and Fund proxy
material made available by the Company to its prospective Participants as
sales literature. In the event the Company elects to prepare a Combined SAI or
Combined Reports, AGSI shall pay one half of the cost of printing the Combined
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SAI or Combined Reports, respectively, made available by the Company to its
prospective Participants as sales literature. In such event, AGSI shall bear
the cost of typesetting to provide the Fund SAI and Fund Reports to the
Company in the format in which the Fund is accustomed to formatting statements
of additional information and annual and semi-annual reports. Notwithstanding
the foregoing, in no event shall AGSI pay for any such costs that exceed by
more than five (5) percent what AGSI would have paid to print such documents.
AGSI shall pay one half the cost of distributing Fund SAIs, Combined SAIs,
Fund Reports, Combined Reports, and Fund proxy material to such prospective
Participants as sales literature.
3.2(d) If the Company chooses to receive camera-ready film or computer
diskettes in lieu of receiving printed copies of the Fund Prospectus, Fund SAI
or Fund Reports, the Fund or its designee will be responsible for providing
the Fund Prospectus, Fund SAI or Fund Reports in the format in which it is
accustomed to formatting such documents, and, notwithstanding anything in
Sections 3.2(b) or 3.2(c), the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses or reports.
3.3. The Fund SAI shall be obtainable from the Fund, the Company or
such other person as the Fund may designate.
3.4. If and to the extent required by law the Company shall distribute
all proxy material furnished by the Fund to Participants to whom voting
privileges are required to be extended and shall:
(i) solicit voting instructions from Participants;
(ii) vote the Fund shares in accordance with instructions
received from Participants; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
Portfolio for which instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act
to require pass-through voting privileges for variable contract owners. The
Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law. The Fund and the
Company shall follow the procedures, and shall have the corresponding
responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible
for ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule C, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings (except insofar as the Securities and Exchange Commission may
interpret Section 16 not to require such meetings) or comply with Section
16(c) of the 1940 Act (although the Fund is not one of the trusts described in
Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further,
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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 prepared by the Company, AGSI or any person contracting with the
Company or AGSI in which the Fund or the Adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund,
the Adviser, or their designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. Neither the Company, AGSI nor any person contracting with the
Company or AGSI shall give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained
in the registration statement or the Fund Prospectus, as such registration
statement or Fund Prospectus may be amended or supplemented from time to time,
or in reports or proxy statements for the Fund, or in sales literature or
other promotional material approved by the Fund or its designee, except with
the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Fund in which the Company or its
Account(s) are named at least ten Business Days prior to its use. No such
material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. Neither the Fund nor the Adviser shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts, other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports or solicitations for voting instructions for
each Account which are in the public domain or approved by the Company for
distribution to Participants, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission
of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and
all amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
investment in an
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Account or Contract contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following: advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
and registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials.
ARTICLE V. [RESERVED]
ARTICLE VI. DIVERSIFICATION
6.1. The Adviser represents, as to the Portfolios for which it acts as
investment adviser, that it will use its best efforts at all times to comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to
the diversification requirements for variable annuity, endowment, or life
insurance contracts and any amendments or other modifications to such Section
or Regulations. In the event a Portfolio ceases to so qualify, the Adviser
will take all reasonable steps (a) to notify the Company of such breach and
(b) to adequately diversify the Portfolio so as to achieve compliance within
the grace period afforded by Regulation 817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract owners and variable life
insurance contract owners; or (f) a decision by a Participating Insurance
Company to disregard the voting instructions of Contract owners. The Board
shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing material
irreconcilable conflicts of which it is aware to the Board. The Company will
assist the Board in carrying out its responsibilities under the Shared Funding
Exemptive Order, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is
not limited to, an
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obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected Contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E., annuity contract
owners, life insurance policy owners, or variable Contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contract owners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account (at the Company's expense); provided, however that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. No charge or penalty will be imposed as a
result of such withdrawal. The Company agrees that it bears the responsibility
to take remedial action in the event of a Board determination of an
irreconcilable material conflict and the cost of such remedial action, and
these responsibilities will be carried out with a view only to the interests
of Contract owners.
7.5. For purposes of Sections 7.3 and 7.4 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 or 7.4 to
establish a new funding medium for the Contracts if an offer to do so has been
declined by vote of a majority of Contract owners materially adversely
affected by the irreconcilable material conflict.
7.6. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then 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.
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7.7 The Company and the Adviser shall at least annually submit to the
Board of the Fund such reports, materials or data as the Board may reasonably
request so that the Board may fully carry out the obligations imposed upon
them by the provisions hereof, and said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Board. All reports
received by the Board of potential or existing conflicts, and all Board action
with regard to determining the existence of a conflict, notifying
Participating Insurance Companies of a conflict, and determining whether any
proposed action adequately remedies a conflict, shall be properly recorded in
the minutes of the Board or other appropriate records, and such minutes or
other records shall be made available to the SEC upon request.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY AND AGSI
8.1(a) The Company and AGSI agree to indemnify and hold harmless the
Fund and each member of the Board and officers, and the Adviser and each
director and officer of the Adviser, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually, "Indemnified
Party," for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company or AGSI) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute 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 or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by
the Company or AGSI, or persons under its control and other than
statements or representations authorized by the Fund or the Adviser) or
unlawful conduct of the Company or AGSI or persons under its control,
with respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund
15
<PAGE>
or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Company or
AGSI;
(iv) arise as a result of any failure by the Company or AGSI to provide
the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company or AGSI in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Company or AGSI, as limited by and in accordance
with the provisions of Sections 8.1(b) and 8.1(c) hereof.
8.1(b). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
8.1(c). Neither the Company nor AGSI shall be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Company or AGSI in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but failure to
notify the Company or AGSI of any such claim shall not relieve the Company or
AGSI from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this indemnification
provision. In case any such action is brought against any or all of the
Indemnified Parties, the Company or AGSI shall be entitled to participate, at
its own expense, in the defense of such action. The Company or AGSI also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company or AGSI to such Party
of the Company's or AGSI's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company and AGSI shall 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 or AGSI
of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company and each of its Trustees
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually, "Indemnified Party," for purposes of this Section 8.2)
against
16
<PAGE>
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements, result from the gross negligence, bad faith, willful misconduct
of the Adviser or any director, officer, employee or agent thereof, are
related to the operation of the Adviser or the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Adviser or the
Fund or the Underwriter by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration
statement, prospectus or sales literature for the Contracts not supplied
by the Adviser or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the
Adviser or persons under its control, with respect to the sale or
distribution of the Contracts or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statement or statements therein not misleading,
if such statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Adviser; or
(iv) arise as a result of any failure by the Adviser to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund or the Adviser; including without limitation any failure by
the Fund or the Adviser to comply with the conditions of Article VI
hereof.
8.2(b).The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as may arise from
such Indemnified Party's willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
17
<PAGE>
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against any or all of the Indemnified Parties, the Adviser will be
entitled to participate, at its own expense, in the defense thereof. The
Adviser also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Adviser
to such Party of the Adviser's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Adviser will not be liable to such Party under this
Agreement for any legal or other expenses subsequently incurred by such Party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company and AGSI agree promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its
officers, trustees or directors in connection with this Agreement, the
issuance or sale of the Contracts with respect to the operation of each
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Connecticut.
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, the Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason upon six-months
advance written notice delivered to the other parties; or
(b) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts. Reasonable advance notice of
election to terminate shall be furnished by the Company,
said termination to be effective ten (10) days after receipt
of notice unless the Fund makes
18
<PAGE>
available a sufficient number of shares to reasonably meet
the requirements of the Account within said ten (10) day
period; or
(c) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment medium of the Contracts issued or
to be issued by the Company. The terminating party shall
give prompt notice to the other parties of its decision to
terminate; or
(d) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company or
AGSI reasonably believes that the Fund may fail to so
qualify; or
(e) termination by the Company or AGSI by written notice to the
Fund and the Adviser with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Adviser by written
notice to the Company if the Adviser or the Fund shall
determine, in its sole judgment exercised in good faith,
that the Company, AGSI and/or their affiliated companies has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity, provided that the Fund or the Adviser will give
the Company sixty (60) days' advance written notice of such
determination of its intent to terminate this Agreement, and
provided further that after consideration of the actions
taken by the Company or AGSI and any other changes in
circumstances since the giving of such notice, the
determination of the Fund or the Adviser shall continue to
apply on the 60th day since giving of such notice, then such
60th day shall be the effective date of termination; or
(g) termination by the Company or AGSI by written notice to the
Fund and the Adviser, if the Company or AGSI shall
determine, in its sole judgment exercised in good faith,
that either the Fund or the Adviser (with respect to the
appropriate Portfolio) has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; provided that the Company
will give the Fund or the Adviser sixty (60) days' advance
written notice of such determination of its intent to
terminate this Agreement, and provided further that after
consideration of the actions taken by the Company and any
other changes in circumstances since the giving of such
notice, the determination of the Company or AGSI shall
continue to apply on the 60th
19
<PAGE>
day since giving of such notice, then such 60th day shall be
the effective date of termination; or
(h) termination by the Fund or the Adviser by written notice to
the Company, if the Company gives the Fund and the Adviser
the written notice specified in Section 2.4 hereof and at
the time such notice was given there was no notice of
termination outstanding under any other provision of this
Agreement; provided, however any termination under this
Section 10.1(h) shall be effective sixty (60) days after the
notice specified in Section 2.4 was given; or
(i) termination by any party upon the other party's breach of
any representation in Section 2 or any material provision of
this Agreement, which breach has not been cured to the
satisfaction of the terminating party within ten (10) days
after written notice of such breach is delivered to the Fund
or the Company, as the case may be; or
(j) termination by the Fund or the Adviser by written notice to
the Company in the event an Account or Contract is not
registered or sold in accordance with applicable federal or
state law or regulation, or the Company fails to provide
pass-through voting privileges as specified in Section 3.4.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement, the Fund shall at the option of the Company, continue to make
available additional shares of the Fund pursuant to the terms and conditions
of this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts") unless such further sale of Fund shares is proscribed by law,
regulation or applicable regulatory body, or unless the Fund determines that
liquidation of the Fund following termination of this Agreement is in the best
interests of the Fund and its shareholders. Specifically, without limitation,
the owners of the Existing Contracts shall be permitted to direct reallocation
of investments in the Fund, redemption of investments in the Fund and/or
investment in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not
apply to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the
Contracts (as distinct from Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Adviser) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the appropriate Adviser 90 days prior written notice of its intention to do
so.
20
<PAGE>
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
Wright Managed Blue Chip Series Trust
24 Federal Street
Boston, MA 02110
Attention: Peter M. Donovan
If to Adviser:
Wright Investors Service, Inc.
1000 Lafayette Blvd.
Bridgeport, CT 06604
Attention: Peter M. Donovan
If to the Company:
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Attention: Steven A. Glover
If to AGSI:
American General Securities Incorporated
2727 Allen Parkway
Houston, Texas 77019
Attention: F. Paul Kovach, Jr.
ARTICLE XII. FOREIGN TAX CREDITS
The Fund and the Adviser agree to consult with the Company concerning
whether any Portfolio of the Fund qualifies to provide a foreign tax credit
pursuant to Section 853 of the Code.
21
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, nor its officers, agents or shareholders assume any personal liability
for obligations entered into on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the 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.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Adviser, if such assignee is duly licensed and registered to
perform the obligations of the Adviser under this Agreement.
13.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any),
as soon as practical and in any event within 90 days after
the end of each fiscal year;
22
<PAGE>
(b) the Company's June 30th quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in any event
within 60 days after the end of each semi-annual period:
(c) any financial statement, proxy statement, notice or report
of the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the SEC or any state
insurance regulator, as soon as practical after the filing
thereof; and
(e) any other public report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of the
Company, as soon as practical after the receipt thereof.
13.10 It is agreed by the Parties hereto that Article VIII and Sections
13.1 and 13.2 shall survive any termination of this Agreement.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative hereto as of the date specified above.
AMERICAN GENERAL LIFE INSURANCE COMPANY on behalf of itself and
each of its Accounts named in Schedule B hereto, as amended from
time to time.
By: _____________________________________________
Name: Rodney O. Martin, Jr.
Title: President and Chief Executive Officer
AMERICAN GENERAL SECURITIES INCORPORATED
By: _____________________________________________
Name: F. Paul Kovach, Jr.
Title: President
WRIGHT MANAGED BLUE CHIP SERIES TRUST
By: _____________________________________________
Name:
Title:
WRIGHT INVESTORS SERVICE, INC.
By: _____________________________________________
Name:
Title:
24
<PAGE>
SCHEDULE A
PORTFOLIOS OF
WRIGHT MANAGED BLUE CHIP SERIES TRUST
AVAILABLE FOR PURCHASE BY
AMERICAN GENERAL LIFE INSURANCE COMPANY
UNDER THIS AGREEMENT
Wright International Blue Chip Portfolio
Wright Selected Blue Chip Portfolio
25
<PAGE>
SCHEDULE B
<TABLE>
SEPARATE ACCOUNTS AND CONTRACTS
<CAPTION>
Name of Separate Account and Form Numbers and Names of Contracts Funded by
Date Established by Board of Directors Separate Account
-------------------------------------- -----------------------------------------------------
<S> <C>
American General Life Insurance Company FORM NO:
Separate Account D 97505
Established: November 19, 1973
NAME OF CONTRACT:
Flexible Payment Variable and Fixed
Individual Deferred Annuity
</TABLE>
26
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for
the handling of proxies and voting instructions relating to the Fund. The
defined terms herein shall have the meanings assigned in the Participation
Agreement except that the term "Company" shall also include the department or
third party assigned by the Company to perform the steps delineated below.
1. The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Contracts and to facilitate the
establishment of tabulation procedures. At this time the Fund will
inform the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in this Step #2. The Company will use its best efforts to call
in the number of Customers to the Fund, as soon as possible, but no
later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement or other voting instructions and solicitation material. The
Fund will provide at least one copy of the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Fund or
its affiliate must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
27
<PAGE>
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
5. During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including,) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The
28
<PAGE>
mutilated or illegible Card is disregarded and considered to be NOT
RECEIVED for purposes of vote tabulation. Any Cards that have been
"kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system.
Any questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
29
EXHIBIT 5(c)(ii)
AMERICAN GENERAL LIFE INSURANCE COMPANY ("AGL")
--------------------------------------------
A Subsidiary of American General Corporation
--------------------------------------------
Houston, Texas
-SERVICE REQUEST-
[American General Logo]
SELECT RESERVE
VARIABLE ANNUITY [LOGO]
COMPLETE AND RETURN THIS REQUEST TO:
Annuity Administration
P.O. Box 1401
Houston, TX 77251-1401
(800)813-5065
-----------------------------------------------------------------------------
[X] CONTRACT INDENTIFICATION (COMPLETE SECTION 1 AND 16 FOR ALL REQUESTS.)
INDICATE CHANGE OR REQUEST DESIRED BELOW.
1. CONTRACT#:__________________________ ANNUITANT:___________________________
CONTRACT OWNER(S):________________________________________________________
(Name and
Address:) ________________________________________________________
[ ] Check here
if change ________________________________________________________
of address
S.S. NO. OR TAX I.D. NO.:____/____/____ Phone Number:____________________
-----------------------------------------------------------------------------
2. [ ] NAME CHANGE
[ ]Annuitant* [ ]Beneficiary* [ ]Owner(s)* (*DOES NOT CHANGE ANNUITANT,
BENEFICIARY OR OWNERSHIP DESIGNATION.)
__________________________________________________________________________
FROM (FIRST, MIDDLE, LAST) | TO (FIRST, MIDDLE, LAST)
____________________________________|_____________________________________
Reason: [ ]Marriage [ ]Divorce [ ]Correction [ ]Other (ATTACH CERTIFIED
COPY OF COURT ORDER)
-----------------------------------------------------------------------------
3. [ ] DUPLICATE CONTRACT
I/we hereby certify that the contract for the listed number has been
[ ]LOST [ ]DESTROYED [ ]OTHER_______________
Unless I/we have directed cancellation of the contract, I/we request that
a Certificate of Lost Contract be issued. If the original contract is
located, I/we will return the Certificate to AGL to be voided.
-----------------------------------------------------------------------------
4. [ ] BENEFICIARY CHANGE
THIS SECTION IS FOR HOME OFFICE USE ONLY
__________________________________________________________________________
PRIMARY | CONTINGENT
___________________________________|______________________________________
This change of beneficiary has been approved by AGL at its Home Office,
and presentation of the Contract for endorsement has been waived.
DATE OF APPROVAL:_____________ By:_______________________________________
AMERICAN GENERAL LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------
5. [ ] AUTOMATIC ADDITIONAL PREMIUM PAYMENT OPTION
_________ By initialing here, I authorize American General Life to collect
$________________ (min. $100), starting on: __________ by initiating
electronic debit entries against my bank account with the following
frequency:
[ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
(Attach voided check to Service Request)
-----------------------------------------------------------------------------
6. [ ] DOLLAR COST AVERAGING
Dollar-cost average: [ ]$_____ OR _____% (whole % only)
Begin Date:___/___/___
Taken from the: [ ]Money Market OR [ ]1 Year Guaranteed Period
FREQUENCY: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
DURATION: [ ]12 Months [ ]24 Months [ ]36 Months [ ]48 Months [ ]60 Months
to be allocated to the following division(s) as indicted.
(Use only dollars OR percentages)
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________
Low Duration VIP (3) _________
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________
OFFITBANK VIF-High Yield (6) _________
OFFITBANK VIF-Total Return (7) _________
OFFITBANK VIF-U. S. Government Securities (8) _________
ROYCE CAPITAL FUND
Royce Premier (9) _________
Royce Total Return (10) _________
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________
Wright Selected Blue Chip (12) _________
OTHER
______________________________________ _________
</TABLE>
-----------------------------------------------------------------------------
7. AUTOMATIC REBALANCING ($25,000 MINIMUM)
USE WHOLE PERCENTAGES. TOTAL MUST EQUAL 100%
[ ]ADD [ ]CHANGE automatic rebalancing of variable investments to the
percentage allocations indicated below:
[ ]Quarterly [ ]Semiannually [ ]Annually (based on contract anniversary)
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________%
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________%
Low Duration VIP (3) _________%
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________%
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________%
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________%
OFFITBANK VIF-High Yield (6) _________%
OFFITBANK VIF-Total Return (7) _________%
OFFITBANK VIF-U. S. Government Securities (8) _________%
ROYCE CAPITAL FUND
Royce Premier (9) _________%
Royce Total Return (10) _________%
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________%
Wright Selected Blue Chip (12) _________%
OTHER
______________________________________ _________%
</TABLE>
[ ]STOP automatic rebalancing.
NOTE: Automatic rebalancing is only available for variable divisions.
Automatic Rebalancing will not change allocation of future purchase
payments.
-----------------------------------------------------------------------------
L9023
PAGE 1 OF 2
<PAGE>
-----------------------------------------------------------------------------
8. CHANGE ALLOCATION OF FUTURE PURCHASE PAYMENTS
Use whole percentages. Total must equal 100%.
<TABLE>
<S> <C>
AMERICAN GENERAL SERIES PORTFOLIO COMPANY
Money Market (13) _________%
HOTCHKIS AND WILEY VARIABLE TRUST
Equity Income VIP (1) _________%
Low Duration VIP (3) _________%
LEVCO SERIES TRUST
LEVCO Equity Value (2) _________%
NAVELLIER VARIABLE INSURANCE SERIES FUND, INC.
Navellier Growth (4) _________%
OFFITBANK VARIABLE INSURANCE FUND, INC.
OFFITBANK VIF-Emerging Markets (5) _________%
OFFITBANK VIF-High Yield (6) _________%
OFFITBANK VIF-Total Return (7) _________%
OFFITBANK VIF-U. S. Government Securities (8) _________%
ROYCE CAPITAL FUND
Royce Premier (9) _________%
Royce Total Return (10) _________%
WRIGHT MANAGED BLUE CHIP SERIES TRUST
Wright International Blue Chip (11) _________%
Wright Selected Blue Chip (12) _________%
OTHER
______________________________________ _________%
FIXED ACCOUNT
1-Year Guarantee Period _________%
</TABLE>
NOTE: A change to the allocation of future purchase payments will not
alter Automatic Rebalancing allocations.
-----------------------------------------------------------------------------
9. [ ] TRANSFER OF ACCUMULATED VALUES
Indicate division number along with gross dollar or percentage amount.
(Maintain $ or % consistency)
<TABLE>
<S> <C>
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
% or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
</TABLE>
NOTE: If a transfer is elected and Automatic Rebalancing is active on your
account, you may want to consider changing the Automatic Rebalancing
allocations (Section 7). Otherwise, the Automatic Rebalancing will
transfer funds in accordance with instructions on file.
-----------------------------------------------------------------------------
10. [ ] TELEPHONE TRANSFER AUTHORIZATION
I (or if joint owners, either of us acting independently) hereby authorize
American General Life Insurance Company ("AGL") to act on telephone
instructions to transfer values among the Variable Divisions and Fixed
Accounts and to change allocations for future purchase payments given by:
(INITIAL APPROPRIATE BOX(ES) BELOW.)
[ ] Contract Owner(s)
[ ] Agent/Registered Representative who is both appointed to represent AGL
and with the firm authorized to service my contract.
AGL and any person designated by this authorization will not be
responsible for any claim, loss, or expense based upon telephone transfer
instructions received and acted on in good faith, including losses due to
telephone instruction communication errors. AGL's liability for erroneous
transfers, unless clearly contrary to instructions received, will be
limited to correction of the allocations on a current basis. If an error,
objection, or other claim arises due to a telephone transfer transaction,
I will notify AGL in writing within five working days from receipt of
confirmation of the transaction from AGL. I understand that this
authorization is subject to the terms and provisions of my SELECT RESERVE
contract and its related prospectus. This authorization will remain in
effect until my written notice of its revocation is received by AGL at its
main office.
[ ] CHECK HERE TO DECLINE TELEPHONE TRANSFER PRIVILEGE.
-----------------------------------------------------------------------------
11. [ ] SYSTEMATIC WITHDRAWAL
(ALSO COMPLETE SEC. 15)
($100 MINIMUM WITHDRAWAL)
PERCENTAGES (WHOLE % ONLY) MUST EQUAL 100%; OR DOLLARS MUST EQUAL TOTAL
AMOUNT.
Specified Dollar Amount $______________________
Frequency: [ ]Monthly [ ]Quarterly [ ]Semiannually [ ]Annually
To Begin on___/___/___
(Date must be between the 5th and 24th of the month and at least 30 days
after issue date.)
Unless specified below, withdrawals will be taken from the divisions as
they are currently allocated in your contract.
<TABLE>
<S> <C> <C>
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
</TABLE>
-----------------------------------------------------------------------------
12. [ ] REQUEST FOR PARTIAL WITHDRAWAL (ALSO COMPLETE SEC. 15)
Amount requested is to be ( ) net OR ( ) gross of applicable charges.
Total Amount = $________
<TABLE>
<S> <C> <C>
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
$ or %________ Div.No.________ $ or %________ Div.No.________ $ or %________ Div.No.________
</TABLE>
-----------------------------------------------------------------------------
13. [ ] REQUEST FOR FULL SURRENDER (ALSO COMPLETE SEC. 15)
[ ] Contract attached
[ ] I hereby declare that the contract specified above has been lost,
destroyed, or misplaced and request that the value of the contract be
paid. I agree to indemnify and hold harmless AGL against any claims
which may be asserted on my behalf and on the behalf of my heirs,
assignees, legal representatives, or any other person claiming rights
derived through me against AGL on the basis of the contract.
-----------------------------------------------------------------------------
14. [ ] ALTERNATE PAYEE
Check(s) will be made payable to the Contract Owner(s) and mailed to the
Owner's address of record unless specified otherwise below:
___________________________________________
Name of Individual or Financial Institution
______________________________
Account Number (if applicable)
_________________________________________________________________________
Address City State Zip
-----------------------------------------------------------------------------
15. [ ] NOTICE OF WITHHOLDING
The taxable portion of the distribution you receive from your annuity
contract is subject to federal income tax withholding unless you elect not
to have withholding apply. Withholding of state income tax may also be
required by your state of residence. You may elect not to have withholding
apply by checking the appropriate box below. If you elect not to have
withholding apply to your distribution or if you do not have enough income
tax withheld, you may be responsible for payment of estimated tax. You may
incur penalties under the estimated tax rules if your withholding and
estimated tax are not sufficient.
Check one: [ ] I do NOT want income tax withheld from this distribution.
[ ] I do want 10% or ____% income tax withheld from this
distribution.
-----------------------------------------------------------------------------
16. [X] AFFIRMATION/SIGNATURE
(COMPLETE THIS SECTION FOR ALL REQUESTS.)
CERTIFICATION: Under penalties of perjury, I certify (1) that the number
shown on this form is my correct taxpayer identification number and (2)
that I am not subject to backup withholding under Section 3406(a)(1)(c) of
the Internal Revenue Code.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
_________________ _____________________________________
DATE SIGNATURE OF OWNER
-----------------------------------------------------------------------------
L9023
PAGE 2 OF 2
EXHIBIT 5(c)(iii)
CONFIRMATION
AMERICAN GENERAL LIFE INSURANCE COMPANY STATEMENT DATE: 01/15/98
A Subsidiary of American General Corporation
P.O. Box 1401; Houston, Texas 77252-1401
REPRESENTATIVE INFORMATION:
Select Reserve Logo
ANY AGENT
321 SALES BLVD
ANYTOWN, USA 98765
OWNER(S) INFORMATION: ANNUITANT: JOHN DOE
CONTRACT NO: VA30000001
JOHN DOE OWNER'S TAX ID NO: 123-45-6789
123 COUNTRYSIDE DR. ANNUITY TYPE: IRA
ANYTOWN, USA 98765 CONTRACT EFFECTIVE DATE: 01/15/98
<TABLE>
CONTRACT ACTIVITY:
<CAPTION>
TRADE DIVISION INTEREST GROSS TRANS. UNIT ACCUMULATION
DATE NUMBER TRANSACTION RATE DOLLAR AMOUNT VALUE UNITS
<S> <C> <C> <C> <C> <C> <C>
01/15/98 13 PURCHASE PAYMENT 10,000.00 1.158013 8,635.4816
</TABLE>
<TABLE>
CONTRACT SUMMARY :
FUTURE
DIVISION DIVISION PAYMENT ACCUMULATION UNIT DOLLAR
NUMBER NAME ALLOCATION % UNITS VALUE VALUE
<S> <C> <C> <C> <C> <C>
13 MONEY MARKET 100 8,635.4816 1.158013 10,000.00
</TABLE>
FOR MORE INFORMATION YOU MAY CONTACT YOUR REPRESENTATIVE LISTED ABOVE OR CALL
OUR OFFICE AT 1-800-813-5065.
<PAGE>
<TABLE>
SELECT RESERVE VARIABLE ANNUITY
AVAILABLE PORTFOLIOS
<CAPTION>
DIVISION NUMBER DIVISION NAME
<S> <C>
1 EQUITY INCOME VIP
2 LEVCO EQUITY VALUE
3 LOW DURATION VIP
4 NAVELLIER GROWTH
5 OFFITBANK VIF-EMERGING MARKETS
6 OFFITBANK VIF-HIGH YIELD
7 OFFITBANK VIF-TOTAL RETURN
8 OFFITBANK VIF-U.S. GOVERNMENT SECURITIES
9 ROYCE PREMIER
10 ROYCE TOTAL RETURN
11 WRIGHT INTERNATIONAL BLUE CHIP
12 WRIGHT SELECTED BLUE CHIP
13 MONEY MARKET
</TABLE>
EXHIBIT 8(a)
AGREEMENT
AGREEMENT made as of the ______ day of __________, 1998 by and between
The Variable Annuity Life Insurance Company ("Adviser"), a Texas corporation
and American General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement American
General Series Portfolio Company and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .15 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
American General Series Portfolio Company International Equities Fund
MidCap Index Fund
Money Market Fund
Stock Index Fund
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(b)
AGREEMENT
AGREEMENT made as of the ________ day of __________, 1998 by and between
Hotchkis and Wiley ("Adviser"), a __________ corporation and American General
Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with the
Hotchkis and Wiley Variable Trust and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
HOTCHKIS AND WILEY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
Hotchkis and Wiley Variable Trust Equity Income VIP Portfolio
Low Duration VIP Portfolio
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(c)
AGREEMENT
AGREEMENT made as of the ________ day of __________, 1998 by and between
John A. Levin and Co., Inc. ("Adviser"), a Delaware corporation and American
General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with the
LEVCO Series Trust and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not, own
or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
JOHN A. LEVIN AND CO., INC.
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
LEVCO Series Trust LEVCO Equity Value Fund
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(d)
AGREEMENT
AGREEMENT made as of the ______ day of __________, 1998 by and between
Navellier & Associates, Inc. ("Adviser"), a __________ corporation and
American General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with the
Navellier Variable Insurance Series Fund, Inc. and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
NAVELLIER & ASSOCIATES, INC.
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
Navellier Variable Insurance Series Fund, Inc. Navellier Growth Portfolio
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(e)
AGREEMENT
AGREEMENT made as of the ________ day of __________, 1998, by and
between OFFITBANK ("Adviser"), a New York chartered trust company, and
American General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with
OFFITBANK Variable Insurance Fund, Inc. and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, OFFIT Funds Distributor, Inc. ("Distributor") is the
distributor for the Funds; and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
OFFITBANK
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
OFFITBANK Variable Insurance Fund, Inc. OFFITBANK VIF-Emerging Markets Fund
OFFITBANK VIF-High Yield Fund
OFFITBANK VIF-Total Return Fund
OFFITBANK VIF-U.S. Government Securities Fund
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(f)
AGREEMENT
AGREEMENT made as of the ________ day of __________, 1998, by and
between Royce & Associates, Inc. ("Adviser"), a New York corporation, and
American General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with the
Royce Capital Fund and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
ROYCE & ASSOCIATES, INC.
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
Royce Capital Fund Royce Premier Portfolio
Royce Total Return Portfolio
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 8(g)
AGREEMENT
AGREEMENT made as of the ________ day of __________, 1998, by and
between Wright Investors' Service, Inc. ("Adviser"), a __________ corporation,
and American General Life Insurance Company ("Company"), a Texas corporation.
WITNESSETH:
WHEREAS, each of the investment companies listed on Schedule A hereto as
such Schedule may be amended from time to time (collectively the "Funds," each
a "Fund") are investment companies registered under the Investment Company Act
of 1940, as amended (the "Act"); and
WHEREAS, Company has entered into a Participation Agreement with the
Wright Managed Blue Chip Series Trust and Adviser; and
WHEREAS, Adviser provides investment advisory and/or administrative
services to the Funds; and
WHEREAS, __________ ("Distributor") is the distributor for the Funds;
and
WHEREAS, the parties hereto have agreed to arrange separately for the
performance of administrative services (the "Administrative Services") for
owners of shares of the Funds who maintain their shares in a variable annuity
and/or variable life separate account with Company; and
WHEREAS, Adviser desires Company to perform such services and Company is
willing and able to furnish such services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, each party hereto severally agrees as follows:
1. Company agrees to perform the Administrative Services specified in
Exhibit A hereto for the benefit of the shareholders of the Funds who maintain
their shares of any such Funds in variable annuity and/or variable life
insurance separate accounts with Company and whose shares are included in the
master account ("Master Account") referred to in paragraph 1 of Exhibit A
(collectively, the Company Customers").
2. Company represents and agrees that it will maintain and preserve all
records as required by law to be maintained and preserved in connection with
providing the Administrative Services, and will otherwise comply with all
laws, rules and regulations applicable to the Administrative Services. Upon
the request of Adviser or its representatives, Company shall provide copies of
all the historical records relating to transactions between the Funds and
Company Customers, and written
<PAGE>
communications regarding the Fund(s) to or from such Customers and other
materials, in each case as may reasonably be requested to enable Adviser or
its representatives, including without limitation its auditors, legal counsel
or distributor, to monitor and review the Administrative Services, or to
comply with any request of the board of directors, or trustees or general
partners (collectively, the "Directors") of any Fund or of a governmental
body, self-regulatory organization or a shareholder. Company agrees that it
will permit Adviser, the Funds or their representatives to have reasonable
access to its personnel and records in order to facilitate the monitoring of
the quality of the services.
3. Company may, with the consent of Adviser, contract with or establish
relationships with other parties for the provision of the Administrative
Services or other activities of Company required by the Agreement, provided
that Company shall be fully responsible for the acts and omissions of such
other parties.
4. Company hereby agrees to notify Adviser promptly if for any reason it is
unable to perform fully and promptly any of its obligations under this
Agreement.
5. Company hereby represents and covenants that it does not, and will not,
own or hold or control with power to vote any shares of the Funds which are
registered in the name of Company or the name of its nominee and which are
maintained in Company variable annuity accounts. Company represents further
that it is not registered as a broker-dealer under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and it is not required to be so
registered, including as a result of entering into this Agreement and
performing the Administrative Services.
6. The provisions of the Agreement shall in no way limit the authority of
Adviser, or any Fund or Distributor to take such action as any of such parties
may deem appropriate or advisable in connection with all matters relating to
the operations of any of such Funds and/or sale of its shares.
7. In consideration of the performance of the Administrative Services by
Client, Adviser agrees to pay Company a monthly fee at an annual rate which
shall equal .25 of 1% of the value of each Fund's average daily net assets
maintained in the Master Account for Company Customers. The foregoing payment
may be paid by Adviser to Company annually. Such payment will be made within
thirty (30) days following the end of each calendar year. The payments by
Adviser to Company relate solely to Administrative Services only and do not
constitute payment in any manner for Administrative Services provided by
Company to Company Customers or any separate account organized by Company for
any investment advisory services or for costs of distribution of any variable
insurance contracts.
8. Company shall indemnify and hold harmless each of the Funds, Adviser and
Distributor and each of their respective officers, directors, employees and
agents from and against any and all losses, claims, damages, expenses, or
liabilities that any one or more of them may incur including without
limitation reasonable attorneys' fees, expenses and costs arising out of or
related to the performance or non-performance of Company of its
responsibilities under this Agreement.
2
<PAGE>
9. This Agreement may be terminated without penalty at any time by Company
or by Adviser as to all of the Funds collectively, upon 180 days written
notice to the other party. The provisions of paragraphs 2, 8 and 10 shall
continue in full force and effect after termination of this Agreement.
Notwithstanding the foregoing, this Agreement shall not require Company to
preserve any records (in any medium or format) relating to this Agreement
beyond the time periods otherwise required by the laws to which Company or the
Funds are subject provided that such records shall be offered to the Funds in
the event Company decides to no longer preserve such records following such
time periods.
10. After the date of any termination of this Agreement in accordance with
paragraph 9, no fee will be due with respect to any amounts first placed in
the Master Account for Company Customers after the date of such termination.
However, notwithstanding any such termination, Adviser will remain obligated
to pay Company the fee specified in paragraph 7 with respect to the value of
each Fund's average daily net assets maintained in the Master Account as of
the date of such termination, for so long as such amounts are held in the
Master Account and Company continues to provide the Administrative Services
with respect to such amounts in conformity with this Agreement. This
Agreement, or any provision hereof, shall survive termination to the extent
necessary for each party to perform its obligations with respect to amounts
for which a fee continues to be due subsequent to such termination.
11. Company understands and agrees that the obligations of Adviser under
this Agreement are not binding upon any of the Funds, upon any of their Board
members or upon any shareholder of any of the Funds.
12. It is understood and agreed that in performing the services under this
Agreement Company, acting in its capacity described herein, shall at no time
be acting as an agent for Adviser, Distributor or any of the Funds. Company
agrees, and agrees to cause its agents, not to make any representations
concerning a Fund except those contained in the Fund's then-current
prospectus; in current sales literature furnished by the Fund, Adviser or
Distributor to Company; in the then current prospectus for a variable annuity
contract or variable life insurance policy issued by Company or then current
sales literature with respect to such variable annuity contract or variable
life insurance policy, approved by Adviser.
13. This Agreement, including the provisions set forth herein in Section 7,
may only be amended pursuant to a written instrument signed by the party to be
charged. This Agreement may not be assigned by a party hereto, by operation of
law or otherwise, without the prior written consent of the other party.
14. This Agreement shall be governed by the laws of the State of __________,
without giving effect to the principles of conflicts of law of such
jurisdiction.
3
<PAGE>
15. This Agreement, including its Exhibit and Schedule, constitutes the
entire agreement between the parties with respect to the matters dealt with
herein and supersedes any previous agreements and documents with respect to
such matters.
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
AMERICAN GENERAL LIFE INSURANCE COMPANY
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
WRIGHT INVESTORS' SERVICE, INC.
By: _______________________
Authorized Signatory
_______________________
Print or Type Name
4
<PAGE>
<TABLE>
SCHEDULE A
<CAPTION>
Investment Company Name: Fund Name(s):
------------------------ -------------
<S> <C>
Wright Managed Blue Chip Series Trust Wright International Blue Chip Portfolio
Wright Selected Blue Chip Portfolio
</TABLE>
5
<PAGE>
EXHIBIT A
Pursuant to the Agreement by and among the parties hereto, Company shall
perform the following Administrative Services:
1. Maintain separate records for each Company Customer, which records shall
reflect shares purchased and redeemed and share balances. Company shall
maintain the Master Account with the transfer agent of the Fund on behalf of
Company Customers and such Master Account shall be in the name of Company or
its nominee as the record owner of the shares owned by such Company Customers.
2. For each Fund, disburse or credit to Company Customers all proceeds of
redemptions of shares of the Fund and all dividends and other distributions
not reinvested in shares of the Fund or paid to the Separate Account holding
the Customers' interests.
3. Prepare and transmit to Company Customers periodic account statements
showing the total number of shares owned by the Customer as of the statement
closing date, purchases and redemptions of Fund shares by the Customer during
the period covered by the statement, and the dividends and other distributions
paid to the Customer during the statement period (whether paid in cash or
reinvested in Fund shares).
4. Transmit to Company Customers proxy materials and reports and other
information received by Company from any of the Funds and required to be sent
to shareholders under the federal securities laws and, upon request of the
Fund's transfer agent, transmit to Company Customers material fund
communications deemed by the Fund, through its Board of Directors or other
similar governing body, to be necessary and proper for receipt by all fund
beneficial shareholders.
5. Transmit to the Fund's transfer agent purchase and redemption orders on
behalf of Company Customers.
6. Provide to the Funds, or to the transfer agent for any of the Funds, or
any of the agents designated by any of them, such periodic reports as shall
reasonably be concluded to be necessary to enable each of the Funds and its
distributor to comply with State Blue Sky requirements.
6
EXHIBIT 9
AMERICAN GENERAL
INDEPENDENT PRODUCER DIVISION
2727-A Allen Parkway, Houston, Texas 77019
Writer's Direct Line Number
(713) 831-3633
Law Department
February 11, 1998
American General Life Insurance Company
2727-A Allen Parkway
Houston, Texas 77019
Dear Executives:
This opinion is furnished in connection with the filing by American
General Life Insurance Company ("AGL") and Separate Account D of AGL
("Separate Account") of a registration statement under the Securities Act of
1933 (the "1933 Act") and under the Investment Company Act of 1940 on Form N-4
("Registration Statement"). The securities being registered under the
Registration Statement are units of interest ("Units") to be issued by the
Separate Account pursuant to certain individual flexible premium variable
annuity contracts (the "Contracts"), described in the Registration Statement.
As Senior Counsel of American General Independent Producer Division, an
affiliate of AGL, I have been asked to provide this opinion for review by, and
the use of the Executives of AGL.
I have examined the Articles of Incorporation and Bylaws of AGL and such
corporate records and other documents and such laws as I consider necessary
and appropriate as a basis for the opinion hereinafter expressed. I have
examined the form of the Registration Statement to be filed with the
Securities and Exchange Commission in connection with the registration under
the 1933 Act of an indefinite number of Units. I am familiar with the
proceedings taken and proposed to be taken in connection with the
authorization, issuance, and sale of the Units. On the basis of my examination
of these documents and such laws that I consider appropriate, it is my opinion
that:
1. AGL is a corporation duly organized and validly existing under the
laws of Texas.
2. The Separate Account was duly created pursuant to the provisions
of Chapter 3, Article 3.75 of the Texas Insurance Code.
3. Under Texas law, the income, gains and losses, whether or not
realized, from assets allocated to the Separate Account must be credited to or
charged against such Account, without regard to the other income, gains or
losses of AGL.
[AMERICAN GENERAL LOGO]
<PAGE>
American General Life Insurance Company Executives
February 11, 1998
Page 2
4. The portion of the assets to be held in the Separate Account equal
to the reserves and other liabilities under the Contracts will not be
chargeable with liabilities arising out of any other business AGL may conduct.
5. The Contracts have been duly authorized by AGL and, when issued in
the manner contemplated by the Registration Statement, the Units thereunder
will constitute validly issued and binding obligations of AGL in accordance
with the terms of the Contract.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the prospectus. On giving this consent, I do not admit that I am
in the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Respectfully submitted,
/s/Steven A. Glover
-------------------
Steven A. Glover
Senior Counsel
SAG/dt
EXHIBIT 10
CONSENT OF INDEPENDENT AUDITORS
We consent tot he reference made to our firm under the caption "Independent
Auditors" and to the use of our report dated March 20, 1997, as to American
General Life Insurance Company, in Amendment No. 65 to the Registration
Statement under the Investment Company Act of 1940 on Form N-4 of American
General Life Insurance Company Separate Account D.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
Houston, Texas
February 9, 1998
Exhibit 13(a)
<TABLE>
<CAPTION>
12/31/96
SELECT RESERVE
AVERAGE ANNUAL TOTAL RETURNS AAT
AND TOTAL RETURNS RETURN
Fees based on ave $50,000 account 1 YEAR 3 YEAR 5 YEAR SINCE
USING HYPOTHETICAL UNIT VALUES AATR AATR AATR INCEPTION
------------------------------ ------ ------ ------ ---------
<S> <C> <C> <C> <C>
01/05/94
WRIGHT INT'L BLUE CHIP PORT. 12/31/96
365 1095 1825 1091
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 9.941994 N/A N/A 10.000000
# OF UNITS PURCHASED 100.583444 N/A N/A 100.000000
END OF PERIOD UV 11.594096 11.594096 11.594096 11.594096
END OF PERIOD VALUE 1,166.17 0.00 0.00 1,159.41
SURRENDER CHARGE PERCENTAGE 0.0% 0.0% 0.0% 0.0%
FREE 10% WITHDRAWAL 0.00 0.00 0.00 0.00
LESS SURRENDER CHARGES 0.00 0.00 0.00 0.00
LESS ANNUAL FEE ($) $0.00 $0.00 $0.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,166.17 N/A N/A 1,159.41
PERCENT RETURN 16.62% N/A N/A 5.07%
WRIGHT SELECTED BLUE CHIP 12/31/96
365 1095 1825 1091
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 11.69041 N/A N/A 10.000000
# OF UNITS PURCHASED 85.540199 N/A N/A 100.000000
END OF PERIOD UV 14.260798 14.260798 14.260798 14.260798
END OF PERIOD VALUE 1,219.87 0.00 0.00 1,426.08
SURRENDER CHARGE PERCENTAGE 0.0% 0.0% 0.0% 0.0%
FREE 10% WITHDRAWAL 0.00 0.00 0.00 0.00
LESS SURRENDER CHARGES 0.00 0.00 0.00 0.00
LESS ANNUAL FEE ($) $0.00 $0.00 $0.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,219.87 N/A N/A 1,426.08
PERCENT RETURN 21.99% N/A N/A 12.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/96
SELECT RESERVE
AVERAGE ANNUAL TOTAL RETURNS
AND TOTAL RETURNS
Fees based on ave $50,000 account 1 YEAR 3 YEAR 5 YEAR 10 YEAR
USING HYPOTHETICAL UNIT VALUES AATR AATR AATR AATR
------------------------------ ------ ------ ------ ---------
<S> <C> <C> <C> <C>
01/01/87
AGSPC MONEY MARKET 12/31/96
365 1095 1825 35430
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00
BEG OF PERIOD UV 7.696248 7.118501 6.803293 5.000000
# OF UNITS PURCHASED 129.933443 140.479014 146.987643 200.000000
END OF PERIOD UV 8.028562 8.028562 8.028562 8.028562
END OF PERIOD VALUE 1,043.18 1,127.84 1,180.10 1,605.71
SURRENDER CHARGE PERCENTAGE 0.0% 0.0% 0.0% 0.0%
FREE 10% WITHDRAWAL 0.00 0.00 0.00 0.00
LESS SURRENDER CHARGES 0.00 0.00 0.00 0.00
LESS ANNUAL FEE ($) $0.00 $0.00 $0.00 $0.00
REDEEMABLE VALUE (after fees & CDSC) 1,043.18 1,127.84 1,180.10 1,605.71
PERCENT RETURN 4.32% 4.09% 3.37% 0.49%
</TABLE>
Exhibit 13(b)
<TABLE>
<CAPTION>
12/31/96
SELECT RESERVE TOTAL
CUMULATIVE 1996 1 YEAR 3 YEAR 5 YEAR RETURN
TOTAL RETURNS YEAR TOTAL TOTAL TOTAL SINCE
USING HYPOTHETICAL UNIT VALUES TO DATE RETURN RETURN RETURN INCEPTION
<S> <C> <C> <C> <C> <C>
WRIGHT INT'L BLUE CHIP PORT. 12/95 12/95 12/93 12/91 01/94
12/96 12/96 12/96 12/96 12/96
BEG OF PERIOD UV 9.941994 9.941994 N/A N/A 10.000000
# OF UNITS PURCHASED 100.583444 100.583444 N/A N/A 100.000000
END OF PERIOD UV 11.594096 11.594096 11.594096 11.594096 11.594096
END OF PERIOD VALUE 1,166.17 1,166.17 0.00 N/A 1,159.41
DIFFERENCE 166.17 166.17 N/A N/A 159.41
PERCENT CHANGE 16.62% 16.62% N/A N/A 15.94%
WRIGHT SELECTED BLUE CHIP 12/95 12/95 12/93 12/91 01/94
12/96 12/96 12/96 12/96 12/96
BEG OF PERIOD UV 11.69041 11.69041 N/A N/A 10.000000
# OF UNITS PURCHASED 85.540199 85.540199 N/A N/A 100.000000
END OF PERIOD UV 14.260798 14.260798 14.260798 14.260798 14.260798
END OF PERIOD VALUE 1,219.87 1,219.87 0.00 0.00 1,426.08
DIFFERENCE 219.87 219.87 N/A N/A 426.08
PERCENT CHANGE 21.99% 21.99% N/A N/A 42.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
12/31/96
SELECT RESERVE
CUMULATIVE 1996 1 YEAR 3 YEAR 5 YEAR 10 YEAR
TOTAL RETURNS YEAR TOTAL TOTAL TOTAL TOTAL
USING HYPOTHETICAL UNIT VALUES TO DATE RETURN RETURN RETURN RETURN
<S> <C> <C> <C> <C> <C>
AGSPC MONEY MARKET 12/95 12/95 12/93 12/91 12/86
12/96 12/96 12/96 12/96 12/96
BEG OF PERIOD UV 7.696248 7.696248 7.118501 6.803293 5.000000
# OF UNITS PURCHASED 129.933443 129.933443 140.479014 146.987643 200.000000
END OF PERIOD UV 8.028562 8.028562 8.028562 8.028562 8.028562
END OF PERIOD VALUE 1,043.18 1,043.18 1,127.84 1,180.10 1,605.71
DIFFERENCE 43.18 43.18 127.84 180.10 605.71
PERCENT CHANGE 4.32% 4.32% 12.78% 18.01% 60.57%
</TABLE>
EXHIBIT 13(c)
COMPUTATION OF HYPO 7 DAY YIELD AND EFFECTIVE YIELD
AGSPC MONEY MARKET DIVISION YIELD FOR 12/31/96
12/31/96 8.028562
12/30/96 8.027702 0.005382 total return for 7 days
12/29/96 no unit value calculated (8.028562-8.02318)
12/28/96 no unit value calculated 0.000671 base period return
12/27/96 8.027047 (.001022/1.421548)
12/26/96 8.023962
12/25/96 no unit value calculated 3.50% yield for 7 day period
12/24/96 8.023180 ending 12/31/96
((8.028562-8.02318)/8.02318)*365/7
3.56% effective yield
((0.000671+1)^(365/7))-1
EXHIBIT 15(e)
LIMITED POWER OF ATTORNEY
WHEREAS, American General Life Insurance Company, a Texas company (and
its successors, if applicable) ("Company"), intends from time to time to file
with the Securities and Exchange Commission ("Commission"), one or more Form
N-4 Registration Statement(s) under the Securities Act of 1933 and the
Investment Company Act of 1940, on behalf of the Company and the Separate
Account(s) maintained or to be maintained by the Company, with such amendments
thereto as may be necessary or appropriate, together with any and all exhibits
and other documents related thereto;
NOW, THEREFORE, each of the undersigned individuals, in his capacity as
a director or officer of the Company, hereby appoints B. Shelby Baetz, Steven
A. Glover and Christine S. Harkey, and each of them, either of whom may act
without the joinder of the other, his true and lawful attorney-in-fact and
with full power of substitution and resubstitution, to execute in his name,
place, and stead, in his capacity as a director or officer or both, as the
case may be, of the Company, any and all Form N-4 Registration Statements and
any and all amendments thereto as each said attorney-in-fact shall deem
necessary or appropriate, together with all instruments necessary or
incidental in connection therewith, and to file the same or cause the same to
be filed with the Commission. The above-named attorneys-in-fact shall each
have full power and authority to do and perform in the name and on behalf of
the undersigned, in any and all capacities, every act whatsoever necessary or
desirable in connection with any and all Form N-4 Registration Statements, and
any and all amendments thereto, as fully and for all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and approving the acts of each said attorney-in-fact.
EXECUTED this 21st day of January, 1998.
/s/JAMES S. D' AGOSTINO, JR. /s/PHILIP K. POLKINGHORN
---------------------------- ------------------------
James S. D'Agostino, Jr. Philip K. Polkinghorn
/s/ROYCE G. IMHOFF, II
----------------------------
Royce G. Imhoff, II
