-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L0e6qejGI8udd6JfGN10hwih/TU3BssdSakaruYG/2Xr0rr2An2Mh2k1vHJ176yO mCc725g6XWKhAcpZTkje9w== 0000904456-98-000032.txt : 19980217 0000904456-98-000032.hdr.sgml : 19980217 ACCESSION NUMBER: 0000904456-98-000032 CONFORMED SUBMISSION TYPE: N-4/A PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 19980212 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO SEPARATE ACCOUNT D CENTRAL INDEX KEY: 0000089031 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4/A SEC ACT: SEC FILE NUMBER: 333-40637 FILM NUMBER: 98535389 BUSINESS ADDRESS: STREET 1: 2727 ALLEN PARKWAY STREET 2: PO BOX 4382 CITY: HOUSTON STATE: TX ZIP: 77210 BUSINESS PHONE: 7138313633 MAIL ADDRESS: STREET 1: 2727 ALLEN PARKWAY STREET 2: P O BOX 4382 CITY: HOUSTON STATE: TX ZIP: 77210 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN GENERAL LIFE INSURANCE CO OF DELAWARE SEPAR ACCT D DATE OF NAME CHANGE: 19920106 N-4/A 1 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 --- --- Post-Effective Amendment No. --- --- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 65 X --- --- 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. 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. 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 PART A Showing Location of Information in Prospectuses
Form N-4 Item No. Prospectus Caption -------- ------------------ 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
i PART A
Form N-4 Item No. Prospectus Caption -------- ------------------ 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
ii PART B
Showing Location of Information in Statement of Additional Information Caption in Form N-4 Statement of Item No. Additional Information -------- ---------------------- 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 * All required information is included in Prospectus.
iii 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 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 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: MUTUAL FUND SERIES 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
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
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 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.
Total Examples Annual Total Annual Total Total Annual Contract Portfolio Annual Charges at End of: Investment Series Charges Charges Charges 1 Year 10 Years ----------------- -------- ------------ ------- ------------------- 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
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 CALENDAR YEAR
DIVISION 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 ----------------------------------------------------------------------------------------------------------------------- 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%
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 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: MUTUAL FUND SERIES 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
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
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 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 CONTENTS 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 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
4 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 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 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 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. PARTICIPANT TRANSACTION CHARGES 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% (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."
8 THE SERIES' ANNUAL EXPENSES (1) (as a percentage of average net assets)
Management Other Fees After Expenses Expense After Expense Total Series Reimbursement Reimbursement Operating and Waiver and Waiver Expenses ------------- ------------- ------------ 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% (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.
Management Other Total Fees Expenses Expenses ------------- ------------- ------------ Wright International Blue Chip 0.80% 3.57% 4.37% Wright Selected Blue Chip 0.65% 1.32% 1.97%
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:
If all amounts are allocated to a Division that invests in one of the Following Series: 1 Year 3 Years 5 Years 10 Years ----------------------------- ------ ------- ------- -------- 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 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 (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.
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 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 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 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 The Series of the investment companies, along with management and investment objective information, are as follows:
INVESTMENT INVESTMENT SERIES ADVISER/MANAGER COMPANY ----------------------------------------------- ----------------------------------- -------------------------------------- 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
14
SERIES INVESTMENT OBJECTIVE ------ -------------------- 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.
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 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 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. 17 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. 18 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. 19 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 20 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 21 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 22 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, 23 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 24 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, 25 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 26 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 27 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 28 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 29 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. 30 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 31 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, 32 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 33 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. 34 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. 35 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 A Statement is available from us on request. Its contents are as follows: CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION General Information....................................................... 2 Regulation and Reserves .................................................. 2 Independent Auditors...................................................... 2 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
37 (THE FOLLOWING DOCUMENTS ARE NOT PART OF A PROSPECTUS.) SELECT RESERVE VARIABLE ANNUITY DISCLOSURES AND FORMS SECTION INDEX 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
(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 as a tax sheltered annuity arrangement or a 401(k) plan), a Simplified Employee Pension program (SEP), any Simple Retirement Account or a plan which promises you a retirement benefit which is based upon the number of years of service you have with the employer, you are likely to be an active participant. Your Form W-2 for the year should indicate your participation status. You are an active participant for a year even if you are not yet vested in your retirement benefit. Also, if you make required contributions or voluntary employee contributions to a retirement plan, you are an active participant. In certain plans, you may be an active participant even if you were only with the employer for part of the year. You are not considered an active participant if you are covered in a plan only because of your service as 1) an Armed Forces Reservist for less than 90 days of active service, or 2) a volunteer firefighter covered for firefighting service by a government plan. Of course, if you are covered in any other plan, these exceptions do not apply. If you are married, (i) filed a separate tax return, and did not live with your spouse at any time during the year, or (ii) filed a joint return and have a joint AGI of less than $150,000, your spouse's active participation will not affect your ability to make deductible contributions. If you are married and file jointly, your deduction will be phased out between an AGI of $150,000 to $160,000. B. ADJUSTED GROSS INCOME (AGI) If you are an active participant, you must look at your Adjusted Gross Income for the year (if you and your spouse file a joint tax return, you use your combined AGI) to determine whether you can make a deductible IRA contribution. Your tax return will show you how to calculate your AGI for this purpose. If you are at or below a certain AGI level, called the Threshold Level, you are treated as if you were not an active participant and can make a deductible contribution under the same rules as a person who is not an active participant. If you are single, the Threshold Level is $30,000. If you are married and file a joint tax return, the Threshold Level is $50,000. If you are married but file a separate tax return, the Threshold Level will be $0. For taxable years beginning in 1999, the Threshold Levels for single individuals and for married individuals filing jointly will increase as follows:
Threshold Level For taxable years beginning in : --------------- Single Married (filing jointly) ------ ------- 1999 $31,000 $51,000 2000 $32,000 $52,000 2001 $33,000 $53,000 2002 $34,000 $54,000 2003 $40,000 $60,000 2004 $45,000 $65,000 2005 $50,000 $70,000 2006 $50,000 $75,000 2007 and thereafter $50,000 $80,000
Page 2 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: Page 3 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. Page 4 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).
Year Deductible Non-Deductible 1990 $ 2,000 1991 1,800 1994 1,000 $ 1,000 1996 600 1,400 -------- -------- $ 5,400 $ 2,400 Deductible Contributions: $ 5,400 Non-Deductible Contributions: 2,400 Earnings on IRAs: 1,200 -------- Total Account Balance of IRA(s) as of 12/31/98: $ 9,000 (before distributions in 1998).
In 1998, the individual takes a distribution of $3,000. The total account balance in the IRAs on 12/31/98 before 1998 distributions is $9,000. The non-taxable portion of the distributions for 1998 is figured as follows: Total non-deductible contributions $ 2,400 Total account balance in the IRAs, before distributions $ 9,000 x $3,000 = $800
Thus, $800 of the $3,000 distribution in 1998 will not be included in the individual's taxable income. The remaining $2,200 will be taxable for 1998. ROLLOVER IRA RULES 1. IRA TO IRA You may withdraw, tax-free, all or part of the assets from an IRA and reinvest them in one or more IRAs. The reinvestment must be completed within 60 days of the withdrawal. No IRA deduction is allowed for the reinvestment. Amounts required to be distributed because the individual has reached age 70 1/2 may not be rolled over. Page 5 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. Page 6 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. Page 7 (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 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). Page 9 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 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 [THIS PAGE INTENTIONALLY LEFT BLANK] Page 12 [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 [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 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) 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 ______________________________________ _________
----------------------------------------------------------------------------- 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 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 ______________________________________ _________
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) ________ 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.________
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 [THIS PAGE INTENTIONALLY LEFT BLANK] Page 16 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. 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 _________%
----------------------------------------------------------------------------- 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 [THIS PAGE INTENTIONALLY LEFT BLANK] Page 18 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 [THIS PAGE INTENTIONALLY LEFT BLANK] Page 20 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 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. 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.
L 8876-SR Page 22 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 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 OF CONTENTS 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
1 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 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 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 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)
SINCE SERIES INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION* 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%
Hypothetical Historical Cumulative Total Returns (Through December 31, 1996)
SINCE SERIES INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION* 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%
Hypothetical Historical Growth of a $1,000 Investment in the Divisions (Through December 31, 1996)
SINCE SERIES INVESTMENT DIVISION ONE YEAR FIVE YEARS TEN YEARS INCEPTION* 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 * 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.
5 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 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.
5 YEARS 10 YEARS 20 YEARS ------- -------- -------- (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
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 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 INDEX TO FINANCIAL STATEMENTS
Page No. -------- 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
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 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 American General Life Insurance Company Consolidated Balance Sheets
December 31 1996 1995 ------------------------------------ (IN THOUSANDS) 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 ====================================
11
December 31 1996 1995 ------------------------------------ (IN THOUSANDS) 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 ====================================
SEE ACCOMPANYING NOTES. 12 American General Life Insurance Company Consolidated Income Statements
YEAR ENDED DECEMBER 31 1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) Revenues: 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 ======================================================
SEE ACCOMPANYING NOTES. 13 American General Life Insurance Company Consolidated Statements of Shareholders' Equity
YEAR ENDED DECEMBER 31 1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) 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 =======================================================
14 SEE ACCOMPANYING NOTES. American General Life Insurance Company Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1996 1995 1994 ----------------------------------------------------- (IN THOUSANDS) 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 =====================================================
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 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 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): 1996 1995 1994 --------------------------------------------------- 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 ===================================================
17 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 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 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 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 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 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 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 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 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS 2.1 INVESTMENT INCOME Investment income by type of investment was as follows:
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) Investment income: 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 ======================================================
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 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:
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) 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) ======================================================
27 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:
GROSS GROSS UNREALIZED AMORTIZED COST UNREALIZED LOSS FAIR GAIN VALUE ------------------------------------------------------------------------ (IN THOUSANDS) 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 ========================================================================
28 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.3 FIXED MATURITY AND EQUITY SECURITIES (CONTINUED)
GROSS GROSS UNREALIZED AMORTIZED COST UNREALIZED LOSS FAIR GAIN VALUE ------------------------------------------------------------------------ (IN THOUSANDS) 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 ======================================================================== * Primarily includes pass-through securities guaranteed by and mortgage obligations ("CMOs") collateralized by the U.S. government and government agencies.
29 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:
1996 1995 ------------------------------------ (IN THOUSANDS) 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 ====================================
The contractual maturities of fixed maturity securities at December 31, 1996 were as follows:
AMORTIZED MARKET COST VALUE ------------------------------------ (IN THOUSANDS) 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 ====================================
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 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:
OUTSTANDING PERCENT OF TOTAL PERCENT AMOUNT NONPERFORMING ---------------------------------------------------------- (IN MILLIONS) 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% ====================================
31 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 2. INVESTMENTS (CONTINUED) 2.4 MORTGAGE LOANS ON REAL ESTATE (CONTINUED)
OUTSTANDING PERCENT OF TOTAL PERCENT AMOUNT NONPERFORMING ---------------------------------------------------------- (IN MILLIONS) 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% ====================================
32 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:
DECEMBER 31 1996 1995 ------------------------------------ (IN MILLIONS) Impaired loans: With allowance* $ 60 $ 79 Without allowance - 4 ------------------------------------ Total impaired loans $ 60 $ 83 ==================================== * Represents gross amounts before allowance for mortgage loan losses of $9 million and $22 million, respectively.
1996 1995 1994 ------------------------------------------------------ (IN MILLIONS) Average investment $ 72 $ 102 $ 100 Interest income earned $ 6 $ 8 $ 6 Interest income - cash basis $ 6 $ 8 $ 3
33 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:
December 31, 1996 ------------------------------------------------------ AMOUNT AT WHICH SHOWN IN THE BALANCE SHEET COST VALUE ------------------------------------------------------ (IN THOUSANDS) 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 ====================================================== * Amount is net of a $49 million allowance for losses.
34 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:
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) 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 ======================================================
4. OTHER ASSETS Other assets consisted of the following:
December 31 1996 1995 ------------------------------------ (IN THOUSANDS) Goodwill $ 55,626 $ 57,795 Other 78,663 67,124 ------------------------------------ Total other assets $ 134,289 $ 124,919 ====================================
35 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:
December 31 1996 1995 ------------------------------------ (IN THOUSANDS) 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 ====================================
Components of deferred tax liabilities and assets at December 31 were as follows:
1996 1995 --------------------------------------------- (IN THOUSANDS) 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 =============================================
36 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:
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) 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 ======================================================
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.
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) 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 ======================================================
37 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 American General Life Insurance Company Notes to Consolidated Financial Statements (continued) 6. TRANSACTIONS WITH AFFILIATES Affiliated notes and accounts receivable were as follows:
December 31, 1996 December 31, 1995 ----------------------------------------------------------------------- PAR VALUE BOOK VALUE PAR VALUE BOOK VALUE ----------------------------------------------------------------------- (IN THOUSANDS) 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 =======================================================================
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 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:
1996 1995 1994 ------------------------------------------------------ (DOLLARS IN THOUSANDS) 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%
40 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:
DECEMBER 31 1996 1995 ------------------------------------ (IN THOUSANDS) 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 ====================================
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 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:
DECEMBER 31 1996 1995 ------------------------------------ (DOLLARS IN THOUSANDS) 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%
The components of postretirement benefit expense were as follows:
1996 1995 1994 ------------------------------------------------------ (IN THOUSANDS) Service cost - benefits earned $218 $171 $208 Interest cost on accumulated postretirement benefit obligation 626 638 527 ------------------------------------------------------ Postretirement benefit expense $844 $809 $735 ======================================================
42 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 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:
1996 1995 ------------------------------------ (DOLLARS IN MILLIONS) 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
Average floating rates may change significantly, thereby affecting future cash flows. Swap agreements generally have terms of two to ten years. 44 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:
FAIR CARRYING VALUE AMOUNT ------------------------------------ (IN MILLIONS) 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 * 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.
45 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 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 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 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:
PERCENTAGE CEDED TO OTHER ASSUMED FROM OF AMOUNT GROSS AMOUNT COMPANIES OTHER COMPANIES NET AMOUNT ASSUMED TO NET ---------------------------------------------------------------------------------------- (IN THOUSANDS) 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% =======================================================================
49 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 COMBINED FINANCIAL STATEMENTS - STATUTORY BASIS AMERICAN GENERAL LIFE INSURANCE COMPANY NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) 51 American General Life Insurance Company Combined Financial Statements - Statutory Basis (Unaudited) Nine Months ended September 30, 1997 CONTENTS 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
52 American General Life Insurance Company Combined Balance Sheet -- Statutory Basis (Unaudited) September 30, 1997
ADMITTED ASSETS September 30, 1997 ------------------- 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 ===================
SEE ACCOMPANYING NOTES. 53 American General Life Insurance Company Combined Balance Sheet -- Statutory Basis (Unaudited) September 30, 1997
LIABILITIES, CAPITAL, AND SURPLUS September 30, 1997 ------------------- 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 ===================
SEE ACCOMPANYING NOTES. 54 American General Life Insurance Company Combined Statement of Income -- Statutory Basis (Unaudited) Nine Months ended September 30, 1997
NINE MONTHS ENDED SEPTEMBER 30, 1997 ------------------- REVENUES: 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 ===================
SEE ACCOMPANYING NOTES. 55 American General Life Insurance Company Combined Statement of Changes in Capital and Surplus -- Statutory Basis (Unaudited) Nine Months ended September 30, 1997
Nine Months Ended September 30, 1997 ------------------- 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 ===================
SEE ACCOMPANYING NOTES. 56 American General Life Insurance Company Combined Statement of Cash Flows -- Statutory Basis (Unaudited) Nine Months ended September 30, 1997
Nine Months Ended September 30, 1997 ------------------- OPERATING ACTIVITIES 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
SEE ACCOMPANYING NOTES. 57 American General Life Insurance Company Combined Statement of Cash Flows -- Statutory Basis (Unaudited) Nine Months ended September 30, 1997
Nine Months Ended September 30, 1997 ------------------- INVESTING ACTIVITIES 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) ===================
SEE ACCOMPANYING NOTES. 58 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 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 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 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 (b) Exhibits 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 (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 (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 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 (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.
C-5 ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The directors, executive officers, and, to the extent responsible for variable annuity operations, other officers of the depositor are listed below.
Positions And Offices Name And Principal With The Business Address Depositor ------------------ --------------------- 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 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
C-7 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 (*).
Jurisdiction of Name Incorporatiion ------ ---------------- 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 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 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 (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 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 (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.
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 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:
Position and Offices with Underwriter, Name and Principal American General Business Address Securities Incorporated ------------------ ----------------------- 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 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
(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 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 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.
Signature Title ----------- ------- RODNEY O. MARTIN, JR.* Principal Executive Officer -------------------------- (Rodney O. Martin, Jr.) ROBERT F. HERBERT, JR.* Principal Financial and Accounting Officer -------------------------- (Robert F. Herbert, Jr.)
Directors --------- 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
EXHIBIT INDEX 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 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.
EX-3.(B)(I) 2 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 TABLE OF CONTENTS
Page ---- ARTICLE I. Fund Shares................................... 2 ARTICLE II. Representations and Warranties................ 4 ARTICLE III. Prospectuses, Reports to Shareholders and Proxy Statements, Voting................. 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
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 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 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 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 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. 5 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 6 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 7 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 8 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 9 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. 10 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 11 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 12 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 13 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 14 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. 15 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 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 (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 SCHEDULE A PORTFOLIOS OF AMERICAN GENERAL SERIES PORTFOLIO COMPANY AVAILABLE FOR PURCHASE BY AMERICAN GENERAL LIFE INSURANCE COMPANY UNDER THIS AGREEMENT
Fund Name Separate Account --------- ---------------- 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
19 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Registration Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
20 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 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 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 EX-3.(B)(II) 3 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_ TABLE OF CONTENTS
Page ---- 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
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 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 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 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 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 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 8 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 9 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 10 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. 11 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. 12 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. 13 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 14 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 15 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, 16 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 17 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 18 (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 (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 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 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 (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 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 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 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
26 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 (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 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 EX-3.(B)(III) 4 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 TABLE OF CONTENTS
Page ---- 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
2 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 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 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 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 6 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 7 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 8 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 9 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 10 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. 11 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, 12 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 13 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. 14 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 15 (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 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 (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 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 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 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 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 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 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 SCHEDULE A PORTFOLIOS OF LEVCO SERIES TRUST AVAILABLE FOR PURCHASE BY AMERICAN GENERAL LIFE INSURANCE COMPANY UNDER THIS AGREEMENT LEVCO Equity Value Fund 25 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
26 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 (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 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 EX-3.(B)(IV) 5 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 TABLE OF CONTENTS
Page ---- 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
2 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 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. 4 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. 5 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. 6 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 7 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 8 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 9 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 10 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. 11 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 12 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. 13 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. 14 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 (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 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 (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 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 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 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 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 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 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 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 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
26 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 27 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 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 EX-3.(B)(V) 6 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 TABLE OF CONTENTS
Page ---- 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
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 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 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 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 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 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 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 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 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 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. 12 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. 13 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 14 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 15 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 16 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 17 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 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. 19 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 20 (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 21 (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 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 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 (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 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 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 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
28 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 (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 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 EX-3.(B)(VI) 7 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_ TABLE OF CONTENTS
Page ---- 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
2 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 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 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 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 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 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. 8 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 9 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 10 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 11 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. 12 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. 13 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 14 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 15 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 16 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 17 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. 18 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 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 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 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 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 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 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 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 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
27 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 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 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 EX-3.(B)(VII) 8 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_ TABLE OF CONTENTS
Page ---- 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
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 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 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 5 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 6 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 7 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 8 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 9 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 10 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, 11 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 12 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 13 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. 14 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 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 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 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 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 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 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 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 (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 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 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 SCHEDULE B SEPARATE ACCOUNTS AND CONTRACTS
Name of Separate Account and Form Numbers and Names of Contracts Funded by Date Established by Board of Directors Separate Account -------------------------------------- ----------------------------------------------------- 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
26 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 (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 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 EX-5.(C)(II) 9 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) 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 ______________________________________ _________
----------------------------------------------------------------------------- 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) 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 ______________________________________ _________%
[ ]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 ----------------------------------------------------------------------------- 8. CHANGE ALLOCATION OF FUTURE PURCHASE PAYMENTS Use whole percentages. Total must equal 100%. 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 _________%
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) % or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________ % or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________ % or $________ from Div.________ to Div. ________ % or $________ from Div.________ to Div.________
NOTE: If a transfer is elected and Automatic Rebalancing is active 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. $ 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.________
----------------------------------------------------------------------------- 12. [ ] REQUEST FOR PARTIAL WITHDRAWAL (ALSO COMPLETE SEC. 15) Amount requested is to be ( ) net OR ( ) gross of applicable charges. Total Amount = $________ $ 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.________
----------------------------------------------------------------------------- 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 EX-5.(C)(III) 10 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 CONTRACT ACTIVITY:
TRADE DIVISION INTEREST GROSS TRANS. UNIT ACCUMULATION DATE NUMBER TRANSACTION RATE DOLLAR AMOUNT VALUE UNITS 01/15/98 13 PURCHASE PAYMENT 10,000.00 1.158013 8,635.4816
CONTRACT SUMMARY : FUTURE DIVISION DIVISION PAYMENT ACCUMULATION UNIT DOLLAR NUMBER NAME ALLOCATION % UNITS VALUE VALUE 13 MONEY MARKET 100 8,635.4816 1.158013 10,000.00
FOR MORE INFORMATION YOU MAY CONTACT YOUR REPRESENTATIVE LISTED ABOVE OR CALL OUR OFFICE AT 1-800-813-5065. SELECT RESERVE VARIABLE ANNUITY AVAILABLE PORTFOLIOS
DIVISION NUMBER DIVISION NAME 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
EX-8.(A) 11 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- American General Series Portfolio Company International Equities Fund MidCap Index Fund Money Market Fund Stock Index Fund
5 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 EX-8.(B) 12 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- Hotchkis and Wiley Variable Trust Equity Income VIP Portfolio Low Duration VIP Portfolio
5 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 EX-8.(C) 13 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- LEVCO Series Trust LEVCO Equity Value Fund
5 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 EX-8.(D) 14 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- Navellier Variable Insurance Series Fund, Inc. Navellier Growth Portfolio
5 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 EX-8.(E) 15 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- 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
5 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 EX-8.(F) 16 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- Royce Capital Fund Royce Premier Portfolio Royce Total Return Portfolio
5 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 EX-8.(G) 17 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 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 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 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 SCHEDULE A
Investment Company Name: Fund Name(s): ------------------------ ------------- Wright Managed Blue Chip Series Trust Wright International Blue Chip Portfolio Wright Selected Blue Chip Portfolio
5 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 EX-9 18 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] 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 EX-10 19 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 EX-13.(A) 20 Exhibit 13(a)
12/31/96 SELECT RESERVE AVERAGE ANNUAL TOTAL RETURNS AAT AND TOTAL RETURNS RETURN Fees based on ave $50,000 account 1 YEAR 3 YEAR 5 YEAR SINCE USING HYPOTHETICAL UNIT VALUES AATR AATR AATR INCEPTION ------------------------------ ------ ------ ------ --------- 01/05/94 WRIGHT INT'L BLUE CHIP PORT. 12/31/96 365 1095 1825 1091 INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00 BEG OF PERIOD UV 9.941994 N/A N/A 10.000000 # OF UNITS PURCHASED 100.583444 N/A N/A 100.000000 END OF PERIOD UV 11.594096 11.594096 11.594096 11.594096 END OF PERIOD VALUE 1,166.17 0.00 0.00 1,159.41 SURRENDER CHARGE PERCENTAGE 0.0% 0.0% 0.0% 0.0% FREE 10% WITHDRAWAL 0.00 0.00 0.00 0.00 LESS SURRENDER CHARGES 0.00 0.00 0.00 0.00 LESS ANNUAL FEE ($) $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%
12/31/96 SELECT RESERVE AVERAGE ANNUAL TOTAL RETURNS AND TOTAL RETURNS Fees based on ave $50,000 account 1 YEAR 3 YEAR 5 YEAR 10 YEAR USING HYPOTHETICAL UNIT VALUES AATR AATR AATR AATR ------------------------------ ------ ------ ------ --------- 01/01/87 AGSPC MONEY MARKET 12/31/96 365 1095 1825 35430 INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00 BEG OF PERIOD UV 7.696248 7.118501 6.803293 5.000000 # OF UNITS PURCHASED 129.933443 140.479014 146.987643 200.000000 END OF PERIOD UV 8.028562 8.028562 8.028562 8.028562 END OF PERIOD VALUE 1,043.18 1,127.84 1,180.10 1,605.71 SURRENDER CHARGE PERCENTAGE 0.0% 0.0% 0.0% 0.0% FREE 10% WITHDRAWAL 0.00 0.00 0.00 0.00 LESS SURRENDER CHARGES 0.00 0.00 0.00 0.00 LESS ANNUAL FEE ($) $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%
EX-13.(B) 21 Exhibit 13(b)
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 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%
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 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%
EX-13.(C) 22 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 EX-15.(E) 23 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 -----END PRIVACY-ENHANCED MESSAGE-----